I was standing out in front of a house in Brooklyn Park one afternoon. I was looking at a straightforward 203K. Except for one thing; the house had septic and a well on the property. Both had been tested and passed inspection, but the bank was requiring that the property be hooked up to the city sewer and water as a condition of the 203K.
FHA currently requires a property to be connected to city sewer and water only if the costs of doing so would be prohibitive. They define “prohibitive” as costing more than 3% to 5% of the appraised value of the house. This requirement to hook the water and sewer up was not an FHA requirement, but a bank requirement. The trouble was that the cost to do so would have put the property over the appraised value.
Finding a lender that did not have this requirement was the obvious solution for this particular property. The trouble was prior to my getting out to look at the property, the loan officer, the buyers, the Realtor, and two other contractors did not understand what really was required.
I am sharing this story to make a point about choosing 203K or Rehab contractors. There are some insider secrets most Realtors and loan officers don’t know about that can help ensure that the deal goes through.
The first secret to choosing a good 203K or Rehab Contractor is experience.
Now you might ask, “Why is he telling me that experience is insider information.” Many Realtors have relationships with remodelers and handyman types. Those relationships are fine for most regular work. When it comes to the 203K or rehab loans though, knowing the ins and outs of the program can be the difference between a sale that goes through and a sale that falls apart just before closing. An experienced 203K or rehab contractor can save both the Realtor and the loan officer a lot of wasted time.
How do you find an experienced 203K or rehab remodeler?
Look for remodelers that have been in business for at least 10 years AND look for someone who does at least two or three rehab or 203K projects a month
The second secret to choosing a good 203K or Rehab Contractor is finding a remodeler with the ability to listen and ask questions.
Too many remodelers bring a one-size-fits-all solution to remodeling issues. Often times there are many ways to solve a problem. For example, a remodeler who is used to doing $80,000 kitchens may not even want to talk to a buyer who is looking at doing a $15,000 kitchen. And a remodeler who is used to doing $15,000 kitchens will likely be lost in an $80,000 kitchen and it will show as they are talking to the home owner.
Find a remodeler who listens to what the client’s problems really are and can suggest solutions that fit in the budget. Listening and solving problems is really the difference between large complex projects and smaller, less complex projects. Most Realtors and loan officers are looking for solution-oriented remodelers who can keep the deal together and keep their clients happy. Happy clients provide good referrals. Isn’t that what most of us really want?
Working with an experienced 203K or rehab remodeler, one who really listens to find solutions that fit budgets and expectations can really cut down on the numbers of deals that fall through. And it can save everyone time on the deals that work out.