A few weeks ago, I received a call from a local realtor with an odd, but not unusual, request: He needed a contractor who was or could become 203(k)-approved. The agent had already started the loan process with a competitor when he realized he did not have a qualified contractor to complete the needed repairs. After several weeks of searching through his and the lender’s sources, a fellow realtor suggested that the agent call me. I gave the agent the names and phone numbers of three contractors that I have used on 203(k) projects over the past year. One of the contractors was awarded the job and is currently handling the repairs.
As a 203(k) lender, I am not required to have a list of potential contractors for use by my customers. However, to be successful with this program you must put yourself in a position to assist your customers with both credit and renovation issues.
What can be learned from this story?
1. The most successful 203(k) lenders have taken the time to put all the pieces of the puzzle together for their customers. A good 203(k) lender will understand the role of contractors, FHA consultants, local zoning and permitting requirements along with a basic idea of renovation cost for their market. Don’t be just an app taker; work the program.
2. Contractors and renovation vendors (e.g., mold and lead-based paint testers, structural engineers, termite inspectors, etc.) should contact local FHA 203(k) lenders and ask to be approved as a contractor or placed on a vendor list for use by potential customers. There is business here for those who search it out.
3. Realtors need to better understand the basics of the 203(k). Go to the loan application with your buyer so you can educate yourself on the 203(k) process. I also suggest that agents accompany their buyers on the walk-through with the FHA 203(k) Consultant. Learn from your consultant; it is my experience that the best consultants really enjoy educating others about home repair (consultants are another excellent source for contractor and renovation vendor referrals).
Foreclosures, short sales, and homes with deferred maintenance continue to saturate the market. Use the “k” to move these properties and get your piece of the pie.
Hey Dustan, good start on your blog, its good to see articles on the 203k.
ReplyDeleteOne suggestion, the comment button is hard to see. I almost thought there wasn't one.
Paul Lesieur/ 203kloanmn.com
Great advice. As a 203k Consultant and Consultant Trainer here in Atlanta, I find that the consultant is usually the most knowledgeable person on how the 203k program works. My training seminars cover the roles and responsibilities of all the parties involved in the transaction. So, what I recommend is the following steps:
ReplyDelete1.Sign a purchase contract subject to 203k financing.
2. Have the lender do a pre qualification based on the borrower's maximum ability to finance.
3. Obtain the services of a HUD approved 203k Consultant to perform a Feasibility Study.
Completing these steps up front will save everyone a lot of time and money because you really don't know if you have a good project until it's inspected and a budget is developed. Plus, getting the Consultant involved in the beginning will give him or her the opportunity to educate everyone else involved.
Garrett Feis
404-925-7163
The203kconnection.com