The Housing Equivalent of the Island Of Misfit Toys (or What is the HUD Section 203(K) Program?)

There have been a lot of changes in the real estate world over the last couple of years but the one that stands out in my mind the most is the death of the "Fixer-upper" or "Handy(wo)man) special". When I was looking for my first home and didn't have a lot of money to work with (actually I think this is true of all my home purchases) there were lots of homes that were in my price range that needed work. Not a huge amount of work but enough work to make it difficult to say that the home was in "move-in" condition. For example, I bought a home on Damariscotta Lake in Jefferson that had a toilet installed off of the kitchen in the space that was sort of the dining room. There was no door or even a wall to separate it from the rest of the living space. So if you were sitting in the living room and looking toward the kitchen, there was the toilet. When people came by and asked what was a toilet doing in the middle of the room we would just say it was the entertainment center. When we began our renovation of the interior one of the first things we did was to wall off and enclose the "entertainment center", put in a washer dryer hookup, add a door and voila! A half bath with first floor laundry. It wasn't a difficult or expensive renovation but it added value (a lot of value as it turned out but that is a different story).

These days it is very difficult to sell a home that needs work. I hear the same refrain over and over from people looking at homes, "It needs a new roof which is more work that we want to do" or "I hate carpeting, I want a house with wood floors on the second floor". Neither of those two things are impossible or very expensive to do and yet people turn up their noses at a house listed at $200,000 that needs $20,000 of work to be exactly what they are looking for and will spend $250,000 or more for a home that doesn't need the a new roof or has wood floors on the second floor too. And why do they do this? Because they can. There is enough inventory on the market that a buyer can find what they are looking for even if it means spending more money than they really need to. That is great and I am glad that they are buying any house right now. But what about those homes that just need a little love like the elephant from the Island of Misfit Toys? They will eventually sell to someone who is getting a great deal because they have a little imagination and either know how to do the work themselves or have enough expertise to write a check. I've seen waterfront that a few years ago the land that they sit on would sell for $500,000 that are being offered for less than $300,000.Why is that? Because it is more work than people want to take on, even if it means spending a couple hundred thousand more somewhere else.

Which brings me to the point of this entire diatribe. There is a U.S. Housing and Urban Development loan insurance project called the Section 203 (k) program. What the program does is to give home buyers the ability to purchase a home (or up to a 4 unity apartment building) that needs some work (new heating system, energy conservation, etc.) or to turn a single living unit building into more living units. This means that people who are not cash rich real estate investors can get in on buying distressed properties and returning them to livable homes. Not only does this benefit the buyer (who is probably getting more house than they could otherwise afford) but it benefits local contractors, the seller and the neighborhood that no longer has to look at the eyesore on the corner that brings down the value of all of their homes as well. This program isn't for everybody and being a government program there are lots of forms and steps to undertake but if you are interested owning a home and the only homes in your price range need work it may be worth checking out. And if you are looking for someone to help you find that bargain home feel free to contact me.