Pay Dirt Series – Financing Hoarder Houses

We’ve all seen the reality TV shows about hoarder houses and the associated mental health issues.  But in front of the TV cameras are real people, and these real people may come to you for financing help.  In fact, you may not realize the hoard until you’ve seen the appraisal.  What do you do then?

Many times these properties won’t be approved by lenders simply because a foreclosure sale will inevitably mean having to clean up the property and a relocation of the borrower.  But occasionally the facts of the borrower’s situation my leave an opening for financing.

For example, if the loan to value is extremely low, so that the land value alone covers the security requirement, or if the subject property is not a principal residence, if the property is otherwise well maintained and the nature of the contents of the house is more items of interest than garbage.  Also if there is a financially strong guarantor or additional property that can be added to the security, lenders may be more willing to consider an exception.

The other situation is where your borrower is the purchaser of such a property.  Here you are much more likely to find a lender to work with.  Provided that the LTV is low enough, your borrower has the expertise to remedy the property and, in the best case, has additional collateral to add to the mortgage, you may find lenders willing to work with your client.

These files are not easy, so its important to know what to look for to find the ones that may be financeable.