| The FHA 203(k) acquisition and renovation program enables a buyer to purchase a house that must be repaired to meet minimum property standards. The 203(k) loan may also be used for other improvements to the property within the FHA guidelines.
Briefly, here’s how it works. The buyer locates a property and has the 203(k) consultant performs an inspection and feasibility study to determine an approximate allowance for the cost of the repairs and improvements desired by the buyer. If it appears that the improvement costs and the acquisition costs will not exceed the loan limit or comparable values, a Work Write-up will be written. This document becomes part of the loan.
The loan is settled. Work can begin then with payments to the contractor in the form of draws as the work progresses.
Conventional Loan or Owners Funds
The inspection, feasibility study and draw process are the same as the 203(k). The difference is that we are not working under FHA guidelines. Nevertheless, many of the FHA requirements are things most people would do anyway, so the real difference is you have fewer restrictions on what you can do.
Construction Inspections
Building a new home, addition or making repairs, an inspection performed at the proper point in the construction process are essential for the project to be completed correctly. If the owner is using his own funds, these inspections can serve as draw inspections. A pair of eyes not in the income stream of the project can be invaluable to the owner.
Dispute Inspections
Sometimes things just don’t go well on the construction site. Owners want it done right and contractors have to make a profit. If things come to an impasse, an inspection will get the problem resolved and the job on the way. These inspections are rather complicated in that they entail an examination of the plans, the contract and change-orders, the work done to date and a financial accounting.
Investor Owned Repair Inspections
Here is the usual scenario. The house has been a rental unit for some time and aside from normal wear and tear there are major damage areas. The bids from the contractors are difficult to understand with prices all over the place. An inspection is performed and a Work Write-up is written. The Work Write-up consists of two parts. One describes all work that could be done and often has specific instructions on certain operations. Allowances are determined for each segment of work. "An allowance is not an estimate but a general amount that most contractors would charge for a specific task". The other is a Bid on Repairs sheet which has the work descriptions and instructions from the Work Write-up but without allowances. After the description there is a field for the contractors to fill in the amounts they would charge for each operation. This makes it quite easy to compare bids. As a bonus, this process often eliminates confusion on what or how things should be done.
Light Commercial Inspections
The inspection of single story commercial buildings will include the structure and systems of the building. Usually the specialized equipment is the responsibility of the tenant, if there is an overlap or some safety concern it will be inspected. The report will be written in paragraph form. Repair allowances are available |
