Northern Michigan Real Estate: Buying a Home in Need of Repairs....Think 203K

i was inclined to write about a 203k loan today after showing a home yesterday.  My buyers were in need of a new home.  They were interested in something that they could put a little "sweat equity" into.  As long as the repairs to the home were not going to be to extensive.  In our search they found a home that they liked.  We went out to look at the home and found the work to be more than we both anticipated.  (it was a bank foreclosure).  Thus the disclosure did not state the extent of the work needed on the home.

  I recommended they look at a 203k loan.  I got one of those looks you get when someone thinks you are talking to them in a strange language.  I explained to them the basics of the loan.  It is a mortgage where the bank gives them a loan for the the home and the needed repairs to the home all rolled into one.  Once approved for the loan and you close; the bank will give you the money for the repairs as the job(s) are done.  You will have to have the work done by a licensed contractor(s) depending on what needs to eb done.

  What is the catch? The catch is you cannot do the work yourself.  Unless you are a liscenced contractor in that field.  And you have to do the work or you are subject to penalities for not having it done within a specified time frame.  In the ones I have done depending on the extent of the work anywhere from 30 to 60 days

  The program is designed to help revitalize neighborhoods.  The contractors like it becasue they know they are going to get paid for the work.  In the few cases I have used it,  the attorney held the money for repairs.  As the contractor finished the job they submit an invoice to the attorney.  The attorney would disperse the funds to the contractor upon proof of the work being done. 

  Is this loan for everyone?  Probably not. But if you are looking at a home...have the down payment but feel the work is just to much to handle;  do yourself a favor and look into the loan program.  For my buyers they are so grateful they can get into their dream house now.....     

Dave diCecco

Realtor/Agent

www.davedicecco.com