203k renovation stories - Stockton CA

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

203k renovation stories - Stockton CA

I've been asked to discuss some of our more interesting projects during the past sixteen years of working with the 203k loan program.

1) Oakland, CA we had a hundred plus year old two story Victorian home that had an aluminum shingle roof. The roof appeared to be original and we couldn't find a single thing wrong with it. There were no leaks, and we couldn't find any reason to disturb it. That seems like the roof everyone would want... everyone except the industry apparently. We all know it is the repeat business that keeps us going in a business and I'm afraid this roofing product would sell for a while then die due to the lack of re-roofs. It was an interesting roof to say the least and had lines in it that resembled a piece of cut wood where you could see the different layers of growth but very flat otherwise. I must say it was fun to see that old Victorian take on a new face and uplift. 

2) Oakland, CA another home built around the turn of the century... 1900 was still standing and had a brick foundation that was in pretty good condition as I remember but some nimrod undercut the foundation trying to dig out a basement and undermined the footing and now the foundation had to be replaced. The engineer called for such a huge buttress causing us to have to dip into the contingency after we got going. Luckily I always suggest a 20% contingency on homes of this vintage. We always find hidden issues or most always. Only once in Vallejo did we ever not have enough contingency to cover the issues that came up after the fact. We had the 20% in the contingency but the pest work was very extensive and a lot more than any of us had anticipated. What do you do when the work exceeds the contingency reserve? The borrower can come up with the difference... not likely. In most cases the borrower is there on a shoestring so we don't encourage that type buyer to purchase very old homes that have lots of repairs we do know about as quite often they will have issues. The other alternative in the old days would be that a Title I loan could be placed behind a 203k loan provided it is clearly for "other work" not already identified in the 203k work write up. Don't think this is a license to get a Title I loan as if you try to cheat the system it is considered FRAUD and you will be found out and go to jail, directly to jail, do not pass GO, and do not collect $200.

3) Stockton, CA, thought I wouldn't get there did you.. lol. I just saved the best for last. A very interesting home east of Hwy 99 on Hwy 4 out a little way from the freeway. There was a small home on a pier and post foundation with more rot than I have ever seen before or since that time. I could literally put my hand through the outside wall anywhere I touched it. I wondered why it was still standing. It was a mess. The home was sitting too close to the front of the lot with plenty of room to move it back but that wouldn't fit the "renovation" part of the 203k loan program. We must used the existing foundation or at least a portion of it. What else was wrong with this home... the septic system had failed and it needed to be replaced. The lot was very large so that wasn't an issue. The well was fine and had a good amount of water flow. Talked with HUD and they agreed due to the condition of the home and the need for it to be farther from the street. We all agreed to use the left rear corner of the existing home's foundation and use it for the front right corner of the renovated home. [This is a unique use of the program and I wouldn't expect it to work in the current market] 

Since the septic system had to be replaced like so many in Vacaville, CA that must be the first work completed. It must be included in the first draw. When we did the first draw it was as though no one heard me. The foundation was installed and, as I remember, the sub flooring was installed, the septic tank was on site but they were digging it out when I got there. I can't stress enough that any septic work should be the first thing that gets done. We can't do the first draw if it doesn't include the septic system. I documented it all with photos and turned in, I really don't remember if the lender funded it or not but don't put yourself in that box where someone you don't know is controlling whether or not you get paid. 

Always keep in mind that any septic replacement is considered structural and the Streamlined "k" is not an option. This must be a Full 203k. 


Posted by

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

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Comments (2)

John Pusa
Berkshire Hathaway Home Services Crest - Glendale, CA
Your All Time Realtor With Exceptional Service

Mike - Excellent information and tips on 203K renovation loan. Thank you for sharing a very good blog.

Oct 10, 2010 07:55 AM
Mike Young
203kOnLine.com, covering the USA - Las Vegas, NV
FHA 203k Consultant 916-758-1809

John, kind of you to say so, I appreciate it. 

Oct 10, 2010 09:12 AM