1. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 1 Distressed Property Solutions John D. Adams, Jr. NEFAR Instructor NMLS#442266 (904) 294-7311 FL203k@gmail.com – www.FL203k.com – (904) 294-7311www.FL203k.com

2. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 2 Why are you here today? What do you hope to accomplish with this education? Take a few minutes and write down the reasons you came to hear about Distressed Property Solutions ______________________________________ ______________________________________ ______________________________________ ______________________________________ ______________________________________ FL203k@gmail.com – www.FL203k.comwww.FL203k.com

3. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 3 First Hour Introductions Learning objectives Market overview Product need Consumers Perceptions Common Misconceptions Mortgage solutions Product application FL203k@gmail.com – www.FL203k.comwww.FL203k.com

4. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 4 Second Hour Non renovation solution: Homepath Renovation Solutions Homepath Renovation Fannie Mae Homestyle FHA 203k Streamline FHA 203k Standard Examples 203 what? FL203k@gmail.com – www.FL203k.comwww.FL203k.com

5. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 5 Third hour The renovation process Needed inspections Hud Consultant Contractor validation Contractor bids Appraisals Renovation forms Draw process How to market Distressed Properties FL203k@gmail.com – www.FL203k.comwww.FL203k.com

6. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 6 Learning Objectives Identify distressed property Identify consumer needs Gain knowledge of specific programs to help consumers purchase distressed real estate Outline the process for renovation Know the “ins and outs” of the process Strategies to help market your listings Know all inspections and required documents Understand timeframes How to avoid common pitfalls FL203k@gmail.com – www.FL203k.comwww.FL203k.com

7. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 7 Lending Requirements are More Stringent Equity Lending is Sparse Availability of Credit Cards – Not as Accessible Sellers unwilling to commit funds for Repairs Short-sales Overwhelming percentage of “As-Is” Listings No repairs prior to Closing More demanding buyers foreclosures FL203k@gmail.com – www.FL203k.comwww.FL203k.com

8. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 8 FNMA and FHLMC: -/+300% increase in Foreclosure 2008 - 2010 Origination of 203k – now seeing conventional type renovation financing Roughly half of existing buyer pool is government loan based Roughly 52% of home sales today are First Time Home Buyers FL203k@gmail.com – www.FL203k.comwww.FL203k.com

9. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 9 Investors setting prices on distressed property 80% of US homes 20 years or older Ability to purchase and renovate homes to better standards FL203k@gmail.com – www.FL203k.comwww.FL203k.com

10. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 10 Could You Help More Consumers if: …you had a solution that allowed you to offer FHA and or conventional financing on virtually any property regardless of condition? …you could cure property conditions after you closed on the property and/or make the home exactly the way the customer envisions it? …the solution was simple for your customers to understand and to execute? …the solution allowed you to close on a property in 45 days from execution of the contract? FL203k@gmail.com – www.FL203k.comwww.FL203k.com

11. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 11 Consumers Consumers don’t know about habitability rules Most do not know that solutions exist Many want to buy distressed property but don’t know where to start Most want the ability to turn a home into what they envision and in the area they want to live “Dream Home” FL203k@gmail.com – www.FL203k.comwww.FL203k.com

12. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 12 Consumers Tax advantages Create DREAM Home build immediate EQUITY after renovation Take advantage of ‘as-is’ market Can finance up to 6 mtg. payments Instant improvement to quality of life No minimum work – appliances to pools from foundation to fabulous FL203k@gmail.com – www.FL203k.comwww.FL203k.com

13. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 13 Perception of Real Estate Agents Home in need of repair cannot go FHA The loan is too expensive Takes too long Too complicated Never closes Tried one before and it was a nightmare Loan officers are not competent to do this loan Loan is for blighted properties or structural damaged properties only FL203k@gmail.com – www.FL203k.comwww.FL203k.com

14. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 14 Truths in renovation lending Renovation solutions are one loan There is no “floating rate” Repairs are done after closing There is only one closing There is only one appraisal You only need one bid No contractor list FL203k@gmail.com – www.FL203k.comwww.FL203k.com

15. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 15 Renovation Lending Solutions (Federal Nation Mortgage Association) FNMA FNMA Homepath FNMA Homepath Renovation FNMA Homestyle Renovation FHA ( Federal Housing Authority) 203k Streamline Standard FL203k@gmail.com – www.FL203k.comwww.FL203k.com

16. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 16 john@FL203k.comjohn@FL203k.com - www.FL203k.com (904) 294-7311www.FL203k.com FNMA Homepath Loans: Homes eligible for Homepath are exclusively FNMA foreclosures they can be found in MLS and posted by FNMA at www.homepath.com

17. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 17 FNMA Homepath Loans No Appraisal – can be purchased “as-is” No monthly mortgage insurance premiums No Upfront mortgage insurance premium Less costly than FHA Up to $417,000 loan amounts All Occupancy types okay As little as 5% down on owner occupied financing As Little as 10% down on investor Specific to FNMA Owned REO Streamline approval for condo certifications FL203k@gmail.com – www.FL203k.comwww.FL203k.com

18. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 18 Repairs with Homepath Renovation and 203k Roofs, gutters and downspouts HVAC systems Exterior wall re-siding Window and door replacements Painting both interior and exterior Wood Rot Plumbing and electrical systems Tile, carpet and flooring Minor remodeling (such as kitchens or baths) FL203k@gmail.com – www.FL203k.comwww.FL203k.com

19. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 19 Repairs with Homepath Renovation and 203k Appliances, including free-standing ranges, refrigerators, washers/dryers, dishwashers, microwave ovens Weatherization: such as storm windows, doors, & insulation Exterior decks, patios, porches Improvements for handicap accessibility FL203k@gmail.com – www.FL203k.comwww.FL203k.com

20. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 20 FNMA Homepath Renovation Loans Up to $35,000 allowed for renovations No monthly mortgage insurance premiums No Upfront mortgage insurance premium Less costly than FHA Up to $417,000 loan amounts All Occupancy types Okay As little as 5% down on owner occupied financing As Little as 15% down on investor Specific to FNMA Owned REO Streamline approval for condo certifications FL203k@gmail.com – www.FL203k.comwww.FL203k.com

21. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 21 FL203k@gmail.com – www.FL203k.comwww.FL203k.com

22. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 22 Larger scale Construction Raze home and rebuild on existing foundation Build out buildings or put in a pool Add a Bedroom, Bonus room, Bathroom or Garage Move a home to a new lot Completely gut existing structure and reframe Convert a building to single or multi-family Convert a building to mixed-use space where allowed Finish a home that may have incomplete construction FL203k@gmail.com – www.FL203k.comwww.FL203k.com

23. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 23 Conventional FNMA Homestyle Less Costs than FHA No limit on repairs Can include luxury ticket items contingency reserve required Loan amounts up to $417,000 Any home is eligible For investors, Second-home, and Primary residence Feasibility study not required under $15,000 Increase size and footprint of home Complete a home without prior C/O FL203k@gmail.com – www.FL203k.comwww.FL203k.com

24. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 24 FHA Streamline 203k Program will allow for up to $35,000 in repairs No minimum amount for repairs Allowed up to 110% of after improved value No minimum limit for repairs Primary occupants only 3.5% down payment No structural damaged property No luxury items Up to 4 unit multi-family mixed use properties allowed FL203k@gmail.com – www.FL203k.comwww.FL203k.com

25. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 25 Standard 203K (Full K ) No limit on repairs (minimum of $5,000 in repairs) Move or raze a home HUD Consultant Write-Up required Structural repairs okay Contingency reserve required No luxury items Lend up to 110% of after complete value Increase size and footprint of home FL203k@gmail.com – www.FL203k.comwww.FL203k.com

26. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 26 Standard 203K (Full K ) - continued Primary occupants only 3.5% down payment Up to 4 unit multi-family mixed use properties allowed Up to 6 months to complete renovations Borrower can finance up to 6 months of mortgage payments FL203k@gmail.com – www.FL203k.comwww.FL203k.com

27. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 27 FL203k@gmail.com – www.FL203k.comwww.FL203k.com

28. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 28 Conventional ( summary) Loan Amount - up to county loan limit of $417,000 Primary residence, 2nd Homes, Investment properties Property – SFR, 1-4 units, condos, etc. Credit – 620 or automated approval Up to 95% LTV FL203k@gmail.com – www.FL203k.comwww.FL203k.com

29. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 29 FHA 203K ( summary ) Loan Amount - up to county loan limit NO minimum repairs (Streamline) NO Maximum dollar ammount on repair (Consultant K) Primary residence only Credit – 620 and up Property – SFR, 1-4 units, mixed-use, mobile homes, etc. HUD 100 dollar down FL203k@gmail.com – www.FL203k.comwww.FL203k.com

30. Distressed Property Solutions A reconstructive approach to financing homes Primary Occupancy Program Traditional Conv. Homepath Homepath Reno Homestyle Reno Purchase price $ 100,000 Rehab amount $ 30,000 financed amount $ 95,000 $ 123,500 Cash required* $ 35,000 $ 6,500 Investor Occupancy Program Traditional Conv. Homepath Homepath Reno Homestyle Reno Purchase price $ 100,000 Rehab amount $ 30,000 financed amount $ 75,000 $ 90,000 $ 110,500 $ 104,000 Cash required* $ 55,000 $ 40,000 $ 19,500 $ 26,000 *Cash necessary for cost of repairs as illustrated with down payment. Closing costs and prepaid expenses are not reflected in these estimates

31. Distressed Property Solutions A reconstructive approach to financing homes Primary Occupancy Program Traditional FHA FHA 203k streamline FHA 203k Standard Purchase price $ 100,000 Rehab amount $ 30,000 $ 50,000 financed amount $ 96,500 $ 125,450 $ 144,750 Cash required* $ 33,500 $ 4,550 $ 5,250 *Cash necessary for cost of repairs as illustrated with down payment. Closing costs and prepaid expenses are not reflected in these estimates HUD 100 dollar down payment program available 31 FL203k@gmail.com – www.FL203k.comwww.FL203k.com

32. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 32 Prequalify your buyers and property Identifying a renovation project Customer looking to buy exclusively short sales or bank real estate owned property Any home could use a renovation solution Homes being sold “as-is” Sometimes offered as “cash only” Bank REO or listings where repairs are not negotiable Short sales where seller cannot afford to make the repairs FL203k@gmail.com – www.FL203k.comwww.FL203k.com

33. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 33 Contract Add contingency for renovation financing Select Conventional or FHA “AS-IS” Allow 45 days for closing Example FL203k@gmail.com – www.FL203k.comwww.FL203k.com

34. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 34 Property Condition Solution Obtain inspections Make sure utilities are on Get home inspections Get HUD Consultant Write-Up if needed Obtain Estimates Make sure the renovations make sense Run comparable for price Finalize bid Order appraisal/Consultant SOR Report FL203k@gmail.com – www.FL203k.comwww.FL203k.com

35. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 35 Consultant Process (203k Consultant K) When you will need a HUD Write-Up What is the consultant write up and SOR Consultant meets with borrower and contractor at property to discuss FHA required repairs Consultant will complete the Work Write Up Will Perform Draw Inspections after closing How much it costs – is financed into the loan FL203k@gmail.com – www.FL203k.comwww.FL203k.com

36. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 36 Feasibility study on Homestyle What is the Feasibility study How much it will typically cost FL203k@gmail.com – www.FL203k.comwww.FL203k.com

37. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 37 Contractor Validation Provided applicable licenses and insurance Provide references May involve credit check Home Owner Contractor Agreement Contractor Notice FL203k@gmail.com – www.FL203k.comwww.FL203k.com

38. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 38 Contractor Bids – Bad Bid FL203k@gmail.com – www.FL203k.comwww.FL203k.com

39. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 39 Contractor Bids – Good Bid FL203k@gmail.com – www.FL203k.comwww.FL203k.com

40. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 40 Contractor Selection Licensed and insured? Experience with this type of transaction? Timeline on start / completing this project? Are you familiar with the draw process on these type of loans and are you comfortable with submitting the permits/paperwork to the lender to get yourself paid? Make sure your contractor can afford to take your project FL203k@gmail.com – www.FL203k.comwww.FL203k.com

41. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 41 Appraiser will not detriment property for defects that have been addressed in the work bid such as: WDO Unfinished construction Health Hazard or Safety Issues Septic, Well or Structural issues Inability to get the utilities on or working properly FL203k@gmail.com – www.FL203k.comwww.FL203k.com

42. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 42 Time for closing Once the customer is satisfied with the bid the appraisal is ordered with the scope of work provided by the contractor for a “Subject To” valuation Once the appraisal order is received, it is reviewed for any additional work required by the appraiser. If necessary, the contractors scope of work will be modified to include the additional repairs The Loan Closes and Renovation Begins FL203k@gmail.com – www.FL203k.comwww.FL203k.com

43. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 43 Important customer points with lenders: How does the draw process work? Who will service my loan once the loan is closed? How fast are the funds available after closing? Can I get money for my contractor for materials up front in the process? How comfortable are you with this process? FL203k@gmail.com – www.FL203k.comwww.FL203k.com

44. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 44 Other important renovation documents Maximum Mortgage Worksheets 203k Acknowledgement Contractor Validation Summary Notices FL203k@gmail.com – www.FL203k.comwww.FL203k.com

45. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 45 Draw Process FHA 203k Streamline K and Homepath renovation 35% of contractor’s bid funded 5-7 days after closing balance released when work completed, after final inspection & title update FL203k@gmail.com – www.FL203k.comwww.FL203k.com

46. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 46 Draw Process FHA 203k Consultant K and FNMA Homestyle Funds released per Consultant’s line item breakdown and completion Up to 5 draws 10% holdback on each draw Holdback released after final inspection & title update FL203k@gmail.com – www.FL203k.comwww.FL203k.com

47. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 47 Renovation Key Points Allow 45 days for closing Make sure utilities are on at time of inspection Get all inspections done early Septic, Well, WDO, Mold, Roof, Etc.. If you don’t know - Consult Add contingency for renovation financing Select contractor or National Home Improvement Vendor Finalize a quote you like - Nail down the details FL203k@gmail.com – www.FL203k.comwww.FL203k.com

48. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 48 FL203k@gmail.com – www.FL203k.comwww.FL203k.com

49. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 49 Interested in increasing you client base and referral network? Turn every house into the customers dream home Increase customer satisfaction Provide options for consumers to purchase homes that otherwise wouldn’t be eligible for financing Include purchase price plus repairs in one loan, one closing, one payment FL203k@gmail.com – www.FL203k.comwww.FL203k.com

50. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 50 How to Market Distressed properties Add “renovation financing available on this property” in MLS Pre-bid minimal work for FHA compliancy and upload in MLS Change from cash only to accept FHA, Conventional, and now there is a 203k financing option in MLS Be informed of lending options Add marketing for renovation financing FL203k@gmail.com – www.FL203k.comwww.FL203k.com

51. Distressed Property Solutions A reconstructive approach to financing homes © John David Adams, Jr. 51 FLYERS/PROPERTY TENTS – Highlight how the Special Financing program can work to a homebuyer’s advantage. Place in homes for sale; attach to your listing flyers and attach to MLS document set YARD SIGNS – “Special Financing” yard signs may help increase traffic and calls on listings. MLS INFO – Advertise with your listings: “Customize this home with Special Financing. Contact Your Renovation Specialist for more information about renovation loans” WORD of MOUTH – Nothing is more powerful than telling your buyers, sellers & colleagues the opportunity Renovation / Special Financing presents. FL203k@gmail.com – www.FL203k.comwww.FL203k.com

52. Thank you for your time today. John Adams NMLS # 442266 (904) 294-7311 www.johnadamsloans.com fl203k@gmail.com © John David Adams, Jr. 52 FL203k@gmail.com – www.FL203k.comwww.FL203k.com