Wednesday, May 18, 2011

Streamlined k

Many lenders are now treating every 203k as a "STREAMLINED k" initially. In most cases it will remain a Streamlined "k"

Procedure: The contractor goes out to see the property first and provides a bid on the work they decide needs to be completed. Whenever the cost of repairs exceeds $15,000 a consultant, plan reviewer, or appraiser MUST be brought in to do a final review once all the work has been completed.

Most every lender calls for a home inspection on the Streamlined "k" projects to get a feel for the condition of the structure, they will also likely call for a pest control report. Learn to read more than just section 1 and section 2 items as the written paragraphs are filled with information that may affect your project compliance. They sometimes call for a structural engineer and if that happens you are no longer a Streamlined "k", you may very well be a Full 203k at that point depending on what the engineer has to say.

The biggest problem I see with the streamlined k if you don't use a consultant to do the home inspection is that the home inspector or contractor misses something that the appraiser catches on the appraisal inspection. That is deadly to the process. The guideline clearly states that if the appraiser finds anything that should have been called by the contractor or home inspector this project is not forced to a Full 203k and now you call a 203k consultant out to the project and this could delay your closing if they can't get our right away. They have to complete a write up and that typically results in a 21-25 page report.

If we have been called in for a "plan review" to be sure there isn't anything else that needs to be added to the scope of work. We will create a draw request, and other necessary contracts and turns them in to the lender. This is an option not a mandatory requirement.

The loan closes and the work is completed. The nature of a Streamlined "k" allows the contractor two draws if they choose to exercise that feature they can get from 35-50% of the contract amount at the start of the project, and one draw upon completion when the Consultant does a final inspection (if over $15,000 in construction cost) and turns in a "compliance inspection report"

For more information please contact:
Mike Young