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What is in a 203k consultant's FEE for services?

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

What is in a 203k consultant's FEE for services?

FHA 203k fees were set up in 1994 and were adjusted one time to add some depth and extend the upper fee from $700 for $30,001 to $50,000 and add a fee of $800 for work from $50,001 to $75,000, a $900 fee for construction between $75,001 to $100,000, and finally a fee of $1,000 for construction in excess of $100,000.

Remember in these days the typical loan amount for FHA loans was about $150,000 to 250,000 and very rarely did you see a construction project in excess of $50,000.

In 2004 the loan limits were dramatically increased up to $729,750 and the project costs skyrocketed sometimes up to $500,000 in construction costs. As a mater of survival consultants across the country had to act on their own and most of them used the HUD guideline which topped out at $100,000 with a 1% fee so larger projects are typically capped at the 1% amount but we have found that most often they can be done for much less by maintaining a time clock on the project write up.

I find it ironic that sometimes a buyer will think the $1,000 fee set in 1994 was too high for a consultant's services.... yet they can't tell you what we do for that fee, only that the fee is too high. 

Some think 6% is too high a commission for selling a home yet I've seen some deals that will eat you up if you do it right. City of Berkeley CA charges 7% for permits... for what.. .approving plans drawn by a licensed architect and monitoring the construction installed by a licensed contractor. Both have liability for the work yet they charge an arm and a leg to watch over the process. Interesting 

So, what then does a consultant do for their fee? That is different across the country and per inspector in most cases. They are all supposed to create a bid specification of repairs and price it or "quote the job" for the borrower. This way our buyer or client is fore armed with this info as the bids start coming in. If you know in advance this project construction cost is going to be about $159,000 and your first bid is $298,000 the client will know this isn't a "fair bid".  This is an actual case. Our fee was $1,000. The next bid was $161,000 and considered viable.  Did we earn our fee. of course we did and no one would argue that. 

However another client who doesn't know what we do or how effective we are at what we do and complain that our fee is too high... The cost of his BMW is too high when compared to a VW and they will both get you where you are going. Is the BMW that much better? 

All consultants aren't equal nor are all Realtors of course. It would be as wrong to assume either are like all others. Choose wisely in both cases. 

If all you want is price you will get what you pay for. Then when the "professional" realizes he under bid the job and isn't making any money on the project and walks away or worse, makes you wait days and possibly more than a week for draw inspection, your contractor is out of money and is a the whim of your "poor choice" you can sit and ponder why your project didn't run smoothly. 

It makes allot of sense to go with proven entity, a company who has a proven record and developed a system to get the job done in a professional manner and who will be with you all the way to the end of the project to see it through.

Posted by

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

To learn more about the FHA 203k loan program go to www.203kOnLine.comWhat is your fee? 

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