The best loan that nobody wants you to use - Part 1

If we told you there was loan that let you buy a distressed property, then loaned you funds to make cosmetic or structural improvements to it and then rolled all the cost of improvements plus the purchase price into one loan you’d probably think that was pretty great. Now, what if that loan allowed you to do this entire transaction with only three percent down?

Impossible you say. Well these loans do exist, but the real estate industry doesn't want you to use them.

Imagine for a minute, that you’re a real estate agent. Most agents are “lone wolfs” they operate independently trying to acquire listings or help their clients buy houses. Real estate is an “eat what you kill” business, agents spend months working with buyers and sellers but, they don’t get paid unless a transaction happens.

So, real estate agents obviously want to get paid for their efforts. While it’s ultimately the buyer’s decision on what property to purchase, their decisions is greatly influenced by the real estate agent they are working with.

Buyers rely on their agents for insight into homes, neighborhood correct pricing and (good) agents have a lot to offer. Like everyone else, real estate agents want to get paid, so and since that will only happen when a transaction takes place, real estate agents have a built in bias to show their clients move-in ready properties.

So, there you are, the lonely real estate agent, you’re client has found a fixer home they are interested in and another one that is move in ready and they ask their agent for guidance, what do you think their agent will say?

This same point is also true for mortgage brokers. Typically, mortgage brokers are commissioned based, they are only going to get paid once your loan closes. Faced with the choice of steering you toward a more time consuming loan or a plain vanilla loan, what do you think they will do?

We'll answer this question and more in Part 2.