Both the mortgage broker and the real estate broker will steer the buyers toward the move-in ready house - that's a fact. There isn’t some vast conspiracy at work, in-fact, it might even be well intentioned, trying to spare their clients from what they see as the hassle of remodeling but the fact is, most agents do not have the knowledge or skill set to accurately advise their clients on buying a fixer or rehab property. So, they just shoot from the hip, telling their client, "Oh you wouldn’t want to do that, it’s so much work, etc." The homebuyer who was nervous already, quickly kills the deal and opts for the move-in ready home.
The transaction closes quickly, the real estate agent get paid and moves on to the next client.
If, you were the client during this transaction did the agent do you a favor by keeping you from remodel hell and a money pit, or did she prevent you from creating equity that would increase your financial health?
This question is at the heart of the mater and reinforces the inadequately of most agent to offer meaningful advice or council when buying these properties. To meaningfully answer the lost aggravation vs. lost opportunity, question you need to perform a detailed analysis, not rely on the “shoot from the hip advice of your agent”. Most buyers are not that well prepared, so they overly rely on their real estate or mortgage agent without first doing their homework.
Therefore, when they ask their agents about the these homes, and the loans that make them a great option, the answer is inevitably, "you don’t want to do that it’s too complicated and takes too long" (translation, I have never done one of these before, so don’t know the first thing about it and I need your transaction to close this month, so, I can pay my mortgage).
In our next post, we'll get to the heart of the 203K loan option.
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