Things are heating up in more ways than you might think. While it is 100 degrees in Charlotte, the humidity is down somewhat from usual but it was 139 degrees in the attic. Wow, yes, the 203k consultant should look in the attic and under the home if there is a crawl space, I must admit that I enjoy slab foundations and full basements more and more as I get older.
Last January I was asked to do a 203k that had started out as a Streamlined k and then someone noted that there were structural issues and at the last minute they need a "Full 203k" ... the big question was "How fast can you get it done?" Well we were able to see it within a couple hours from that call but.. the home didn't qualify for a 203k. As soon as I pulled up in front of the home I saw the reason for the deal to fall through and called the lender who immediately also knew the deal wouldn't pass muster at FHA underwriting.
Why? you ask... well there was a "high tension" tower standing adjacent to the home within about 15-20 feet and clearly within the Fall Distance of the tower. Who should have known this would be an issue with and FHA loan? Everyone in the transaction should have known. The lender clearly knew once I explained the situation but by then it was way too late, no one had informed the lender prior to calling me out.
Who should have known? Realtor's and agents... learn your product. If you are using FHA regardless of what type of FHA loan, you need to know the parameters of their guidelines. NOT blaming this on the Realtor or agent, but had that person been aware of the FHA guidelines even the "deal killer" guidelines then they may have saved a lot of time and certainly money for their client. Education, CE, AllRegs is a great place for that as well as many others.
Who else? How about the appraiser? Absolutely.. and they did and when they were being paid for an appraisal they might have called the lender as I did and gone on to their next job. However, they are not being paid for their work and there isn't enough work to go around so instead of calling anyone, they were hired to do an appraisal so they did. Inside the appraisal was the information that killed the deal but not in such a way that it sent up red flags as it might have but rather as an information point from what I heard. But the appraiser did catch it.
A home inspection was completed... they are clearly not trained as compliance inspectors for the FHA loan program so they didn't know to tell anyone about it and they weren't inspecting the property next door that had a "high tension" tower on it. This is why we recommend a home inspection for a Streamlined k to be by a 203k Consultant / home inspector. That way you get the home inspection you are looking for and the eyes of someone versed in the guidelines of FHA.. a double benefit for your client. Now, had that happened in this case we would have saved lots of time because 1 this deal would have been dead at the first visit and the client would have been saved this fee. If you haven't figured this out yet, we are all working in the interest of the client, the borrower, the purchaser, and so on. The other value the "203k Consultant / Home Inspector" brings to the table in the case of a Streamlined k that doesn't have a high tension tower adjacent to it is that they would have noted the "structural issues" on this home and told everyone up front that this is a Full 203k on day one not day 34.
Instead this deal went up to the day before it was to close before anyone realized the deal was never a deal at all. NO house for the qualified buyer who had been approved at every step of the way, NO payday for the agent, NO payday for the loan officer. Who did get paid - The appraiser - the home inspector - the pest control company who inspected got paid for an inspection only. Wow... This was wrong and didn't serve the borrower or anyone else in a positive manner.
Why is that important? Not all lenders do both Streamlined k loans and Full 203k loans. The differences is are pretty simple. The Streamlined k is for non structural work, mostly cosmetic in nature like carpets, paint, even a roof is okay, but no structural issues and the total cost of fees and the work must be less than $35,000. Guess what? There are many lenders who only do the Streamlined k loans and don't participate in the Full 203k. If you have a lender tell you that the work costs too much for a 203k loan, they are likely talking about the Streamlined k as they may be all they offer. I've actually had deals people told me about that fell apart cause the work totaled $37-40,000 and the 203k doesn't go that high for repairs... BS The Streamlined k doesn't but the Full does. A friend of mine (Mitch) is doing one right now that the construction cost is over $400,000 in Benicia CA, another friend in upstate NY has a deal with construction costs at $465,000 so $37-40,000 isn't a magic number for a deal to fall apart. There is one other difference between a Streamlined "k" and a Full 203k loan and that is the need for a 203k consultant. A consultant is not required for a Streamlined "k" but is mandatory for a Full 203k.
See you again soon. M
Comments (4)Subscribe to CommentsComment