The Home Buyer's Korner

Information presented should be used for educational purposes only.

February 16th, 2017

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The Role of the HUD Certified Consultant

Homebuyers who choose the Standard FHA 203(k) will partner with a HUD certified consultant. The consultant’s role is to provide value and protection for the homebuyer from start to find in the home renovation process, and tasked with ensuring the renovation is completed according to the contractor’s agreements and contracts, as well as any FHA 203(k) program specifications related to the renovation process and mandated by HUD.

The HUD certified consultant is a vital resource, for any homebuyer choosing the FHA 203(k) Home Renovation Loan Program. HUD certified consultants can easily be found here; where you can begin to make arrangements and receive recommendations about the appropriate home renovation partnerships you’ll want to put in place.

The HUD certified consultant’s role is to review and verify the accuracy of the general contractor’s cost estimates and ensure that all required repairs are completed. They do not however, make a decisions about which repairs should or should not be made.

The HUD certified consultant’s first task during the homebuyer renovation process is to perform an initial property inspection, and possibly offer a feasibility study. If the homebuyer is unfamiliar with repairs and reasonable cost, they should involve a HUD certified consultant, as soon as possible. If the homebuyer has a good grasp of what is needed, a HUD certified consultant can be brought in after the general contractor(s) has submitted bid(s). Option one, however, is most often the best choice.

As mentioned, the HUD certified consultant can perform a site visit and can complete a feasibility study to determine FHA-required repairs. The feasibility study is often used for homes with unique issues and gives the homebuyer a better understanding of upgrades and modifications the home needs.

Furthermore, a HUD certified consultant is often familiar with local property value and can assist you with comparing recommended improvements, and which ones best enhance a home’s value. These suggestions can assist the homebuyer with establishing an expected equity position once the renovation is complete, as well as assist the home buyer and their real estate agent in determining an offer price. A feasibility study is optional, so consider it and determine if its information is useful to you particular home renovation needs.

Here are the main responsibilities your HUD certified consultant will be paying close attention to:

Initial Consultation: If you employ a HUD certified consultant prior to writing a purchase agreement, they can help you make an informed decision before you buy. The HUD certified consultant is not necessarily a home inspector, but they can make an on-site visit and provide an idea of needed repairs and their estimated costs.

They will establish whether or not the homebuyer has a general contractor at time the time of introduction, and they are often a valuable resource to locate experienced general contractors, if needed. They review all mandatory disclosures required by HUD with the homebuyer and offer clarity to the homebuyer. Most of all, they are often or should be one of your first and last points of contact in the renovation process.

The HUD certified consultant will complete a limited property inspection report, also known as a Compliance Inspection Report, designed to identify property defects that will require repair to the property and meet FHA’s Minimum Property Standards (MPS). They also provide valuable input at this stage of your home renovation process, and homebuyers are encouraged to discuss any request, additional repairs or remodel items that are on their mind.

Documents the HUD certified consultant will review with the homebuyer include:

• HUD Certified Consultant Agreement;
Borrower’s Acknowledgement;
• Borrower’s Acceptance of Conditions;
• Rehabilitation Agreement;
Homeowner/General Contractor Agreement or Self Help Agreement;

FHA 203K Lender Work Write-Up: A scope of documents arej created by the HUD certified consultant from your general contractor’s bid specifications. These documents describes the entire project in clear, unambiguous detail, and the documents require itemized lists of repairs and remodel items from each general contractors bidding on your renovation.

Each general contractor uses what is called a “Scope of Work Contractor Bid Package” to provide the homebuyers with a detailed bid that reflects the total cost of improvements, including labor and materials. The HUD certified consultant can often assist the homebuyer with insightful information to negotiate with their general contractors; thereby assuring the homebuyer get the most out of the repair budget.

Your HUD certified consultant will prepare a detailed description of the property repairs needed for your lender. The work write-up will include the homebuyer’s desired upgrades, as well as what will be required to satisfy HUD, the lender, and any local building code compliance requirements. The work write-up will include detailed line item descriptions, pricing, and will be prepared with the homebuyer’s budget in mind. Although the HUD certified consultant does not decide how much the homebuyer 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 HUD certified consultant, they must be reviewed by the homebuyer for corrections, deletions, or additions. These documents are where the lender begins to determine your maximum loan to value requirements, based on the purchase price and your detailed renovation cost. Make sure you check your figure at least twice!

After the work write-up is reviewed and approved by the homebuyer – 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, and assist the homebuyer to make a better decision about which general contractor is right for them.

At this point the homebuyer has their bids in hand, and the HUD certified consultant can prepare their work write-up required by the lender – to order the appraisal and process your loan request. This consists of a summary page, all renovation contracts, and any architectural exhibits like: a sketch of the building, if a wall is being relocated, or plat map showing an existing septic or well.

Finally your HUD certified consultant will work directly with the homebuyer, the general contractor(s) and the lender, as you begin and complete your home renovation process. This includes requesting draws after all inspections are successfully completed by the local building authority and/or authorized agents of HUD.

The HUD certified 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 any future mechanic’s liens. In addition that, your HUD certified consultant will ensure at all times, that enough escrow funds held by your lender remains to complete the project.

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