The Home Buyer's Korner

Information presented should be used for educational purposes only.

October 31st, 2015

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GREATER KAILUA/WAIMANALO HAWAII

The Home Buyer’s Korner

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The Role of FHA 203K Consultant

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Home Buyers who choose the Traditional or Standard FHA 203K will partner with a HUD Certified Consultant on their loan. The 203K Consultant’s job is to provide value and protection during the FHA 203K renovation, and is tasked with protecting the home owner and ensuring that the renovation is completed according to the home owner’s wishes.

Although the Consultant can be a vital resource, especially for first-time buyers or renovators, they are not created equally, and the homeowner must choose wisely. An experienced FHA 203K Renovation lender can provide you with a roster of approved FHA 203K Consultants to make arrangements or recommendations about the appropriate home improvement partnership for you.

The Consultant’s role is to review and verify the accuracy of the general contractor’s estimates and ensure that all required repairs are completed. They do not make a decision about which repairs should or should not be made.

The FHA 203K Consultant’s first task during the loan process is to perform an initial property inspection. If the home buyer is unfamiliar with repairs required by FHA guidelines, they should involve the Consultant as soon as possible. If the home buyer has a good grasp of what is needed, the Consultant can be brought in after the general contractor(s) has submitted bid(s).

The FHA 203K Consultant is also responsible for obtaining signed Lien Waivers during draw inspections, to be sure that sub-contractors have been compensated correctly and to protect the homeowner from mechanic’s liens. If you are not happy with the quality of the work, the Consultant will request that the contractor correct any issue prior to payment.

With the amount of moving parts involved in successfully closing an FHA 203K Buy It, Fix It home loan, the designated FHA 203K Loan Consultant is a key player on your Buy It, Fix It Renovation Home Loan.

Here are the main responsibilities your FHA 203k Loan Consultant will be paying close attention to:

  1. Initial Consultation

If you choose your FHA 203K Consultant prior to writing an offer, your FHA 203KConsultant can help you make an informed decision before you buy. The FHA 203K Consultant is not necessarily a home inspector, but they can make an on-site visit and provide an idea of potential renovations and costs, FHA will requirement, which may allow you to negotiate a better purchase price.

They will establish whether or not the home buyer has a general contractor. Review all mandatory disclosures and educate the home buyer, so they are more knowledgeable about the process. In addition to helping a home buyer find a general contractor, a good FHA 203K Consultant will also review forms the home buyer will be required to sign at the close, including:

  1. FHA 203K Consultant Agreement;
  2. Borrower’s Acknowledgement;
  3. Borrower’s Acceptance of Conditions;
  4. Rehabilitation Agreement;
  5. Homeowner/General Contractor Agreement or Self Help Agreement;
  6. Initial Property Inspection

If the property is already under contract, your FHA 203K Consultant will perform a site visit and can complete a feasibility study to determine FHA-required repairs, and gain an understanding of upgrades and modifications the home buyer desires. A good FHA 203K Consultant will be familiar with property values, and with the type of improvements that enhance a home’s value. These suggestions can assist the home buyer with establishing an expected equity position once the renovation is complete.

The FHA 203K Consultant will complete a limited property inspection report, also known as the FHA 203k Program Compliance Report, designed to identify property defects that will require repair to bring the property to FHA’s Minimum Property Standards (MPS)

The Consultant will also input the buyer’s list of requests, additional repair or remodel items.

  1. FHA 203K Lender Write-Up

A scope of work document is created by the FHA 203K Consultant for contractor’s bid specifications. This document describes the entire project in clear, unambiguous detail, so all general contractors bid the same list of required repairs and remodel items.

The general contractor uses the Scope of Work Contractor Bid Package to provide the home buyer with a detailed bid that reflects the total cost of improvements, including labor and materials. The FHA 203K Consultant often helps the home buyer negotiate with general contractors, thereby helping the home buyer get the most out of the repair budget.

Your FHA 203K Consultant will prepare a detailed description of the property repairs needed for your lender. The Write-up will include the home buyer’s desired upgrades, as well as what will be required to satisfy the lender, FHA and building code compliance. The Work Write-up will include detailed line item descriptions and pricing, and will be prepared with the home buyer’s budget in mind. Although the FHA 203K Consultant does not decide how much the home buyer should pay for upgrades, they do have primary responsibility for establishing a basic value for the renovations.

Once the bid specs are complete and a cost projection is calculated by the FHA 203K Consultant, the specs are reviewed by the home buyer for corrections, deletions, or additions.

  1. Prepare Contractor Bid Packages

Once the Work Write-up is reviewed and approved by the home buyer, a final written estimate, called a Scope of Work, is created to provide general contractors with a bid package. A well-done scope of work will help general contractors return the best bid possible. Your FHA 203K Consultant will prepare detailed general contractor packages that will help bring in better bids, and help the home buyer make a better decision about which general contractor is right for them..

The final bid specifications are submitted to your prospective renovation general contractors, who ideally has been identified early in the process. Bid(s) are returned to the FHA 203K Consultant.

  1. Work Write Up

The FHA 203K Consultant finally prepares the Work Write Up required by the lender to order the appraisal and process the loan. This consists of a summary page, the contracts listed in Step 1, and any Architectural Exhibits, which are documents that may include items like a sketch of the building if a wall is being relocated, or plat map showing an existing septic or well.

  1. Facilitate Contractor Relationships

The FHA 203k Consultant will work directly with your general contractor and lender to be sure you receive the quality work you deserve. The FHA 203K Consultant is also responsible for obtaining signed lien waivers during draw inspections, to be sure that sub-contractors have been compensated correctly and to protect the home owner from mechanic’s liens. If you are not happy with the quality of the work, the FHA 203K Consultant can work with you and the general contractor to correct any issue prior to payment. In addition, your FHA 203K Consultant will ensure at all times that enough funds remain to complete the project.

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HAWAII HOME OWNERSHIP TOOLS

Your Home Purchasing or Refinancing & Renovation Tools,

Home Improvements, Home Renovations,

Mortgage Loan Officers, Real Estate Agents & General Contractors

are ready to assist you with your home purchase.

Here are just a few of the home improvements

you might consider with any Home Renovation loan

Repair or replace a roof

Install, replace or repair gutters and downspouts

Replace, repair or upgrade your HVAC system

Repair or replace plumbing

Install, repair or replace electrical systems

Kitchen remodeling (including the purchase and installation of appliances)

Bathroom remodeling, Full interior painting, Total exterior painting

Repair or replace a septic system and/or well

Disability access (wheelchair ramp, elevator, widen doorways)

Build, repair or replace deck, patio or porch

Basement waterproofing and finishing

Abatement/Stabilization of lead-based paint hazards

Replace old windows, Room additions, Finish an attic

Add a second story to your home

Replace a termite damaged sill plate (a water-damaged sill plate also)

Possible landscaping items such as correction of grading & drainage problems,

tree removal, repair a driveway and sidewalks

FHA 203K

Your Home Purchasing or Refinancing & Renovation Tool

Mortgage Loan Officers, Real Estate Agents & General Contractors

are ready to assist you with your home purchase

FANNIE MAE HOMESTYLE

The Conventional Alternative to FHA 203K

Great for Real Estate Investors and Second Home Renovations

Mortgage Loan Officers, Real Estate Agents & General Contractors

are ready to assist you with your home purchase

USDA RURAL DEVELOPMENT

Up to $10K for Home Improvements, Renovations or a Simple Remodel

Mortgage Loan Officers, Real Estate Agents & General Contractors are ready to assist you

A SIMPLE HOME SHOPPING INSPECTION TOOL

Organizing your home shopping experience affords a wise decision-making process.

This simple home inspection tool makes your ultimate buying decision a smart one.

To print this document click on “Open in New Window” located at the lower right corner;

click on “File”; then click on “Print”. In the center of the screen you will

have the option to “Create A Printable PDF of the Presentation”.

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