The Consultant
Q/A: Best Time to Hire a 203(k) Contractor
Hi all! I have a question for contractors… As a soon to be 203K buyer, I’m wondering about the process of making an offer without yet knowing the cost of repairs or if they’ll be in my budget.
Do you give estimates at this stage? Do you charge for estimates? Is it typical to be contacted multiple times by the same buyer through their home searching process?
Thanks in advance. – Abigail
Hi Abigail – – that’s an excellent question!
When considering working with the 203(k) loan, if you haven’t established a budget and created a specification of repairs, it’s not the right time to speak with a contractor.
You should attempt to know more about the following before you consider having a contractor give you a cost estimate:
- (potential) value of the finished product/project
- minimum repairs that will be mandated by FHA
- loan qualification(s)
One of the main reasons for waiting is simply this: by the time you hire a contractor – you want to be prepared to give ALL contractors the exact same info.
Gary Smith – Professional 203(k) Consultant
Never call a contractor and ask them to price “something”.
You are in charge of the project. For the best result of your efforts you want to”tell” them what you want priced in a fairly detailed breakdown. Collecting more information will allow you to get at least 3 contractors to price the work – – – at that point you have the options to compare their price, personality, work history, etc.
Because working with the 203(k) Loan is a team approach – you’ll want to contact each team member.
Contact a lender now. Remember – think of FHA as an insurance company. The mortgagee will actually qualify you and lend you the money – FHA will insure the loan. It’s important to speak with a lender them about your idea very early in the process. Some lenders/mortgagees don’t offer the K Loan – here’s a list: https://www.hud.gov/program…/housing/sfh/lender/lenderlist
Ask a real estate professional for a “broker opinion” on value (ask about the “repaired value vs the as is value”). The broker will consider similar homes in the area and help you determine if the finished project will be “overbuilt” for the area you’re considering.
Contact and hire a 203(k) Consultant.
He/She should visit the job and speak with you about the job’s feasibility. You will want to share the broker opinion with the consultant to help them obtain a good idea about the home’s value.
Based on your remodeling ideas and plans the consultant should help you detail potential repairs. Because the consultant understands Minimum Property Requirements you and the contractor may not consider, the consultant’s repair list will help you understand cost and fit the cost into an overall idea about the value of the finished project.
The consultant will be able to help you determine if the project is feasible and should offer you a detailed list of repair items and specifications.
It’s now time to hire a contractor.
Finally – it’s a good idea to begin setting up a budget for the entire project. Include the cost to hire the right professional at the right time so you don’t back-track over steps you’ve already taken.
You’re ready to create a clean path to a successful remodel.
Reach out to us in our Facebook Group with your progress and let us help guide you in the right direction.
Smoke Alarms in Federally Subsidized Housing Fail Tests
FHA Consultants recognize there’s little dispute that smoke alarms and carbon monoxide alarms help save lives.
FHA believes the relatively inexpensive devices are considered important safety features. Consultants should take extra precautions to insure the 203(k) remodel includes an inspection to update the home to current fire safety standards.
4000.1 Handbook: Minimum Property Requirements (MPR) – “…all homes insured by FHA be safe, sound and secure.”
A minimum requirement should include upgrading single station smoke detectors to interconnected devices. That action would allow all devices to sound an alarm when one station detects smoke or fire. For the most reliable protection the alarms should be dual technology – ionization and photoelectric type devices and should be replaced (the entire unit replaced) every 10 years. I’m sharing a GOOD ARTICLE HERE about the topic – give it a read.
Recently an ABC Owned Television Station obtained and analyzed data from the Department of Housing and Urban Development’s inspections of subsidized housing between 2014 and 2019. ABC found more than 11,000 properties, or 41% of all complexes run by public housing authorities or private landlords who receive taxpayer subsidies, were cited for missing, broken or inadequate smoke alarms.
HUD rules say tenants are responsible for ensuring smoke alarm batteries are kept in place and informing property owners of any problems with detectors. Preston Prince, executive director of the Fresno [Cal.] Housing Authority, says informing residents of their rights and responsibilities could help get some repairs made faster.
“I believe families should know their rights and [how] to make the demands,” he told KFSN. “If something’s not working in their unit, they have a right to speak up and more than to speak up, they have the right to a safe house.”
The FHA requires that every property implement all appropriate security measures to protect the house itself and the occupants. FHA inspection criteria necessitate that properties contain the most basic safety features, including lock-and-key and deadbolt locks for every outside-accessible door and functioning locks for all windows.
The FHA does not require security systems be installed in every property; however, for properties that do boast a security system, the system must be in functional condition or the seller must completely uninstall the system prior to the final inspection.
The federal government posts all of its inspection scores and some details about deficiencies, including smoke detector problems, on HUD’s public website and updates the records regularly. ABC reviewed the most recently published data, posted at the end of 2019.