Two types of 203k’s
Limited (formally Streamline)
Use of a 203k consultant is optional but may be required by the lender. Discuss with your lender who will provide the guidelines needd for this type of loan.
Use of a 203k consultant is mandatory for a Standard 203k loan.
How does it work?
Two major phases of the program includes developmental phase to settlement and construction phase to completion.
- Buyer/Borrower works with real estate agent to select a property and secure a ratified contract. (If uncertain of the repair cost, the “Bill Evans Home Team” can assist you in determining the mandatory repair costs. We offer a Pre-off Feasibility Study to evaluate the property and provide repair costs.
- Schedule on-site meeting and property evaluation. Contact the Bill Evans Home Team to setup a meeting at the property to evaluate condition of the property with one of our consultants.
- Constultant performs the Initial Property Assessment/Feasibility Analysis. This on-site inspection is not a full home inspection but includes may of the areas normally evaluated during a home inspection. This inspection is designed to identify all HUD mandatory repairs and esimated costs. The “Bill Evans Home Team” renovation consultant is also a licensed home inspector and can perform a combination of home inspection and 203k inspection. Doing both together will save the buyer money on inspections.
- Consultant develops the specification of repair (SOR) (work write-up) in the HUD approved format. This SOR includes all the renovations and repairs that will be completed within scope of the loan. The consultant will include cost brekdowns for all the designated work. In addition, a contractor bid package or Bid On Reapirs (BOR) is prepared that includes the SOR write-up with no cost estimates.
- The Consultant is required to rview all required architectural exhibits the project will need. These may include drawings, mold tests, termite inspection, structural entineer report and any other required inspections needed prior to settlement.
- Buyer/Borrower receives and reviews the SOR and BOR. After review, the Borrower will coordinate with properly licensed contractor(s) to visit the property and BOR. Contractor will complete the required BOR that includes cost of each line item showing both materials and labor cost for each.
- Buyer/Borrower reviews the contactor proposals and selects the contractor to perform the required work. The final BOR is submitted to the Lender and the Bill Evans Home Team Consultant.
- 203k Consultant will review the contractor BOR’s and update the draft SOR. The final SOR with other required 203k documents will be sent to the Lender and Buyer/Borrower. Upon receipt of the final SOR the Lender will order an formal appraisal of the property. The appraisal will bebased on the after repaired market value or the properly.
- Upon final appraisal and underwriting approval the settlement will occur.
- After settlements Contractor begins work with 30 days. There are no advance funds or deposits given to the Contractor at this time.
- Upon completion of designated work defined in the SOR, the contractor can request funds (Draws) to be release. The Contractor and Borrower should meet together and develop the 203k Draw Request forms per HUD guidelines. After agreement for funds to be released, the Bill Evans Home Team should be contacted to schedule a site draw inspection. The signed draw request should be sent to the Consultant prior to the site inspection.
- A Bill Evans Home Team Consultant will perform the site inspection reviewing the work completed and finish sign off on requested funds. The Consultant will send the signed draw paperwork with accompanying pictures to the Lender for release of funds. The lender will withhold 10% of each draw amount request until the end of the project. This is required by HUD 203k guidelines.
- Any deviation from the SOR will require a change order. The Contractor will develop the changes which needs to be approved by the Borrower, Consultant and Lender prior to work being done.
- Upon successful completion of work and final inspections the repair escrow and renovation project will be closed out. Any remaining funds left in the escrow will be put on the principle of the loan.
What does it cost?
HUD sets the fee schedule that 203k Consultant can charge.