The Role of Roofing in the Mortgage Approval Process: How California Home Flippers Can Accelerate the Sale

A house will not qualify for many types of mortgage financing unless it is habitable, and habitability includes a roof in good repair. In order to pass the appraisal process for a Veterans Administration backed loan, for example, the roof must “provide reasonable future utility, durability, and economy of maintenance.” In other words, the roof must not simply be passable; it must be in good working order. Regulations for other federally-backed mortgage loans require the appraiser to determine whether or not the roof has a minimum of two years of life left.

It’s a good rule of thumb that a roof has about 15 years of life before it needs repair or replacement, however, even before then it can weaken despite the absence of visible holes. It’s important that you get a roofing professional to inspect your roof to determine what is needed. Home inspectors are generalists – they’re able to spot the readily apparent problems, but a specially-trained professional will be able to give specific, detailed information about the health and longevity of your roof to ensure that you either meet the required standards or know exactly where and how your roof falls short.

The Benefits of a New Roof

A buyer’s first reaction to your home is often a difficult one to overcome. If they see the roof looking worn or old, notice shingles missing, or see any other red flags in the roofing, their cautionary thoughts will lead them to question the integrity of other parts of the house. You don’t want to endanger your sale by not taking the time to repair or reroof if the house needs it.

Beyond curb appeal, a new or improved roof can offer other benefits including:

Substantial Return on Investment

On the West Coast, replacing the roof on a mid-range remodel costs around $22,000, with an 82.5% cost to value assessment. That means you’re gaining back around $18,000 at sale. Don’t despair for that missing $4,000, though. That money will be well-spent when it comes to engaging home buyers who want to put down roots without having to worry about replacing their roof in the near future. The target buyers for home flippers won’t be interested in doing major repairs to their home for at least 5 years.

Added Discounts on Insurance Premiums

If you’re working on a fix-to-rent project, consider the fact that reroofing your home can sometimes get you a discount on homeowners insurance. In California, minor improvements to a roof, such as using fire resistant materials, may get you a special additional discount from insurance companies.

Cool Roof Technology

In the last decade, cool roof technology has joined the ranks of initiatives geared at helping California reduce its energy costs. The shingles or coatings are specially designed to reflect a certain amount of the sun’s light and heat, taking a bite out of energy costs. It’s a bonus for homebuyers if your shingles are rated well on the cooling scale. Additionally, this kind of roof will last longer than a roof that constantly endures the stress of high heat. This can be a a big pull for energy-conscious buyers, especially here in California.

Socotra Capital Can Make Your Fix-and-Flip a Success

Socotra Capital is California’s premier equity-based lender to small and large real estate investors alike. Traditional banks go by credit and can cost investors opportunities which require immediate cash. Socotra makes much faster decisions based on the quality of the project and the equity in the project, rather than depending on a lengthy credit approval. This quick cash makes the rehab necessary for time-sensitive fix-and-flip or fix-to-rent projects possible and profitable.

If you’re looking to purchase a fixer-upper in need of big improvements like major roof repair, a Residential Rehab Loan from Socotra Capital might be a viable option for you. We can often provide you with same-day pre-qualification so you can hit the ground running on your project.

Your real estate assets are your best investments for the future. At Socotra Capital, we’re proud to be the premier direct hard money lender for California real estate. Contact us today to learn more about how we can help.

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