If the residential property being considered for purchase by the buyer is in need of repairs and the scope of the work to be done exceeds beyond the 203(k) streamline guidelines, then the involvement of a 203(k) HUD Consultant is needed.
Consultant’s role: to help the borrower/homebuyer make an informed decision before purchasing the property and provide an idea of potential rehab costs and FHA requirements
Initial Site Visit/Consultation
- Consultant will perform a thorough examination of the property (it is not a Home Inspection)
- Consultant will perform a feasibility analysis to determine FHA-required repairs, and will also input the buyer’s list of requested additional repair or remodel items
- Consultant determines the estimated cost of the scope of work, does not make a decision about which repairs should or should not be made
- The homebuyer pays a retainer fee, and the exact fee to be paid depends on the cost of the proposed repair work (the HUD stipulated fee amounts)
FHA 203(k) Lender Work Write-up
- A Scope of Work document is created by the Consultant for contractor’s bid specifications. This document describes the entire project in clear, unambiguous detail so all contractors bid the same list of required repair and remodel items.
- The Contractor uses the Scope of Work Contractor Bid package to provide the homebuyer/borrower with a detailed bid that reflects the total cost of improvements, including labor and materials.
- The Work Write-up will include the borrower’s desired upgrades, as well as what will be required by FHA and building code compliance.
- Once the bid specs are complete and a cost projection is calculated by the Consultant, the specs are reviewed by the borrower for corrections, deletions, or additions.
- Consultant will also prepare the lender packages and contractor bid packages
- Review of Contractor bid (BOR)
- Review of architectural documents (termite, mold, well, septic, drawings)
- Review of lender requests
- Review of revisions to the Specifications of Repairs (SOR) and BOR
- Submits all required documents and completion of detailed work write-up to the lender, contractor, and borrower