Tuesday, February 24, 2015

I'm an Inspector - Why Should I Know & Understand the 203k? Columbia

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There are several good answers to that. Every home inspector has been accused of “killing the deal” at one time or another and it just isn’t true. The home inspector is hired to discover whatever they can to “inform the borrower” so they go into the transaction with their eyes wide open. In any case they never kill a deal, the deal just becomes a 203k loan.

I did an inspection for a 203k loan refinance and room addition in which I discovered some foundation issues and when I pointed them out to the borrower who had purchased the home about a year ago. He had a home inspection and when we looked at it found that the inspector had called the foundation “typical” and it clearly wasn’t “typical” it had failed. Did that inspector do a service to the client, absolutely not, but he didn’t kill the deal, did he? In fact when questioned admitted that he didn’t want to kill the deal. What did he think his job was? He failed at the home inspection process and failed in his service to this buyer.

Buyers depend on us to “find any problems” and “report on those issues” There is pressure put on home inspectors every day but they must do their job. We need to train them in the ways of the FHA 203k loan program so they can find those issues and offer solutions to those problems by telling you who to call. The home inspector is not typically allowed to provide a quote on the repairs and certainly not to make the repairs for a fee. What they do is “recommend” other services, or “suggest” other trades be called in to evaluate the cost and expense to make repairs. There is nothing wrong with this process but it doesn’t get what you want done accomplished.

What is the answer to this problem then? Why not educate the home inspector to be a “referral partner” that is what we do. The other alternative might be to train the home inspector to be an FHA 203k consultant. If that home inspector can also do the 203k compliance inspection they are also able to pick up a second fee on that project. HUD makes a clear distinction between a 203k compliance report and a home inspection and suggest every home buyer understand that they may need both and it is okay to order both. If you have a “home inspection” or you are about to order one and you have a 203k consultant that consultant MUST review the home inspection, pest report, and any other reports such as well reports, septic system report, and any engineering reports that might exist up to an including the day of the COE (close of escrow).

The HUD guideline for the FHA 203k loan program doesn’t “require” a pest control report however it does “require” a pest control clearance at the end of the project. Therefore all of the lenders I’m aware of have a “supplemental requirement” calling for a pest report going into the project if it is a “full 203k loan”.

What about a Streamlined k? Do we need a pest report? Not necessarily. If you don’t have one you don’t need to respond to the repairs. If you have one and it is a streamlined k, you now have to clear it. The streamlined k is for "non structural" related repairs. So as you go through a home on your inspection and you find minor repairs are needed but NO STRUCTURAL issues exist you can offer this home as a "Streamlined k potential". That that means is that the borrower or buyer can get a low interest loan to make the repairs after it closes escrow. This is true of either type 203k loans. the work is always completed after it closes escrow and the borrower's expense. The agents and Brokers all get paid and then the work begins and the 203k Consultant will stay with the project until it is complete.

Call us in Columbia SC 704.451.1599 ask for David Sovde