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

Home buyer who consider the Traditional FHA 203K home loan will partner with a HUD certified consultant. The consultant’s role is to provide value and a layer of protection from start to find in your home renovation process. They are tasked with ensuring any renovations or repairs are completed according to the contractor’s agreements, as well as all guidelines set by HUD in its FHA 203K home loan program.

HUD certified consultants are vital resources, for any home buyer choosing this great buy it – fix it home loan program. HUD certified consultants can easily be found here or asking your your lender. Once you’ve found a good one, you can begin making arrangements; get valuable insight; and recommendations about the appropriate home renovation partnerships to complete your home renovations.

HUD certified consultants are part of the HUD’s program to review and verify the accuracy of your general contractor’s cost estimates, and ensure all required repairs are completed. They do not make decisions about which repairs should or should not be made, but considering and advice is probably a choice well made.

When you meet with your HUD certified consultant, their first task will be to preform 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, early in the process. If the home buyer has good insight to what is needed, a HUD certified consultant can be brought in after your general contractors has submitted their bids. Employing a HUD certified consultant early, however, is always the better choice, and it doesn’t save you any money bringing them in later.  

Your HUD certified consultant will 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 home buyers a better understanding of upgrades and modifications the home needs, however a feasibility study is optional. Consider it and determine if its information is useful to your particular needs.

A HUD certified consultant is often familiar with local property values and can provide valuable insight to recommended improvements, and which ones best enhance a home’s value. Their suggestions can often assist the home buyer with establishing an expected equity position, once the renovation is complete.

The HUD certified consultant’s primary responsibilities are:

To offer an 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 – information invaluable to both you and your real estate agent, when considering an offer price.

They are often a valuable resource to locate experienced general contractors. They review all mandatory disclosures required by HUD with the home buyer and offer clarity. Most of all, they are often 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. The report is designed to identify any property defects that will require repair and meet FHA’s Minimum Property Standards (MPS). 

Documents the HUD certified consultant will review:

FHA 203K Lender Work Write-Up:

A set of documents are created by the HUD certified consultant from your general contractor’s bid specifications. These documents describes the entire project in unambiguous detail, and the documents require itemized lists of repairs and materials 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 home buyers with a detailed bid, that reflects the total cost of improvements, including labor and materials. With close observation the HUD certified consultant can often assist the homebuyer with insightful information to negotiate with their general contractors; thereby assuring the home buyer receives the most out of the repair budget.

The HUD certified consultant is also responsible for preparing a detailed description of the property repairs for your lender. The work write-up will include the homebuyer’s desired upgrades, what will be required to satisfy HUD, and any local building codes. The work write-up will include a detailed line item descriptions and pricing. Although the HUD certified 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 HUD certified consultant, they must be reviewed by the homebuyer for corrections, deletions, or additions. These documents are critical in the lender’s determination of your maximum loan amount, which is based on the purchase price and your detailed renovation cost. Make sure you and your HUD certified consultant checks each figure at least twice!

After 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, 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.

The HUD certified consultant works directly with the homebuyer, the general contractors and 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. They are 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, and your title agent will check for lien updates and secure any “satisfaction of liens” placed on the property by the general contractor, sub-contractors and vendors.

Foremost, your HUD certified consultant will ensure at all times, that enough escrow funds held by your lender, remains to complete your home improvements.

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