There are pros and cons to every market condition. We’ve compared the sales commission of the standard loan vs. the K loan and explained how value appreciation can be a real payoff for the borrower. Let’s look at a few other reasons why you’ll want to keep the 203K option open to your client.

The K is not “Just-for-Borrowers”

Do you have a client preparing to sell a home that’s, shall we say, not quite ready for prime time? REFI to the rescue! Remember, a current home owner qualifies as a borrower. The K Loan can help you do more than just put lipstick on that pig! Send your client to a qualified lender and get them hooked-up now, before you list it!

Fix it Your Way!

The K loan has POWER! What kind-a-power? The power to create a customized look and feel. Think of it like building a new home! You get to pick the colors, upgrade the finishes, flooring and appliances. Want a window here? A door there? Not a problem, unless you want to try this idea out on a convential loan. Give it up! It’s not going to happen in this market. Conventional banks scoff at repair lending. Start picking out that granite and the cabinet work you’ve seen on HGTV!

Foundation Trouble 

OH MY GOD! What a crack! Structural issues are real and they can kill a deal very dead, very fast. But it doesn’t have to end here. Foundation repairs are just a phone call away. Because the repair item is consider structural in nature you’ll need a 203K Consultant. Never fear, we gotcha covered!

Home Inspection Woes

You’ve seen it before. The laundry list of repairs a thorough home inspector can conger up will quickly jamb the road to the closing table. Don’t allow that to happen to you! A streamline K’s the answer! No minimum repair total. Maximum total of $35,000! WOW! That’s a huge home inspector punch list knocked out with the Streamline K.

Team Approach! 

Every lender I know knows a good contractor. Add a lender and a 203K Consultant and you have a winning team. Use that team to your advantage and you’ll be closing more loans with less effort in a shorter period of time. It’s just that simple. Rely on your trusted team.

Where’s the Beef!

Here’s the laundry list:

• Structural Problems OK
• Do it Green OK
• Bad/Leaky Roof OK
• Termites OK
• Code Violations OK
• Customize/Modernize Yep
• No Kitchen? No Problem
• Mold OK
• House too small? Additions…OK
• Tear Downs OK
• Did it Burn? Yes
• Owner Occupied duplex, triplex, or quad OK
• Mixed Use office / retail / professional OK

The K loan will allow you to make the DEALS that you ordinarily would not. With a K loan your a problem solver. Create, don’t Procrastinate. Make repairs that the seller will not!

Got other ideas? Questions? Comments? Leave’m below!

Contact us and learn more about the NAHB Green Building Standard!

Last week, 25x’25 posted a blog article outlining the current process at the Mississippi Public Service Commission in considering the establishment of energy efficiency programs and standards (http://blog.25×25.org/?p=1918.)    The Commission recognizes the importance of energy efficiency programs and wishes to establish programs and standards that fit the needs of Mississippi ratepayers.  The Commission opened Docket 2010-AD-2 to provide homeowners, businesses, industry, utilities, etc. the opportunity to provide comments on what programs are best and how they should be delivered.  Also, a collaborative process for considering and developing meaningful energy efficiency standards is currently ongoing.  It will be extremely important for consumer advocates, business interests, and concerned citizens to get engaged and make public comments at the appropriate time.  Please let me know if you are interested in learning about how you can become more involved in this process.  My contact info is:

Brent Bailey

601-573-4815

bbailey@25×25.org

See Brent’s article below.  To sign up for his weekly newsletter, please go to www.25×25.org.

Efforts underway in Mississippi to establish statewide energy efficiency standards and programs reflects a growing trend among officials in Southeastern states who are recognizing the value of conserving energy use as a means of achieving economic growth and a clean energy future.

The Mississippi Public Service Commission is engaged in a formal process that is expected by the end of the year to launch the creation of efficiency standards and programs that advocates believe will meet the common needs of Mississippi’s consumers, businesses and generation utilities.

The commission has solicited input from the state’s public and investor-owned utilities, environmental groups and other stakeholders, including the Mississippi state 25x’25 Alliance, through a formal collaborative process to develop recommendations that can guide the regulatory body in the creation of policy tools that lower energy bills for consumers and improve the competitiveness of businesses.

Energy efficiency, which is the option of first choice under the 25x’25 Vision for a clean energy future, is also seen by Mississippi advocates as a means of improving the state’s and national energy security, stabilizing energy prices for consumers and base load generators, reducing the need for construction of new generation capacity, enhancing electrical and natural gas system reliability, and reducing air pollutants and other emissions.

25x’25 State Activities Coordinator for the Southeast, Brent Bailey, reports that Mississippi is closely following efficiency standard development most recently undertaken by Arkansas in the recruitment of major stakeholders, including power utilities, to help state officials examine various energy efficiency policies. He says Mississippi also joins Louisiana, Georgia, North Carolina and other states in the region in efforts to reduce market and regulatory barriers, implement the necessary codes and standards, and increase the public visibility of energy efficiency as an energy resource.

This collaborative effort among in-state stakeholders can result in viable energy efficiency standards that have the input of the people with the expertise to fully evaluate candidate energy efficiency programs, to measure cost-effectiveness, to determine what makes good utility performance incentives, and to establish energy and demand savings goals and targets.

Mississippi officials should be commended for recognizing that the state stands at a turning point in its energy future. The 2009 State Energy Efficiency Scorecard issued by the American Council for an Energy-Efficiency Economy ranked Mississippi 49th in its measurement of overall energy efficiency policy. State officials understand that not only do Mississippi consumers lose the benefits that come with efficiency programs and policies, but other states continue to draw economic development by building upon these programs and policies.

The Mississippi PSC has taken up the challenge of facilitating the implementation of the proper mix of technologies, programs and incentives that will help reduce overall energy demand and drive positive results. The commission recognizes that consumers want to be in control of their energy consumption, and that energy efficiency programs should be a substantial part of the strategy to meet customers’ future energy needs. Mississippi regulators are working to provide consumers with multiple tools that permit them to be better stewards of their power consumption.

As a new home buyer or current homeowner, you may be able to use FHA’s Energy Efficient Mortgage (EEM) to finance the cost of these improvements. FHA which is part of HUD offers the Energy Efficient Mortgage Program to allow home buyers to finance the purchase of a home—or refinance your current mortgage—and include the cost of the energy-saving, cost-efficient improvements through a single mortgage. FHA’s EEM program recognizes the monthly utility cost savings when home buyers make energy-efficient improvements. Borrowers may use the EEM program to finance the cost of energy efficient improvements into their new mortgages, without the need to qualify for additional financing, because cost effective energy improvements result in lower utility bills making more funds available for their mortgage payments.

How the Loan Works

You can take out an EEM loan as a 15- or 30-year fixed-rate mortgage or as an Adjustable Rate Mortgage (ARM) from an FHA-approved lender. FHA requires that you make at least a 3.5 percent cash investment on the property, based on the sale price. The total amount of your mortgage is based on the value of your home plus the projected cost of energy-efficient improvements. Because your home will be more energy efficient, you will save on utility costs and, therefore, be able to devote more income to the monthly mortgage payment. Your final loan amount can exceed the maximum FHA mortgage limit by the amount of the energy-efficient improvements. To find FHA mortgage limits in your area, visit the HUD website at www.hud.gov. A Home Energy Rating System provider or energy consultant will complete a measurement of your home’s energy efficiency and provide a report listing recommended cost efficient energy improvements and an estimated cost of the energy improvements and estimated energy savings to you and your lender. You may finance the cost of the energy inspection report as part of the mortgage if the entire package, including these fees, is cost effective. The amount of the energy efficient improvements is placed in an escrow account and released after an inspection verifies that the improvements are installed and the energy savings will be achieved. You can begin making energy improvements after the loan’s closing. You are responsible for hiring contractors and getting bids for the work to be done on your home. The work must be completed within 90 days after closing.

Estimated mortgage payments are based upon principle and interest only, and do not include taxes and insurance. Value indicated here is for comparison only, and will vary from home to home. Many homes qualify for energy upgrades. This home qualified for $4,816 in upgrades. With the EEM, lenders recognize the savings the upgrades will bring. Borrowers may use these potential savings like extra cash, and add the cost of upgrades into the mortgage, paying them off easily as part of the monthly mortgage payment. Once the upgrades are installed the potential savings turn into real savings.

Eligibility

Almost anyone who has satisfactory credit, enough cash to close the loan, and sufficient steady income to make monthly mortgage payments can be approved for a FHA-insured EEM loan. There is no upper age limit and no certain income level required. The following types of properties are eligible under the EEM program, including new construction or existing one- to four-unit single-family residences:

• Detached houses
• Townhouses
• Condominiums (certain restrictions apply)

The Cost and Types of Improvements

You may finance into your mortgage the cost of the energy-efficient improvements determined to be “cost effective,” which means that the total cost of the improvements, including any maintenance costs, is less than the total present value of the energy saved over the useful life of the energy improvement. The maximum cost of improvements that you can add to the mortgage is either 5 percent of the property’s value (not to exceed $8,000) or $4,000, whichever is greater based on the value of your property. For example, if your property’s value is $75,000, the maximum cost of improvements allowed is $4,000 because this is greater than 5 percent of the property value. If your property’s value is $100,000, the maximum amount of improvements allowed is $5,000 because this is 5 percent of the property’s value, greater than $4,000 but less than $8,000. Finally, if your property’s value is $160,000, the maximum cost of improvements allowed is $8,000, which is 5 percent of the property value and the maximum allowed overall. Examples of improvements that are made under an EEM loan:

• Replacing a furnace/cooling system
• Fixing or replacing a chimney
• Insulating an attic, crawl space, and/or pipes and air ducts
• Replacing doors or windows
• Installing active and passive solar technologies

If you can demonstrate you have the skills, time and ability to complete the work yourself in a satisfactory manner, your lender may authorize you to complete the labor portion of the installation yourself.

Applying for an EEM You may apply with any participating HUD-approved lender, such as a bank, credit union, or mortgage company. You can find a searchable list of HUD-approved lenders online at www.hud.gov. For lending in the deep south see this lender: Bo Smith @ Cornerstone Lending.

Gary,

My wife and I are considering selling our current home and building a new home.  Note that “considering” is the key word and we are very early into the conversation.  However, I was wondering what is the value of getting a HERS evaluation on my current home to use as 1) an assessment to identify weak points in the current efficiency/energy use systems and 2) use as a selling tool for prospective buyers?

Also, what is the timeframe for conducting such a HERS assessment and the costs?

Brent

Good question and one that I wish more sellers would ask.

Time Frame: Two Visits Required

1. One to three hours for interview and diagnosis.
2. Recommendations made.
3. An hour of so to return and measure the results of the repairs made per recommendations.

Cost: Full energy audit with report of duck leakage, whole house air infiltration evaluation and recommendations to improve if applicable = $450.00. Often times the cost to repair/improve is less than $350.00 (handyman with average skills). Total cost…approximately $800.00 (+ -). The savings and cost to repair will vary based on the quality of construction and the age and condition of your HVAC equipment, water heater, insulation, windows and appliances.

Why consider: Statistics show that lowering home energy usage directly improves value. This notion is supported by Fannie Mae, Freddie Mac, ENERGY STAR, FHA and VA financing instruments. When you increase the value through energy savings the increase is recognized in the new loan. A potential buyer will consider cost to operate the home, but only if informed. Information and education is the key to using the homes energy consumption as a sales marketing tool.

As evidence of the savings a prudent seller should consider creating solid data prior to beginning the sales/marketing efforts. I suggest that you learn where your greatest opportunity for savings is located by diagnosing your usage. You might be surprised at how little time and effort it takes to improve your home’s efficiency and value.

Selling Points: Improved marketability, improved comfort and indoor air quality, lower energy cost lead to lower cost of ownership and less maintenance.

Supporting Links
Home Energy Ratings What’s the HERS Scale?
ENERGY STAR Watch this video
Efficiency First Membership as Energy Rated Homes of Mississippi

Let me know if I can answer any other questions or help you in any way…

If you talk to 10 different people you’ll most likely get 10 different answers to “What does green mean?”

You’ll hear everything from “Yes, we’ve gone green at my office by buying recycled copy paper!” to “Green…sure I bought one of GM’s new SUVs, they’re environmentally friendly. See, the commercials place their vehicles in a forest setting?”  Actually, General Motors is a member of the Coalition of Vehicle Choice, an organization that opposes clean air legislation and laws directed at reducing auto emissions. Huh, are you sure? Yes, check it out!

What about housing?

When you purchase a home and the builder makes a green declaration how can you tell if he’s done the right thing or just blowing smoke to ride a wave of hype!?!

There are two basic types of Green Certification programs in America today. The builder or owner verified program and the unbiased 3rd party verification.

The NAHB Green Building Standard, LEED-H, Energy Star, Earth Craft and Green Built are some of the more promenant certifying bodies in the US.

Certifications

Certifications for green construction are awarded upon successfully adhereing to the particular specifications of their respective programs. Typically, points are awarded for specific energy or resource efficient principles. Other areas of note are water efficiency, indoor air quality and home owner education.

Verification

Verification for green is typically an indepth technical visual  inspection process that confirms program adherence and includes performance testing. This test is provided by highly trained “energy raters” who deterime, amoung other readings, how air tight the building is and how well the heating and air conditioning system operates.

For more info about green building contact me toll free 1-877-809-6139 or online at http://www.greenbuildinginspector.com.

Home Inspections and Energy Ratings in Central Mississippi at http://www.garynsmith.net

Jo Usry Executive Director JAR

I few months ago I spoke with JAR Executive Director Jo Usry about the idea of adding an option for Green or/and Energy Efficient homes to be showcased in MLS. This past fall the option’s were added.

Thank you Jo!

The idea is catching on all over the US. Now I see that NAR’s Green REsource Council (GRC) is promoting and supporting the options by publishing some examples.

What’s the GRC?  It was established by the Real Estate Buyer’s Agent Council (REBAC), a wholly-owned subsidiary of the National Association of REALTORS®, and was founded to make the knowledge of green real estate practices available to everyone.

They say:

A “green” Multiple Listing Service (MLS) system offers data entry fields to identify green features and certifications. This helps agents search for sustainable homes and properties, and allows builders and sellers to market their green endeavors.

In order to advance the green building movement, MLS systems should be including green data entry fields. This would involve local boards and MLS committees to understand and commit to a green initiative. The Green REsource Council hopes that by providing education, advice and panel discussions on sustainable property issues, we can expand our reach and encourage positive change.

The following is a list of green entry fields, guidelines and best practices organized by MLS systems across the US.

Department of Energy Guide to Greening Your MLS (PDF 55KB)

AZ-Tucson MLS Green Plans (PDF 348KB)
AZ-Phoenix MLS Green Plans (PDF 91KB)

CA-Santa Barbara MLS Inputs (PDF 434KB)
CA-SoCal MLS Inputs (PDF 219KB)

MI-Traverse City MLS Inputs (PDF 187KB)
MI-Traverse City Green Disclosure Statement (PDF 126KB)
This is the most comprehensive greening of the MLS the GRC has reviewed.

NC-Triangle Area MLS Inputs (PDF 460KB)

NM-Albuquerque MLS Green Plans (PDF 213KB)

OR-Portland MLS Inputs (PDF 622KB)
OR-Portland Listing Abbreviations (PDF 157KB)

SC-Charleston MLS Inputs (PDF 188KB)

TN-Middle TN MLS Inputs (PDF 93KB)

TX-Austin MLS Inputs (PDF 84 KB)
TX-San Antonio MLS Inputs (PDF 643KB)
TX-Houston MLS Green Plans (PDF 137KB)

To see this article or learn more about the GRC visit: http://www.greenresourcecouncil.org/greening_the_mls.cfm

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