Purchase + Improvements

Did you know you can buy a home that has problems and get these problems fixed within 3 months of moving in? 

This product is called a Purchase PLUS Improvements.  There are a few rules, but basically, if you like a house but it has, for example, a poor furnace and shabby roof, you can purchase this home and get the roof and the furnace replaced.  This, of course, increases the value of the home. 

So—how can this be done?

If you see a place and indentify a few problem areas like those stated above, you should initially tell your real estate agent that you will need to get a new furnace and roofing specialist in the house soon after an agreement of purchase and sale has been signed.  Next, I would require the agreement of purchase and sale, the MLS listing, and two quotes (one for the furnace, one for the roof).  The following will show how your mortgage would then be determined: 

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Sale Price                             $170 000.00

Improvement                         $12 000.00            (Roof - $5000, Furnace-  $7000)

                                             $184 000.00

CMHC                                     $  5 328.00

Total Mortgage          $189 328.00

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The Rules: 

1. The improvement can only equal a 10% increase in property value if insured by CMHC and a 20% increase if insured by G.E. Capital.  This part will be handled by the broker agent.

(In our example above, the maximum improvement is $17 000.00 to $34 000.00.)

2. The work must be completed within 3 months of the closing date.  You need to discuss with the sub contractor to assure the 3 month deadline will be met.

3.  No one gets paid until all of the work is complete.

4. Most improvements need an appraiser to confirm work is actually completed.  This typically costs about $100.00. 

My Recommendations: 

1. Co-ordinate work (roof and furnace) so all workers finish around the same time.  Also, ensure sub contractor understands when he/she gets paid.

2. Take before and after pictures.

Overall, this product can be very helpful to buyers.  If you find the perfect place, and then find there is a huge “BUT, this needs work...” there is still an easy way around it. Please call or e-mail if you would like more details about the Purchase Plus Improvements product, or any other mortgage product. 

I offer a variety of options for every situation!