Page 19 - Sonoma County Gazette February 2017

Are those Real Estate TV shows real?
I think you know the answer to that question. Buyers are looking at 3 homes and then deciding, every house they look at is available right now AND the sellers will wait for them to decide and nally, houses are always sold right at the open house, I don’t think so!
Don’t get me wrong, I love watching those xer upper shows or house hunters or property brothers and my wife and I will sometimes binge watch them. They are very entertaining. I have a friend whose wife loves to watch all of the design shows and it drives him crazy because she never works on their house. He laid down the law one day and told her that for every 2 hours she spent watching HGTV, she needed to spend an hour sprucing up their own house...and he now resides in the dog house.
I kind of drive my wife crazy but in a di erent way. These shows NEVER discuss how nancing a ects the buying decision and in real life it has a huge e ect. On shows like Property Brothers they ask people what their budget is and let’s say the budget is $500,000 and they nd a xer upper that is $400,000 and the brothers say... Buy this and with the extra $100,000 you can x up the house and BOOM you have the house you want. This scenario works great if the buyer has $500,000 in cash but doesn’t work so well if they are getting a loan. We lend a percentage of the home value and if the house is too rough, we won’t lend on it at all.
Let’s assume the house is in OK shape but needs some xing. The buyer gets it for $400,000 and so that means if they are putting 20% down they put down $80,000 and get a loan for $320,000. So if they want to x up the house, they need to have another $100,000 in their pocket or there is no x up happening. So this buyer doesn’t need to have $500,000 in cash, just $180,000.
The other one that really bugs me is on house hunters and it is basically the same thing. The buyers budget is $350,000 and they nd a house for $335,000 but needs just $15,000 of work. Sounds way more reasonable, right? Not really, if that buyer is putting 10% down on their purchase then getting the house for $335,000 will save them $1,500 in cash. Even if they were putting 20% down, they just saved $3,000 and that is a little short of $15,000 my friends.
There are loans out there that will allow you to buy a house AND x it up. At my company we have a loan that will nance up to 96.5% of the purchase price of the home AND 96.5% of the x up costs. In my rst example, we would lend $386,000 on the initial purchase and we would also lend $96,500 of the $100k in x up costs and so the buyer can get into that home AND have it xed up for just $17,500 down payment plus closing costs.
I don’t think my vision of HGTV showing how the nancing works will ever become reality but at least I got to gripe to a wider audience than just my poor wife. Thanks for reading.
Need to know more? Please send me your real estate and mortgage related questions. I am happy to answer you and it may become the topic of a future article.
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