Thursday, May 1, 2014

Who Prepares The Scope Of Work For An FHA 203k Project?

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That is actually a very good question... the answer can cause you delays in closing if you choose wrongly.

The consultant is typically the first one on the job. The consultant and client create the scope of work and includes the "FHA Must Do List" and add the clients "Wish List". Together these will make the "scope of work". This scope of work is then sent out to bid. The contractor bids the list and they all bid the same list this way.

What we are seeing of late is that some lenders or loan officers are having the contractors come out and they verbally tell each contractor what to bid on. Hoping the list is similar at least... it isn't always because it isn't written down. Even if it is written down it fails most often to capture the FHA Minimum Property Standards for health and safety.

I just had a contractor that was used in the second scenario ask me if we had to secure the open wiring in the house, add GFCI's, add smoke and CO detectors that were missing, and a counter top for the kitchen cabinets since it was missing. They didn't have any of that nor did they want to do the grading.

So far the closing has been pushed back while we argue the merits of the HUD Guideline. I don't want to debate the guideline, we didn't create, we just have to follow it.

Fastest way to get your loan closed, let your consultant develop the scope of work, have your contractor write in his numbers right on the blank forms where indicated for each line item and return it. Wow, is it fast and we know what words they want to change in the scope if they do at all. Sometimes they want clarification and that is perfectly okay... OR...

The contractor can convert the file into a document that they can type into and change the words, and input the dollars... this causes delay as now we have to read and compare each line item in the scope in case they changed the scope... NOT the best way and wastes more time.