Guest Post by: Aislinn Garza, Head of Customer Success at Kopa. With over 10 years of experience in real estate and property management, she has a passion for helping others find solutions to find their forever homes and create lives they love.
Make Relocation a Seamless Transition for Your Clients
For clients looking for ways to be flexible when finding their next home, we tend to look to bridge loans as the solution. But is this the best option economically for your client?
Bridge Loans: Pros and Cons
Bridge loans do have some fairly significant pros, including:
Overall flexibility of the loan provided to the borrower.
Access to quick capital that can help finance the a quick close on a new home or meet current financial obligations.
Allow clients to finance and complete necessary home projects and/or renovations.
However, the benefits come at a cost:
Higher interest rates that can (and will) fluctuate at any given time and are subject to change without notice to the loan holder.
Applicants need at least a 20% home equity line of credit (HELOC) in their old home, meaning many homeowners may not even be eligible for financing.
Applicants must have an excellent (800+) credit score along with a low debt to income ratio.
If approved, borrowers will essentially be paying on a second mortgage with a separate mortgage rate. Borrowers must prove they have sufficient income to cover the additional monthly payments: the bridge loans and the mortgage payments for their new home.
Borrowers might face prepayment penalties if they choose to try and pay off their loan faster in one lump-sum payment, creating a catch-22.
In addition to all of those cons, bridge loans are still mortgage loans, and they require the same amount of work and effort as conventional loans or term mortgages. Bridge loans are also subject to origination fees, transactions through a mortgage lender and mortgage broker, and additional stress and worry for your client.
Smart and Highly Recommended Alternatives to Bridge Loans
Buying one home is hard enough; do you want your clients to have to pay two mortgages at once? Trying to have clients qualify for bridge loans and a traditional mortgage loan is double the work and headache for you and them. Thankfully, a new (and wallet-friendly) solution is on the rise: furnished, mid-term housing. Provide your clients with a space to stay and call their own without the hassle of having to provide financial documentation, take on an enormous amount of unneeded debt, and still live in a comfortable space they can call home.
When it comes to finding furnished rentals, it can be kind of a toss-up. Where do you look? Where do you start? How is this going to be less expensive for my client? You and your clients have options depending on the length of a client's stay.
Relocation Companies and Relocation Professionals
For stays longer than 6 months, clients can hire a relocation company for their interim housing. Relocation companies, or "RELO" as they are known in real estate, are businesses that help with the full relocation experience. While their most common connotation is with corporate relocation, this service can help anyone looking to find a short-term space while they wait on their long-term dream home. Working with a relocation professional can be a blessing because their job is to be the expert in your client's real estate market, and they'll help make the relocation process seamless from beginning to end.
Because of its concierge service and attention to detail, relocation services are not inexpensive. While amounts vary, a study conducted by the Worldwide ERC in 2012 estimated that relocation packages could cost an average of $22,000 for a full relocation specialist and service. Prices ranged from as low as $3,000 to as high as $100,000.
Craigslist and Facebook Marketplace
Most clients don't have the additional funds to finance a professional relocation service, but they still want a comfortable, interim home. For shorter-term stays, clients can access online platforms like Craigslist and Facebook Marketplace to find a home or apartment to lease or sublease. However, beware: what you see isn't always what you get. As valuable as these services can be, both Craigslist and Facebook Marketplace are notorious for "too good to be true" scams, sometimes costing people hundreds of thousands of dollars.
Kopa (our recommended option)
Kopa is a mid-term rental marketplace that will provide an easy way for your clients to find a place they can call home without having to deal with referral fees, or trying to navigate home sales sites like realtor.com. Unlike other marketplaces, hosts on Kopa are specifically looking to rent their spaces for 2-8+ months, are verified, and payments to hosts are made securely online. Through Kopa, renters connect with hosts who are renting their spaces for 1+ months, perfect for clients trying to find a temporary place to live while they browse the housing market for their next forever home.
How to Decide What's Best for Your Client
Many clients enter the home buying process and it feels as if they're walking into the unknown. Not having immediate cash on hand should not be the factor that prevents them from securing their dream forever home. Bridge loans may be the most well-known option, but taking on additional debt in the form of an unregulated loan might not be the best choice for your clients. While no home buying and selling transaction is perfect, by looking beyond the norm when it comes to interim housing solutions for clients, the experience can become that much more manageable and less stressful for everyone involved.
More about Kopa.co
Kopa, is an online furnished marketplace focused on mid-term rentals with flexible leases ranging from 1-18 months. Founded with renters in mind, Kopa makes searching for the perfect space both easy and convenient while also being 3x cheaper than other online furnished marketplaces. Finding a space to call home shouldn't be hard and the Kopa experience helps finding home become that much easier.
Your clients can begin their search by browsing listings here or reach out to their support team for customized recommended listings.
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