Contractors Need to be Coached on the 203k Loan

I had heard recently from a Realtor that they would never again be involved with a 203k Streamline or the 203k loan (standard). When I asked why she mentioned that it took too long to get job estimates from the contractor and escrow had to be extended 2 times as a result.

This can happen if the contractor isn’t aware on how the 203k loans work.

The contractor needs to be coached to know that their bids must be done quickly and ledgibly breaking down materials and labor for each improvement to be done.  The appraisal should not be ordered until the contractor bids are done since the appraiser needs these bids to arrive at the final appraised value.

The contractor also needs to understand that witha 203k loan, the method of compensation is different.  A 203k Streamline has two disbursements.  One at the beginning of the process which typically covers materials, and one after all improvements are certified as done.  Which means if it takes 30 days for all projects to be finished, than that’s when the balance of the contractors compensation is paid.  The contractor needs to be coached on this upfront and prior to making a bid.

A 203k loan (standard) which is different from the 203k Streamline, is for bigger remodeling  jobs so it has up to 5 advances during the process which is what contractors are more used to.

Whether it’s the 203k Streamline which is good for up to $35k for cosmetic repairs, or the 203k loan standard which is for jobs that involve structural repair or for jobs over $35k, as long as the buyer, seller, Realtors and contractors are all coached upfront on how a 203k loan works everyone will have a better overall experience.

If you have a question in regards to this article, please let me know by clicking here!

Warmest,

KW

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3 Comments

  1. Posted December 22, 2010 at 11:12 am | Permalink

    Thanks for contributing so much with this wonderful content.

  2. Posted February 15, 2011 at 6:31 am | Permalink

    Just don’t forget to use a Certified 203k Contractor found on the 203k Contractor Directory at http://203kContractors.com.

  3. Posted January 20, 2012 at 4:01 am | Permalink

    I am a licensed contractor in Maryland and the District and we provide FREE estimates for 203k loans within 24hours. http://www.homecplus.com

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