Wendy Cheung, Home Buyer in Sacramento County, CA

How do I find a reputable general contractor who is familiar with the 203k loan requirement and process in Sacramento?

Asked by Wendy Cheung, Sacramento County, CA Mon Mar 7, 2011

I was approved for a 203k loan and am interested in a bank owned property, but scared of the prospect that I'll be dragged into a black hole of unknown damages of this property. How can a home buyer protect himself/herself in the 203k loan process?

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Get an independent home inspection done by a reputable home inspector recommended to you. Thry should take photographs and write a comprehensive report of urgent repairs, moderately urgent, and mildly urgent. Then you can often negotiate with the bank's Realtor. It's well worth the investment to have an independent home inspection for yourself. You'll know what you are getting into.
0 votes Thank Flag Link Tue Oct 29, 2013
The FHA inspector would take care of that. The house and the extend of work needed will be thoroughly inspected before lender goes ahead with the loan. The lender is the one taking the risk in this deal (they want no surprises) as they lend you the 96.5% + the upfront Mortgage Insurance + the $35,000 rehab ...

Thierry

Thierry Abel
Senior Loan Consultant
By Referral Only
All California Mortgage, Inc
P: (415) 464-8261
C: (415) 378-7508
F: (415) 464-2367
E: tabel@allcalifornia.com
0 votes Thank Flag Link Tue Mar 8, 2011
Your Buyers Agent should have contacts for your needs in regards to finding a General Contractor savvy with the 203K process. IF not ask them to conduct interviews’ for you and or have your lender contact interview some GC candidates to see if they are comfortable with how the loan process will work. It is similar to a normal Construction Loan in that they will need to set up a Bid for work to be done, and set up a draw schedule for the bank to review that funds are needed to get the home back together. This can be a great way to have little down on a distressed property just make sure you are getting a GREAT buy and leave 10-15% as budget FLUFF as it seems to always take more then projected to get a house project complete!
Good luck with your search let us know if you have any more questions and or needs we can serve.
Web Reference: http://www.bhrparkplace.com
0 votes Thank Flag Link Tue Mar 8, 2011
Hello Wendy. I think that whether a 203k rehab loan makes sense depends very much on what kind of repairs are necessary and whether your budget allows you to have all the repairs done that should be done. I think a 203k rehab loan can work very well to pick up a good deal and you get the benefit of things being new. The reason why it's important to pick contractors who have experience with the 203k process is because they will get the job done in a timely fashion, which is important with a 203k loan. Feel free to ask the contractor for references and ask to see some of their recent work. I personally would feel comfortable recommending the 203k route to a friend or family member as long as they pick the right house and make sure their budget allows them to make all the necessary repairs and they know where they will live while the repairs are being done. Depending on the type of repairs, it may not be feasible to live in the house while the work is being done.
0 votes Thank Flag Link Mon Mar 7, 2011
Ute Ferdig -…, Real Estate Pro in New Castle, DE
MVP'08
Contact
Thank you so much for your advice! I have been overwhelmed with all the information I found since my realtor suggested the 203k loan. For a first-time buyer with no knowledge in construction and limited budget, the whole idea of renovation can be daunting. I have another question on the topic, for those who have had 203k experience, would you say that the construction/renovation/fixing is likely to be done properly within a reasonable time frame and budget if the contractor is knowledgeable on 203k? And it's worth it? Would you recommend it to your friends or family? Thank you everyone!
0 votes Thank Flag Link Mon Mar 7, 2011
Talk to my son, Chad, http://www.chadofalltrades@cox.net. He works with these frequently
0 votes Thank Flag Link Mon Mar 7, 2011
Hi Wendy,
While it is true, you can use any licensed and bonded contractor for the 203K, you will still need to hire the 203K Consultant to walk the property with your contractor, and ensure that the minimum FHA guidelines will be addressed within the scope of work, and bid for repairs.
I am actually in the middle of a 203K escrow right now, in Midtown, and my client was forced to switch contractors half way through the escrow because the contractor was not experienced with the 203K bidding process, and was not able to work within the escrow period. My client ended up hiring the 203K Consultant directly, and within 3 days, we had the bid and the deal was submitted to underwriting.
Whatever your case, working with someone who understands the process, is paramount to your sanity! Ask your lender for a referral, but if they can't help you, I can refer you to the folks who have taken over our project.

Good Luck!
Kyle Groves
0 votes Thank Flag Link Mon Mar 7, 2011
Both Summit Funding and Wells Fargo do 203K renovation loans that I know of (I'm sure there's others. You can select your own licensed contractor, but they also have ones that they've worked with more frequently. On a streamlined loan, the max is $35K with a 10% swing factor. (If you don't spend it all you have the option to reduce the loan amount by that, or get the reimbursement...at the time my clients did theirs). As policies change don't hold me to that.

I had a bad experience with a client who used the Home Depot's version of a contractor to do the 203K loan. The bid looked more like a list of equipement than specifying the quality of finished labor they were providing. In addition, I was happy that my clients still had a home inspection as part of escrow. It helped to document what condition the home was in prior to the work being completed. I don't think the program allows you to be 'dragged into a black hold of unknown damages'. I think it's a great way to get a 'new house' by using your imagination on the ones that 'need TLC'.
Web Reference: http://www.suearcher.com
0 votes Thank Flag Link Mon Mar 7, 2011
With 203K loans, there is a limit of what you can spend on repairs. Your lender will require all inspections to be completed before they fund and if they believe the property needs more repairs then the limit allowed with a 203K loan, your loan will not fund.

Please make sure you are working with a knowledgable Realtor.
0 votes Thank Flag Link Mon Mar 7, 2011
Wendy,
Most lenders have 203k qualified contractors to select from. You should first do inspections termite/pest, roof, home inspection. Once you have completed your inspections give those to the contractor, let them know of the changes and upgrades that you would like to do. If there are concerns on any report the contractor will have discussion with you about those areas and resolve those issues upfront before moving forward.

The "unknow damages" by working with a "skilled" qualified contractor and the possible "unknow" they will know how to resolve the issues. A house has a story to tell, and a qualified contractor can tell the story and make good judgement. And one working for the lender must be more skill, must have to pass requirements to be on the list. You can also use "Joe the contractor" of your choice, they still need to meeting 203k lender guidelines.

So, start with your 203k lender for contractors
Do all inspections for your protection.

Have fun, take pictures and video before and after.

You can post to my~~~ http://www.facebook.com/sacramentorealestate2
0 votes Thank Flag Link Mon Mar 7, 2011
Your 203K lender will most likely have some recommendations for you too. The contractor needs to be on top of everything and the timeframe. They are not fully paid until the job is complete and inspected.

It can be a great way to purchase an otherwise unfinanciable home. Be sure to ask about the energy improvement loan too, for upgrading windows, HVAC, water heaters......
0 votes Thank Flag Link Mon Mar 7, 2011
Wendy,

I thought that you could use any contractors with the 203 K rehabilitation program. As long as their work meets the FHA inspector's approval and as long as they are OK with the payment schedule.

Thierry

Thierry Abel
Senior Loan Consultant
By Referral Only
All California Mortgage, Inc
P: (415) 464-8261
C: (415) 378-7508
F: (415) 464-2367
E: tabel@allcalifornia.com
0 votes Thank Flag Link Mon Mar 7, 2011
Here is the contact info for a 203k consultant who works all over the Western region and he has lots of contractors with whom he has worked on 203k projects. I also like Michelle's suggestion of going to check with the manager at Lowes.

Mike Young
704-454-5684
Mike.Young@203konline.com
http://www.my203kconsultant.com
http://www.203konline.com
0 votes Thank Flag Link Mon Mar 7, 2011
Ute Ferdig -…, Real Estate Pro in New Castle, DE
MVP'08
Contact
I have a great contact for you at Lowe's in Roseville.
He is the Store manager and has a list of pre-approved contractors for you to interview
all related to the 203K process. They (Lowe's) has a great system in place for this process
and understands all requirements, time frames, data needed.
**He even used this program for his own home purchase last summer... :)

Please give me a call or send an email.

I am happy to provide you with his information.

Michele Peterson
Keller Williams Realty
(916) 743-5934
CallMichelePeterson@gmail.com
0 votes Thank Flag Link Mon Mar 7, 2011
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