For more articles
on renovation lending
Director of national sales
By Carl Markman
Illustration by Dennis Wunsch
s the year comes to a close, it’s always a
good idea to reflect on the success you had
and what you could have done better. For
most originators, despite dire predictions
from “experts,” it was a pretty good year. The industry bounced
back from the headaches over implementing the TRID consumer-
disclosure rules and many mortgage professionals actually
saw business grow in 2016.
But even if 2016 was a great year for you, your success in 2017
is far from guaranteed. The changes that can affect your future
are often beyond your control, which can cause a great deal of
stress. Add to that the massive amount of stress the holiday
season brings, and perhaps it’s time to give yourself a present. >>
View these articles and more at
“Renovation Loans Can Build New Business
Avenues,” Nicholas DiMilia, July 2016
“The Thrill of Renovation Loans,”
Shelley Collins, June 2015
“Understanding Renovation Loans,”
Andrew Leff, May 2013
“The Ultimate Holiday Gift Guide,”
Carl Markman, December 2016
The first quarter of 2017 is coming to a close, and this is proving to be dramatically differ- ent year in the mortgage industry. A mas- sive amount of time has been devoted to
discussing market uncertainty and rising interest rates,
and many mortgage professionals have read every article while silently waiting for the mortgage industry to
The 2.75 percent interest rate may have gone the
way of the dodo bird, but our industry does not find
itself on the brink of extinction. Clever mortgage originators began to prepare for the changing landscape
months ago, and are thriving today despite the loss
of refinance business. They found a product that enhances every aspect of real estate sales financing, is resistant to price sensitivity and helps redefine them as
premiere service providers who offer services beyond
the capability of their competition.
This strategic advantage is effective and accessible, and not only can it salvage 2017, it can propel this
year’s production outlook beyond the success of 2016
for originators who learn its capabilities. It is time to
reveal the identity of this mystery savior: For those of
you who have not yet made its acquaintance, say hello
to renovation lending.
Renovation lending — and yes we are speaking about
Federal Housing Administration 203(k) and HomeStyle
loans — provides originators with that ever-elusive
competitive advantage they seek. Renovation loans
work phenomenally well with purchase business, and
we just happen to be in purchase market now.
These days, relationships with referral partners
are crucial to the success and survival of an originator’s business, and in a purchase market the primary
referral sources are real estate agents. Providing these
renovation-loan programs can set an individual originator apart from the field of suitors who are all jockeying for a Realtor’s attention. The natural question that
arises here is: “How is this accomplished?” The answer
is far more straightforward than one would imagine.
Giving real estate agents access to renovation loans
allows those Realtors to greatly enhance the sales
techniques they apply to their daily business operations. Small deficiencies with properties can be remedied prior to the borrower moving in. Fixer-uppers can
be masterfully re-imagined and renovated. Properties
the agent lists as a seller’s agent can be renovated to
capitalize on their full market potential. The impact of
adding the ability to sell a tangible, finished product
instead of selling the potential of the existing property
totally shifts the paradigm of the homebuying experience because it grants easy access to all homebuyers.
Consider the reality of selling fixer-uppers. On paper
the prospect seems surefire: Find a distressed or dated property in a great neighborhood at a discounted
price and make renovations to the home to bring it up
to market standards and satisfy the buyer’s wish list.
The end result is a move-in-ready, customized, modern home at a significant discount; a home that echoes a standard of living previously unobtainable to the
buyer because of budget constraints.
Conceptually this is a surefire solution that sounds
ideal for a homebuying market, but in reality this concept is often out of reach for prospective homebuyers.
The barrier that separates homebuyers from the ability to work with fixer-uppers is purely financial, and
this financial barrier is the primary reason why real estate agents cannot successfully sell less-than-perfect
homes to most buyers.
The discount in list price, even when it is $100,000
or more, does not translate into spendable money that
buyers can use to make renovations to the property.
Most buyers are not willing to resign themselves to
living in unsuitable properties while stretching a staccato rehab plan across several years. So the notion of
buying a fixer-upper is immediately nixed once the
buyer reveals they do not have the cash on hand to
make the renovations.
Typically, this is the end-game moment for the
property. The Realtor puts on a brave face and be-
gins to locate other homes the buyer may find more
suitable. Instead, look at what happens when a mort-
gage originator intervenes and deploys the secret
weapon or renovation lending.
After the buyer’s financial revelation, the Realtor
can query the buyers regarding the exact renovations
they would like to make and give an initial analysis of
the cost of the renovations and the potential value
added to the property as a result. With a specific price
tag in hand, the agent can inform the buyers that they
could borrow up to 96. 5 percent of the total cost of
the renovation project.
The final picture in the above scenario is a property
featuring the custom-designed renovations delivered
within six months of the buyers taking possession of
the property. This is an idyllic picture made accessible
by the use of a renovation-lending program provided
by the Realtor’s favorite referral partner.
Realtors connected to an originator with access to
renovation lending products instantly gain the ability
to sell even problematic distressed properties, which
increases their visibility in the market. All the while, originators leverage renovation products to deepen their
referral relationships and maximize the flow of referrals
they receive. The increase in business from real estate
agents alone will help originators sustain a healthy flow
of business in 2017 and beyond. The most amazing
thing about this new secret weapon is that this is only
one of the ways it can enhance origination business.
In an ultra-competitive mortgage environment,
renovation loans can create multiple opportunities
to expand origination business and convert more
opportunities to fund loans. They help cultivate new,
lucrative referral sources, create more direct word-of-mouth referrals, and preserve loans that would otherwise be lost because of issues with subject properties
— by eliminating the possibility that a leaky roof or a
cracked foundation can mess up a closing.
2017 is a different mountain to climb, but the odds are
not nearly as insurmountable as many feared they might
be. An open mind, fresh tactics and a new secret weapon
are all any of us need to once again be king of the hill. n
Damon Richardson is a renovation lending specialist at
REMN Wholesale. With more than 15 years of experience as a
frontline and QC underwriter, Richardson brings a high level
of professionalism to his work while never sacrificing the
personal touch. Richardson believes that communication,
education and customer service are the tent poles of success
in business. He shares his expertise and educates broker
partners in renovation lending to facilitate stronger business
relationships. Reach Richardson at firstname.lastname@example.org.
Say Hello to Renovation Lending
This secret weapon can help put your year back on track
By Damon Richardson