HUD 203K Consultant Role Explained: Working with Borrowers, Lenders, & Contractors

A HUD 203K Consultant plays a vital role in the FHA 203(k) rehabilitation loan process, especially before the loan closes. Their involvement ensures the project is feasible, meets FHA standards, and that both the borrower and lender have a clear understanding of the scope and costs. Here’s an overview of their pre-closing responsibilities:

1. Initial Property Assessment (Feasibility Study)

Feasibility Study: The consultant performs a detailed inspection of the property to assess its condition and determine the scope of necessary repairs and improvements. This ensures the property qualifies for the 203(k) loan.

Repair Recommendations: They identify which repairs are mandatory (to bring the home up to FHA standards) and which are elective, based on the borrower’s goals.

2. Cost Estimate Preparation

Work Write-Up: The consultant creates a detailed work write-up outlining the specific repairs and renovations needed. This includes labor, material costs, and a timeline for completion.

Cost Estimates: They prepare an itemized list of all project costs, ensuring that the repairs are feasible within the borrower’s budget and the loan limits.

3. Creating the Scope of Work (Work Write Up)

The consultant works with the borrower to develop a clear and detailed scope of work, which contractors will use to prepare bids. This helps prevent future disputes between the borrower and contractor over what work was agreed upon.

4. Contractor Bids and Selection

The consultant helps the borrower review contractor bids to ensure they align with the scope of work and cost estimates.

They may assist in ensuring that the selected contractor meets FHA guidelines and has the qualifications to complete the project.

5. Submitting Documents to the Lender

The consultant prepares the necessary documentation, including the scope of work and cost estimates, which the lender uses to approve the loan amount.

The consultant ensures that all FHA-required repairs and improvements are accounted for in the loan documents.

6. Ensuring Compliance with FHA Standards

The consultant ensures that the proposed renovations meet HUD and FHA standards. This includes both safety and structural requirements, as well as energy efficiency and livability standards.

7. Reviewing the Draw Schedule

The consultant establishes a draw schedule, outlining how and when the contractor will be paid as the work progresses. This schedule is critical for both the borrower and lender to ensure timely and proper payments.

8. Consultation with the Borrower

They serve as a liaison between the borrower, lender, and contractor to clarify expectations, answer questions, and make sure the borrower fully understands the renovation process before closing.

By facilitating clear communication and documentation, the 203(k) consultant ensures the borrower, lender, and contractor are on the same page, reducing the likelihood of future disputes.

WATCH me explain how I work with Loan Borrowers, Lenders, and Contractors in this 3-minute video!

Contractor Homeowner Disputes and How To Resolve Them

7 Common Contractor-Homeowner Disputes During Home Renovations & How to Resolve Them

When a contractor and a borrower have a disagreement on a rehab loan, it can cause delays and complications in the project. Here are some common issues I’ve encountered and potential solutions so you can keep your project on track.

Common Areas of Disagreement:

Scope of Work: The contractor and borrower may have different understandings of the work to be done, leading to disputes.
- Solution: Refer to the original agreement or contract. It’s important to have a clearly defined scope of work, including detailed plans, material specifications, and timelines.
Costs and Budget: Disagreements over costs, especially if unexpected expenses arise, can strain the relationship.
- Solution: Set up a contingency budget in the loan to account for unexpected costs. If the dispute is over costs already agreed upon, reviewing the original estimate and ensuring both parties stick to it can help resolve the issue.
Payment Schedule: Some borrowers might feel the contractor is asking for payments prematurely, or contractors may feel they are not being paid on time.
- Solution: Rehab loans often have specific draw schedules where payments are made as work is completed. Stick to this schedule and ensure inspections are completed before releasing funds.
Quality of Work: If the borrower feels the work is not being completed to their standards or within code, they may refuse to approve payments.
- Solution: Have a HUD 203k Consultant, licensed inspector, or third-party mediator assess the quality of work. This helps provide an objective opinion.
Timeline Delays: Delays in the project timeline are common, but they can lead to frustrations on both sides.
- Solution: Review the contract for specific completion dates and penalties for delays. Ensure any delays are documented and, if justified, negotiate an extension.
Change Orders: Changes requested during the project may not be properly documented or agreed upon by both parties, leading to disputes.
- Solution: All change orders should be in writing and agreed upon by both the borrower and contractor before any work begins. This helps prevent misunderstandings.
Project Delays: Delays by the contractor may frustrate borrowers, especially if loan terms have timelines.
- Solution: A clear timeline with penalties for delays can be included in the contract. Regular progress checks can help manage expectations.

How to Resolve Disagreements:

Communication: Foster open and transparent communication between the borrower and contractor. Misunderstandings often arise from a lack of clarity.

Mediation: If direct communication fails, a mediator or arbitrator can help resolve disputes without escalating to legal action.

Legal Recourse: If the disagreement cannot be resolved through other means, it may be necessary to involve an attorney. Contracts and agreements will be critical in this process.

Ensuring proper documentation from the start can prevent many of these issues from occurring.

Watch this video to learn how a 203K Consultant can help when a dispute arises between the borrower and contractor.

What Is The Final Draw Process For A 203(k) Project?

This Is What The Final Draw Means, Plus 3 Tips To Ensure It Goes Smoothly

The final draw process for a HUD 203(k) project involves several steps to ensure that all the renovations or repairs funded by the 203(k) loan are completed to satisfaction. Here’s an outline of the general process:

1. Completion of Work: The borrower must ensure that all the renovation work has been completed according to the specifications outlined in the work write-up. This includes any repairs, improvements, or modifications that were agreed upon.

2. Final Inspection: Once the work is completed, a HUD 203(k) consultant will conduct a final inspection. This is to verify that all the work has been done as per the plan and meets the required standards.

3. Consultant’s Final Report: The consultant prepares a final inspection report. This report details the work completed and confirms whether it meets the FHA guidelines and the original scope of the project. The consultant also ensures that any required permits were obtained and properly closed out.

LEARN MORE about the final draw process by watching this QUICK 3 minute video!

4. Borrower’s Sign-off: The borrower will review the completed work and must sign a statement confirming that the work has been completed to their satisfaction. If there are any issues, they should be addressed before the final draw is approved.

5. Contractor’s Lien Waiver: The contractor must provide a “Final” lien waiver, which is a document that states they have been paid for their work and materials and that they waive any future lien rights against the property.

6. Final Draw Request: The contractor submits a final draw request for the remaining funds. This request typically includes the consultant’s final report, the borrower’s sign-off, and the lien waiver.

7. Lender Review: The lender reviews all submitted documents, including the final inspection report, borrower’s sign-off, and final lien waiver. They ensure everything is in order and that the project is completed satisfactorily.

8. Release of Funds: Once the lender is satisfied with the completion of the project and all documentation, they will release the final draw of funds to the contractor including the 10% holdbacks from the previous draws. This marks the end of the financial transaction portion of the 203(k) loan process.

Tips for a Smooth Final Draw Process

Regular Communication: Maintain regular communication with your contractor, consultant, and lender throughout the project to avoid any surprises.
Documentation: Keep all paperwork organized and readily available, including permits, contracts, and inspection reports.
Final Inspection: Be present during the final inspection to address any concerns immediately.

By following these steps and tips, you can ensure a smooth final draw process for your 203(k) project.

Check Out This Video To Learn More About The Final Draw Process!

Contractors: Having Issues? Talk To Your 203(K) Consultant

As a HUD 203(k) Consultant, one of the main things I see that can sabotage the contractor/borrower relationship is not getting the 203(k) Consultant involved if an issue comes up during the home renovation.

Let me give you an example. During a renovation project, a borrower had the vision of opening a wall to create an open floor plan between the dining room and kitchen. However, that vision was not in the original Specification of Repair (SOR) the contractor bid on in the Work Write Up. So, the borrower and the contractor agree to open the wall for an out-of-pocket fee.

When I was called in to perform the Draw Request (draw inspection), the wall was opened. Since I, the 203(k) consultant, was not notified in advance of the change in the SOR, the contractor may not get paid from the Lender for the work that they have completed.

This is why communication with your consultant is important. If I had been notified earlier, I would have reminded the contractor that any changes in the SOR, must be approved BEFORE the work can commence by the Lender. I would also remind the contractor that any work performed outside the SOR, may cause unnecessary delays to the borrower’s rehab project, since no co-mingling can occur per the Lender’s signed agreement at closing.

The moral to the story is that I am here to assist the borrower AND contractor so everyone can get through a project with very little friction. Contractors, please reach out to your 203(k) consultant to avoid any problems with you getting paid.

All the best!

Want to learn more? Watch this quick Youtube video!

HUD 203K Consultants Are Not Project Managers

In my work as a HUD 203(k) Consultant, I occasionally come across homeowners who think it’s my job to oversee their contractor’s day-to-day operation like a project manager, and that’s not the case. I can see why there can be room for confusion. The rehab process can be confusing and even overwhelming to first time homeowners who need to figure who does what fast. That’s where this article comes in!

If you’re a home buyer that’s confused about your HUD 203(k) Consultant’s role, you’ll find your answer here. Keep scrolling to learn the difference between a HUD 203(k) consultant and a Project Manager.

The Difference Between a HUD 203(k) Consultant & a Project Manager

The role of a HUD 203(k) Consultant is distinct from that of a project manager, construction consultant, rehab coordinator, or whatever you’d call it. Why is that? Well, the differences lie in the responsibilities and focus areas.

HUD 203(k) Consultant:

Specialization: HUD 203(k) Consultants specialize in the Federal Housing Administration’s (FHA) 203(k) Loan Program, which is designed to help home buyers finance the purchase and renovation of a home in one mortgage.
- Inspection & Approval: HUD 203(k) Consultants primarily focus on inspecting the property to determine its current condition and identifying necessary repairs or improvements. They play a key role in ensuring that the proposed renovations meet FHA/Non-FHA guidelines.
- Draw Inspections: HUD 203(k) Consultants conduct draw inspections during the renovation process to verify that the completed work aligns with the agreed-upon plans and specifications.

Project Manager:

Overall Project Oversight: Project Managers are responsible for overseeing the entire renovation or construction project, regardless of the financing method. Their role extends beyond FHA-specific requirements.
- Budgeting & Scheduling: Project Managers handle the budgeting, scheduling, and coordination of all aspects of the project. They ensure the work is completed on time, within budget, and according to the client’s specifications.
- Contractor Management: Project Managers may hire and manage contractors, negotiate contracts, and handle day-to-day communication with the construction team.
- Risk Management: Project Managers are involved in risk assessment and mitigation, addressing issues that may arise during the project.

While a HUD 203K consultant focuses on FHA compliance and inspections related to the 203(k) loan program, a Project Manager has a broader role in overseeing all aspects of a construction or renovation project. The distinction arises from the specific requirements and objectives associated with the FHA 203(k) loan program.

Want a quick summary of what a HUD 203(k) Consultant does? Watch the video below!

Continuing Education – 2020 Virtual Discovery Days

To my Realtors and Loan Officers friends out there…

From National Association of FHA Consultants…I am so excited about the upcoming 203k Virtual Discovery Days- I am looking forward to helping lenders, contractors and borrowers understand what the role of a consultant is and how to navigate the entire rehab process.

The real benefit from attending the conference is to see the extensive training that we get as a rehabilitation consultants to being able to present a product that everyone can benefit from. Please follow the link for more information and to register…

https://www.203kdiscoverydays.com/virtual-discovery-days1602172889810

What a Summer!!!

Most of you know that we are still recovering of getting use to a “New Normal” in dealing with Covid-19. So, I wanted to give you an update on upcoming events and opportunities. Here are the current promotions that are going on…

“First Responders” (Active Military, Veterans, Police, Fire, Health Care Professionals, Teachers) I’m giving you a 10% discount off the following services:

“Home Inspections Services”

and

“Residential Design Preliminary Services”

Just produce documentation supporting your claim as a “First Responders” and you will receive your 10% discount.

This offer will end on December 31, 2020.

“NACA members”, I wanted to say congratulations for you going through the NACA Home Buyers Program on home ownership. So as a thank you for you going through the program. Just produce your NACA ID # and you will receive your 10% discount.

This offer will end September 30, 2020.

“New Decade – New Home Seminar Series”, that was schedule for September 12, 2020 has been reschedule to October 31, 2020. The formal format was to do a live presentation but due to the current Covid-19 health issue, it will be an “Online” presentation.

More detail information is coming to you soon.

As a reminder, People, Places & Things LLC and PPT Inspections are still operating safe practices until further notices. These safe practices including the following…

Clients should limit the number of people attending inspections to as few, as necessary.

All parties should meet the inspector in front of the property- NOT inside the property.

Inspectors will provide disposable (non-vinyl) gloves for each participant. Masks will not be provided but may be brought and worn if desired.

All gloves used during inspection will be collected and disposed of immediately upon exiting the home.

Sanitary wipes and/or hand sanitizer will always be accessible during the property inspection.

It is important to recognize that as home inspectors and rehab consultants, we are entering homes and touching surfaces that may be contaminated by this virus. During the entire process, we need to stay focused on the home buying activity and the process of the inspection.

That is all for now.

203kconsultants #NAFHAC #203kdiscoverydays #203kproject #203klender #203krehab #203kloan #203kcontractor #renovationproject #renovationloans #homerenovationloan #203kconsultant #203kcontratista #203krehabloan #203kloans #fhaloan #fha203k #generalcontractors #homeinspectors #homeinspections #buildingdesign #residentialdesign #homedesign

THE PAUSE IS OVER – Here is the “New Normal” (For Now)…

The “Staying in Place” order has been lifted so in the State of Michigan we can resume somewhat the new normal for now. So as a reminder, People, Places & Things LLC and PPT Inspections are still operating safe practices until further notices. These safe practices including the following…

Clients should limit the number of people attending inspections to as few, as necessary.
All parties should meet the inspector in front of the property- NOT inside the property.
Inspectors will provide disposable (non-vinyl) gloves for each participant. Masks will not be provided but may be brought and worn if desired.
All gloves used during inspection will be collected and disposed of immediately upon exiting the home.
Sanitary wipes and/or hand sanitizer will always be accessible during the property inspection.

Here are some wonderful opportunities for the clients to participate during the month of June.

New Decade – New Home Seminar Series that was schedule for April 18, 2020 has been postpone until September 12, 2020. The current format was to do a live presentation but due to the current Covid-19 health issue, the decision to have a live in person event will be made soon.

“First Responders” (Active Military, Veterans, Police, Fire, Health Care Professionals) I’m giving you a 10% discount off the following services:

“Home Inspections Services”

and

“Residential Design Preliminary Services”

Just produce documentation supporting your claim as a “First Responders” and you will receive your 10% discount.

This resolution will end on December 31, 2020.

NACA members, I wanted to say congratulations for you going through the NACA Home Buyer Program on home ownership. So as a thank you for you going throughthe program, I am giving you a 10% discount off “Home Inspections Services” during the month of June.

Just produce your NACA ID # and you will receive your 10% discount.

More information and offers are coming soon.

Thank you for your business.

#203kconsultants #NAFHAC #203kdiscoverydays #203kproject #203klender #203krehab #203kloan #203kcontractor #renovationproject #renovationloans #homerenovationloan #203kconsultant #203kcontratista #203krehabloan #203kloans #fhaloan #fha203k #generalcontractors #homeinspectors #homeinspections #buildingdesign #residentialdesign #homedesign

A PAUSE… DAWN COMING SOON

Okay, being “Staying in Place” at home is beginning to get to us. However, hope is on the horizon as in Michigan, May 1 is fast approaching and the state government will have to make some important decisions. It does not mean that we will be getting our lives back before Covid-19 but it means that we will began to do a slow burn back to becoming a normal society. As the weather gets warmer and some of our industries are getting to go back to work (housing market, I hope), golf course (please) and attending church service in person (cannot wait) we will live by the specter of seeing if the health experts gets the prediction correct on Covid-19 second wave is coming or if we as a society can withstand a possible “Staying in Place” order during the summer or fall months.

Since I am an opportunist at heart, I am hoping for the best but preparing for the worst. So, until the time we are getting the all clear from the proper authorities, PPT Inspection process under Covid-19 will continue.

Why?

Because even when other industries will be permitted to go back to work (housing market), there will be a transition period and during that time the protection of the client and their representatives, seller and their representatives and to myself will be paramount. As a reminder…

Clients should limit the number of people attending inspections to as few, as necessary.
All parties should meet the inspector in front of the property- NOT inside the property.
Inspectors will provide disposable (non-vinyl) gloves for each participant. Masks will not be provided but may be brought and worn if desired.
All gloves used during inspection will be collected and disposed of immediately upon exiting the home.
Sanitary wipes and/or hand sanitizer will always be accessible during the property inspection.

It is important to recognize that as home inspectors and/or rehab consultants, we are entering homes and touching surfaces that may be contaminated by this virus. During the entire process, we need to stay focused on the home buying activity and the process of the inspection.

Hope that helps and its almost over. Yay.

New Decade – New Home Seminar Series

What better way to start off a new decade than with buying your very first home? Of course, the process can be quite confusing. PPT Inspections is here to help by hosting a homebuying and home inspection seminar in Detroit, MI.

When you join our first-time homebuyer seminar, you’ll get valuable information about:

The homebuying process from start to finish
The power of using a rehab loan to get the house of your dreams
Finding the neighborhood and home that is right for you
What to expect during the process, from showings to closing

We’ll be hosting our first-time homebuyers seminar on Saturday, April 18th from 9:30 a.m.-3:00 p.m. Continental breakfast and lunch will be provided. The seminar will be held at:

PW Community Development Nonprofit Housing Corporation
20011 Grand River Avenue
Detroit, MI 48219

In addition to learning valuable information about the homebuying and home inspection process, all attendees will receive a gift bag and will be entered to win prizes

RSVP today by reserving your seat via Evite at…

https://www.evite.com/event/0310HOJCF7RKWEZRMEPKJYCD3RPNDQ/activity

Use the QR Code…

Or call to get more information…

877-399-203K

uni-soul

There are a lot of housing opportunities out there, make sure your decision on one is the right one… No matter how much you paid for it, it will be the most important, expensive investment that you will make. That what’s make “Uni-Soul” so special.

Menu

Tag Archives: contractors