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Can I use multiple contractors on my 203k project?

By
Home Inspector with 203kOnLine.com, covering the USA S0289

Can I use multiple contractors on my 203k project?

This comes up time and time again. This is a double edged sword.  www.203konline.com

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. 

Posted by

Mike Young, 203k Team Leader    Mike ready for your 203k order

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Comments (2)

Dave Halpern
Dave Halpern Real Estate Agent, Inc., Louisville, KY (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert

It is advisable to have a general contractor who will be responsible for the project in its entirety.

Nov 23, 2017 12:42 PM
Mike Young
203kOnLine.com, covering the USA - Stallings, NC
FHA 203k Consultant 916-758-1809

Dave, Yes that is a must. He will typically have his own subcontractors that he works with regularly. On rare occasion a lender might allow a big ticket item to be completed by another contractor. Such as a septic system might be needed in addition to a number of repairs items. A general would typically add another 20% markup to a $30,000 septic bid. 

Jan 14, 2018 03:58 PM