Can I use multiple contractors on my 203k project?
This comes up time and time again. This is a double edged sword.
1) Limited 203k loans are not a problem, it is the way the program was designed. It allows you do smaller jobs where the borrower obtains bids for the various components of their project. This is typically what a general contractor (GC) does for you. In this case and this case only the borrower is acting as a GC by doing so.
2) The problems arise however on larger project we need to have a GC in charge. Someone who knows what he is doing and knows his subcontractors with the ability to coordinate the various trades so they don't conflict with each other.
When a home owner works with a lender who does mostly Limited 203k loans they might be instructed to get bids from the subcontractors in preparation of ordering a consultation. This is not the way to make the consultant happy or the borrower.
The GC will get bids from his/her subcontractors and then put their markup on those costs. This is how they make their money. The borrower goes out and gets subcontractor bids, thinking they are doing themselves a favor... while they are setting themselves up for a let down.
We have actually tried some of the smaller Standard 203k loans with multiple contractors and found them to be more trouble than they are worth. When the borrower is getting subcontractor bids they are in effect working as the GC and the Standard 203k specifically calls this "self help" and most lenders will require the borrower to be a licensed GC in the state where the home or property is located.
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