Sunday, December 14, 2014

Permit Fees for a 203k

Most projects will require one permit or another. This week we have had a couple comments from contractors as they attempt to put them into the line item bid form under "miscellaneous".

A couple were quite adamant about doing it that way and it isn't going to happen per the HUD Guideline. The guideline states permit fees, architectural and engineering fees are to be kept out side the line items in the bid.

It is done this way so these fees can be paid out at 100% with no hold back. Any of the "line items" if they could put it there would have a 10% hold-back. If we put them in a line item then input them where they should be the borrower would be paying for them twice.

What I think it really boiled down to was the contractors wanted to see their mark up for profit and overhead on those expenses since they were paying the upfront money for those services and rightly so.

The guideline and more-so the lenders have determined they will only pay the exact amount of the permit fees and/or architectural and engineering fees and NO MORE.

I suggests your contractor figures out how much that profit and overhead would have been, take that amount and add a line item in the bid called "permit processing fee" - this is the cost for the time the contractor sits at the inspection department waiting for the permit to be issued or meetings with the architect or engineer to get things resolved. He is entitled to get paid for his time and this has been a good solution that still keeps things within the guideline.

Yes, I know there is another instructor, and maybe more, out there telling consultants that is is okay to put these fees into a line item but "beware" you can be sanctioned and removed from the list for doing something that it outside the guideline. It is your career at risk not theirs.