Name: Jose S. Guerrero Email Address: jguerrero2019@austin.rr.com
Message:
Hello Brent; Enjoyed reading what you have to say about the 203K. I have been involved with the 203K since 1976, first as a Contractor and in 1996 I started as a Consultant. You mention that your contracting company has done 203K's from the other end of the table, which I assume you are the owner of the contracting company. I myself have much experience from been a contractor, investor, residential compliance inspector and consultant. With all combined experience I want to set up a "One Stop 203K Shop" to help and share my experience with potential Sellers, Buyers and Lenders, however it appears that since I am a Consultant there exists a conflict or identity interest, so I am sord of stuck just working as a Consultant. I welcome any advice you can share on this subject. Also, if you know of a direct lender willing and able to provide Standard/Full 203K loans under $75,000.00, kindly let me know. Have several towns within 45 minutes drive from Austin and San Antonio Texas where property values are between $20K and $50K and with repair and upgrades would appraise at $55K to $75K. Have not solicited any 203K business in those small towns because have been able to find an able and willing 203K lender for loans under $75K. Again, I also welcome you advice on how loans under $75K can be accomplished. If you are that lender and can lend in Texas, I welcome all your input. I am always open to new opportunities. Thank you Jose S. Guerrero (D0513) in Austin, Texas
Jose (et. al),
Thanks for the message. I trust you won't mind me utilizing your question as a post, so it may benefit others.
There are two sections/questions to your email and I will address both. 1st - Contractor vs. Consultant & conflict of interest. 2nd - Lender in Texas and why can't find someone to do the loans that are such a low price.
1st - Contractor vs. Consultant, et. al.
Interesting perdicament you are in... Through the years, I have been a DE Underwriter, Owned Companies and licenses in Contracting, Home building, Auctioneer Services, Mortgage Banking, Title & Real Estate Business and also ran a REITs. I'm not trying to pat myself on the back and more appropriately am probably pointing out my "Adult ADD Affliction" (which by the way...Why is the SELF HELP MANUAL for ADD 300 pages long?), but I am trying to illustrate I HAVE BEEN THERE. In the business that we are in, we have phrases like these: Conflict of Interest, Arms Length Transaction, Affiliated Business Disclosure, Dual Agency, Fiduciary Responsibility. WOH! Grab my checkbook, I need my attorney!
Here is the long and short of it. You are what I like to call, "Uniquely Qualified". You have a leg up on other Consultants. You actually KNOW construction. You know the difference between a rafter and a joist, what underpinning a foundation takes and if that wall is load bearing or not. GREAT! That makes you a BIGGER asset to your customers. State and Federal Laws differ, of course, on their definition of how businesses can be "intermingled" and co-exist. Sure, I know how it works... The TRUTH is you want to HELP your customer and if you are referred to the customer for a 203K Consulting job, why not also offer to do the Termite, Radon, Well test, and Septic??? You do those services. Also, your contracting company could EASILY handle this job and who has the closest communication with the customer??? A CLEAR picture of what they envision as their build... YOU! In a perfect world, you rationalize that you could even SAVE them money, because since you have consolidated all the services, you can reduce the fees here/there and the net result is, at the end of the day, the CUSTOMER gets a legitimate savings... What could be wrong with that!!!
This...
Everything is great when we are all friends and everyone gets along. To ensure your legal protection, you talked to one of those 'blood sucking legalease leaches' and they told you DISCLOSE, DISCLOSE, DISCLOSE and more than likely, you will be fine. (isn't it always interesting how they can talk a lot and say nothing?) Somewhere down the road, you start the construction on this project and when you do, you get that "Can of worms" you didn't know you had. You find that the Contingency Reserve isn't enough to cover it. The HVAC is bad and completely goes up, the basement flooded on the next big rain and you just finished the basement, the water was turned back on and while they were away for a week, driving the U-haul from the other coast, water leaked in the house for a week... You flash your "Affiliated Business Disclosure" to them and say, "You knew, and you signed a Hold Harmless". Right. Who do you think the Judge will be looking down upon when it hits his bench? YOU... YOU took advantage of the public. Your Hold Harmless was illegal because of specific CONFLICT OF INTEREST and YOU will pay the remedy.
Rule of Thumb: Utilize your various skills to be a better and more competent CONSULTANT, CONTRACTOR, INSPECTOR, whatever, BUT ONLY WEAR ONE HAT AT A TIME. You will do a better job, inform your customers better, actually EARN their trust and confidence and in the long run, will be referred more business in the future than you would have, should you have tried to be all things to everyone.
Do Yourself and Your Companies a favor... ONE HAT AT A TIME, ONE CUSTOMER AT A TIME.
2nd - Finding a 203K Lender in Texas and why your finding they won't touch Low Loan Amounts
Thank you for the offer, but there is SO much business here, I want to stay here. The truth is, I don't understand how a Lender can be an effective 203K Lender from 5 states over. As discussed in my other BLOGS, it takes an educated Lending Professional to properly counsel their client throughout the ENTIRE lending process. How can that be done from a desk 1,500 miles away? How do you find a lender there doing K's? Easy... Go to HUD's website and do an "Approved Lender Search". You have the option to choose a box that says 203K. Click that and search for the Lenders in YOUR AREA doing 203K's. Lenders, you TOO can utilize that website to find a Licensed Consultant in the area... As usual... NOT ALL LENDERS ARE CREATED EQUAL, so is the same for Consultants. Just because their name is on the list, doesn't mean they are competent. Do the Due!
Here is the link: http://www.hud.gov/ll/code/llslcrit.cfm
Why won't the Lenders you have talked to touch these Low Loan Amounts??? Wait a minute... I thought 
everything was bigger in TEXAS? Its pretty simple. As a lender, low loan amounts are major "hits" to our pricing. When we price out a loan that is 35,000, the Bank we are going to SELL THE LOAN to is going to hit us with Pricing Adjustments, and bring our price down. To counter this, we raise the rate to "maximize the back end", so our Net Price is at least PAR (meaning we don't have to pay anything to issue that rate). Well two things happen. We have to make money for our efforts, right? Well, here we have a loan where we are trying to justify why we have raised the rate to 5.5% while everyone on the TV is saying the rates just dropped just below 5.0% ??? ALSO, we were PAR at that rate, so to make anything we have to charge POINTS. 2, 3, 4 ??? The quandry is that the LOAN AMOUNT IS SO LOW... a point is only $350.00 in this example and we are USED TO MAKING AT LEAST A THOUSAND!
BOLLOCKS!
Here is the long and short of it. IF you are a LOAN PROFESSIONAL... that customer is not a customer... they are a CLIENT! This means you do whatever you can to take care of them. Yes, you have to make money... but take the good with the bad. Imagine all the referrals you could get from this family or that Agent or that Consultant because you actually will take the time to do this loan and make a measily $450.00 (maybe you should go do some manual labor and appreciate just what you do). Furthermore, they are MISSING THE BIG PICTURE. 203K's are a LENDERS BEST FRIEND... why? Unlike a Realtor, we are not paid on the Purchase Price... We are paid on the LOAN AMOUNT. That means maybe they do buy the house for $18,000.00 (not a bit Texas Commission for that Realtor)... But they are putting $50,000.00 into the renovation of the home, so we are paid on a loan over $70,000 !!!! As a lender, our points that we charge or that we receive "on the back end" ( Yield Spread Premium ) ARE PAID ON THE LOAN AMOUNT.... Not too shabby a deal! Once again, recognize you are being paid for this, so BE INVOLVED THROUGHT THE ENTIRE LOAN PROCESS....
YOU OWE IT TO YOUR CLIENTS!
Kluge Out!
Comments (0)Subscribe to CommentsComment