One of the biggest misconceptions in mortgage lending is that our job goes on autopilot once we’ve issued the pre-approval letter. I used to think that way, too. Once the borrower was pre-approved, I assumed my next job was to work on the other loans in my pipeline and wait for a purchase agreement to arrive in my inbox.
After originating enough renovation loans, I realized some of the most important work I did happened before there was ever a signed contract.
Writing an offer on a home that needs renovations isn’t quite the same as writing an offer on a move-in-ready property. The purchase price is only part of the financial picture, the improvements may affect the appraisal, and the additional steps involved in renovation financing can influence the closing timeline. If the mortgage loan officer helps the borrower and selling agent think through those considerations before an offer is submitted, many of the problems that might otherwise surface later can be avoided.
That doesn’t mean stepping into the real estate agent’s role or advising a borrower how to negotiate a purchase contract. It means helping everyone understand how the financing affects the transaction so they can make informed decisions before committing to the property.
A Longer Closing Doesn’t Necessarily Make an Offer Weak
One of the first conversations I typically had with borrowers and their agents involved timing. Whenever I recommended allowing 60 days for closing, I could almost predict the response: “Sixty days?! That’s way too long.”
I understood the reaction. Traditional mortgage lending has conditioned borrowers, agents, and sellers to view a 30-day closing—or even less—as the goal. Renovation loans, however, aren’t traditional mortgage transactions. There may be contractor bids to finalize and review, a Consultant report when applicable, additional renovation documentation to collect, and an appraisal that evaluates the property subject to the proposed improvements. There is simply more happening before closing.
What I discovered, though, was that a 60-day closing wasn’t always the obstacle people assumed it would be. Homes that need substantial repairs or updating may have already spent more time on the market than comparable move-in-ready properties. Years ago, investors frequently scooped up distressed homes at deep discounts, but rising home prices have made some of those opportunities more difficult to find. In certain markets, properties requiring significant work can remain available longer because fewer buyers are willing or able to take them on.
By the time a renovation buyer comes along, the seller may be more interested in a qualified buyer who has a viable plan for financing the property than holding out indefinitely for a cash buyer or a quicker offer that may never materialize.
That changes the way I would frame the closing period. Rather than apologizing for requesting additional time, I wanted the agents involved to understand why that time was appropriate and what needed to happen during it. If we were able to close sooner, wonderful. But I would much rather establish a realistic expectation at the beginning than request an extension later because we promised a timeline the transaction couldn’t support.
A Strong Offer Starts With the Right Property
Another conversation I found myself having frequently had less to do with mortgage guidelines and more to do with judgment.
Renovation financing is exciting because it gives borrowers an opportunity to look at a home as it could be, rather than simply accepting it as it is. Once buyers understand that, their imaginations can take off. They may start envisioning the chef’s kitchen they’ve always wanted, an elaborate outdoor living space, luxury finishes throughout the house, or improvements they never thought they could complete immediately after buying a home.
There’s nothing wrong with dreaming. In fact, helping borrowers see those possibilities is one of the things I love most about renovation lending. But somewhere along the way, I learned to ask a different question:
Does this renovation make sense for this property?
Just because a renovation program allows an improvement to be financed doesn’t necessarily mean every possible improvement represents a sound financial decision. I’ve seen borrowers want to add features that simply didn’t exist anywhere else in the neighborhood. Truth be told, I’ve made that mistake myself, and I paid for it. Consider this one of those “do as I say, not as I did” lessons learned through experience.
A renovation budget can become so ambitious that the borrower is attempting to create a property whose value exceeds what the surrounding market can reasonably support. That’s important because the completed property still has to be appraised using appropriate comparable sales.
The objective isn’t necessarily to create the nicest house on the block. It’s to help the borrower create a home that meets their needs while understanding how their choices may affect value, financing, and affordability.
Not Every Renovation Decision Has to Be About Return on Investment
That doesn’t mean every renovation has to produce a perfect financial return.
If a borrower plans to live in a home for decades and wants to spend more on an improvement because it will meaningfully enhance their enjoyment of the property, that’s a personal decision. A homeowner may knowingly choose finishes or features that won’t return every dollar invested when the property is eventually sold.
There’s an important difference, however, between making that decision intentionally and discovering after the appraisal that the market won’t support the renovation budget.
That’s where a knowledgeable mortgage loan officer can add value. We aren’t there to choose countertops or tell borrowers how they should remodel their homes, but we can help them understand the financial implications of the choices they’re making.
The same principle applies to the mortgage payment. Qualifying for a particular loan amount doesn’t necessarily mean that’s the payment a borrower will enjoy making every month. I wanted borrowers to consider whether they could comfortably afford the home after accounting for the renovations, not only when they purchased it but years afterward.
I also wanted them prepared for the possibility that the subject-to appraisal might not support everything they hoped to accomplish. If that happened, which improvements were essential and which ones could they live without?
Those aren’t always easy conversations, but they’re valuable ones. Our job isn’t simply to help someone finance a renovation. It’s also to help borrowers understand the financing well enough to make decisions they can still feel good about long after the paint has dried.
Don’t Let the Purchase Price Consume the Renovation Budget
All of these conversations shared a common purpose: setting expectations before they became problems.
One expectation I always wanted the selling agent to understand was that the borrower wasn’t simply approved for a purchase price. They were approved for a total investment, or acquisition cost—the purchase price plus renovation costs.
That distinction matters tremendously when the agent begins identifying properties.
If a borrower uses virtually all their financing capacity to purchase the home, there may be little or nothing remaining for the renovations. The property may technically fall within the buyer’s price range while being completely impractical for the renovation strategy they had planned.
I’d much rather explain that before the buyer falls in love with a house.
The mortgage loan officer and selling agent don’t need to do one another’s jobs, but they do need to understand how their respective roles intersect. The agent needs enough information about the financing structure to help the buyer identify realistic properties, while the mortgage loan officer needs enough information about a potential property to help the borrower understand whether the financing still works.
That collaboration can make the difference between simply finding a house the borrower can purchase and finding one they can actually afford to renovate.
Don’t Let an Unfamiliar Loan Program Weaken the Offer
Once the borrower and selling agent were ready to put an offer together, my attention shifted to the other side of the transaction.
As I discussed in the previous article, Your Pre-Approval Letter Is More Than a Letter, I developed the habit of calling the listing agent whenever one of my renovation borrowers was preparing to submit an offer. I didn’t wait until the offer was accepted. I wanted to speak with the listing agent beforehand because I believed that conversation could help my borrower compete more effectively.
Many listing agents have never participated in a renovation loan. Their impressions may come from something they heard from another agent or from a difficult transaction someone experienced years earlier. Some assume renovation loans are extraordinarily complicated. Others believe they take forever to close or involve so much red tape that their seller would be better off accepting another offer.
If those assumptions exist, I don’t want the listing agent filling in the blanks on their own.
I would introduce myself, explain that I specialized in renovation lending, reassure them that this wasn’t a loan program I was attempting for the first time, and briefly explain our process. I acknowledged that renovation financing involves some additional steps, but I also explained that those steps are manageable when everyone understands what is expected.
Sometimes the agent had questions. Sometimes I had an opportunity to correct misconceptions. Sometimes they simply thanked me for taking the time to call.
What I learned over the years is that people are often much less apprehensive about something once they understand it. A five-minute conversation could turn an unfamiliar financing program into a transaction the listing agent felt comfortable discussing with the seller.
That mattered because if the listing agent had confidence in the financing, there was a much better chance the seller would, too.
Education Can Make an Offer Stronger
None of these conversations required me to negotiate a purchase agreement or tell a real estate agent how to do their job. My role was to help everyone understand how renovation financing affected the transaction.
That difference is important.
Helping a borrower submit a stronger renovation offer isn’t necessarily about making the highest offer, promising the fastest closing, or filling in the blanks on a purchase agreement differently. Sometimes it’s about eliminating uncertainty.
The borrower understands how the purchase price and renovation budget work together. The selling agent understands why an appropriate closing period matters. The buyer has considered whether the renovation makes financial sense for the property and whether the resulting mortgage payment is comfortable. The listing agent understands the financing well enough to discuss the offer accurately with the seller.
When people know what to expect, they can make better decisions.
The strongest renovation mortgage loan officers don’t wait for problems to appear before they begin educating everyone involved. They look a few steps down the road and ask themselves what questions they can answer now that might prevent problems later.
That’s ultimately what helping borrowers submit stronger renovation offers means. It isn’t about taking over the homebuying process. It’s about becoming a knowledgeable resource at one of its most important moments.
And very often, the questions you answer before the contract is signed are the problems you never have to solve afterward.
Continue Your Renovation Lending Education
Continue your renovation lending education by exploring additional articles in the blog series, including Your Pre-Approval Letter Is More Than a Letter, Stop Selling Renovation Loans. Start Solving Real Estate Agents’ Biggest Problems., and Why Homebuyers Use Renovation Loans Rather Than Buying Move-In Ready Homes.
You can also listen to the renovatED for Lenders podcast for practical strategies, real-world experiences, and lessons designed to help mortgage professionals build, improve, and grow successful renovation lending businesses.
About Jennifer Goldsby
Jennifer Goldsby is a nationally recognized renovation lending consultant and founder of The Reno Gal®. For more than two decades, she has helped mortgage lenders build successful renovation lending platforms through consulting, education, and operational strategy. Jennifer is also the host of the renovatED for Lenders podcast, where she shares practical guidance, real-world experiences, and proven strategies to help mortgage professionals expand their expertise and grow their renovation lending business.