Are 203k Loans Being Used More Now?

Question

Are you all seeing more 203k loan offers get accepted now that the market is becoming a little more favorable to buyers? I know over the past few years offers with this product have been pretty hard to get accepted, but was wondering what everyone out there is seeing now. It seems like such a powerful tool if you can get it done correctly with good contractors!

Paul Welden · Answer

@Cole Britting

YES ... I'm seeing an increase in rehab loans being used, such as the 203k,and getting accepted by sellers.

And more contractors now have more availability to do them, whereas during the past 2 years, most contractors were just slammed with other work, but quite a bit of that other work is drying up and there are now more contractors doing rehab work, such as those with the accreditation as a Certified 203k Contractor.

Hope this helps!

Steve Schulman · Answer

FHA 203k one of the most powerful loan options out there! My advice, find yourself an agent and lender who has done these loans before. They can guide you and also go to bat for you pitching it to the listing agent. It's always a plus. Period.I've closed a bunch of 203ks these last few years with clients. Never had an issue getting them accepted over cash or any other offer. Sure, my track record doing a 203k myself and with multiple clients helped present the 'complex' unknown loan to the listing agent. End of the day however, it came down to being the smart investor for myself and my clients. What do I mean? Well, let's break it down. Who's buying majority FHA 203k worthy 'rehab' deals? Honestly, mostly investors with cash or first time homebuyers rather new investor looking to take a big bite on their first investment purchase (with some training wheels as I like to say) and swing for the fences. Besides cash or investor + construction loan, it's not your everyday forever dream home buyer, barriers to entry are low (especially for MFs).. My point? As an investor, I knew for my 203k purchase and most of my clients a) what to say to the listing agent (how's this a win-win?) and b) what the other cash investor was offering aka how to have a truly competitive advantage... Thus, I knew how to beat them, and make it a win-win for both sides of the transaction, my experience and pitch to the listing agent was always just reassurance. Even your newbie investor knows that less down = higher ROI. Do you know where that cash investor needs to be for this deal to work? Do you know what that investor wants in your market? What's their goals? What's market cap/return they're seeking? Ask yourself these questions... I can tell you most cash buyers in my market want quick returns, money in money out... They don't want to waste time renovating cosmetics AND mechanicals in an already high balance market unless they can see that CASH soon. Most who hold that type of cash aren't even long-term buy & hold like majority BP pool. Some deals just don't make sense for them. Period. Well... if not them then WHO ??When you understand this you realize the leverage you never knew you had. Regardless of the seller or buyers market... All fluff. FHA 203k deals are not for the faint of heart but if you are up for it and know what to looks for and have the team who's been there to guide and advise you... Game over. Even more so now, in a cooling market when most of your investor competition gone fishin' and MIA thanks to current interest rate environment, and majority value-add multifamily's seeing higher DOMs and more leverage & negotiation power for your only (203k) buyer willing to step up to the plate :-)

Trevor Oldham · Answer

I'd also recommend checking out Matthew Porcaro from the 203K Way!

Nicholas Coulter · Answer

@Cole Britting yeah for 2 reasons. 1 construction has slowed down so qualified contractors are now more available. 2 sellers are hurting and there is a stronger appetite to take on a "less favorable offer" like the 203k loan!

Christian Ehlers · Answer

I'd also agree I'm seeing more 203K loans, FHA, VA etc being used and accepted by sellers as there's not usually 10 offers on each property anymore. I've also had more success in getting buyers greater amounts of closing cost credits, lower prices and inspection concessions/repairs.

Cole Britting · Answer

It's good to see some of these product making a little bit of a comeback, and that note about contractors having more time is something I didn't think about!

Thanks for the insight, @Paul Welden !

Cole Britting · Answer

@Christian Ehlers @Nicholas Coulter @Trevor Oldham Thank you all for chiming in with what you all are seeing, I appreciate it!

And thank you @Steve Schulman for a little more insight into this product. It seems buyers have more leverage than meets the eye if buyers are strong willed and are surrounded by the right people. Thank you!

Are 203k Loans Being Used More Now?

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