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Renovation loans are great but not all contractors are doing their job

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

Renovation loans are great but not all contractors are doing their job

Did you ever have a contractor on a 203k project that really impressed you? Everything about them was great. Well funded, great demeanor, just all around a great company to have on your projects. 

Then something changes, one after another the jobs they are on are falling apart, they no longer satisfy the clients, none of the clients. Not just your clients but all of their clients.

We sometimes recommend contractors to clients that have shown responsible behavior in the past, that is no indication that they will continue to do so apparently. I can't believe this is happening to my clients.

However, all that said, read carefully the followning


203 (k) Borrower's Acknowledgment

• I understand the contractor(s) is responsible to complete the work described in the architectural exhibits in a workmanlike manner. If I agree the work has been properly completed, I will sign the Draw Request, form HUD- 9746-A, thereby accepting the responsibility that the completed work is acceptable and payment is justified. I understand there is a 10 percent hold back on each Draw Request to assure the work is properly completed and for lien protection.

 • I understand I am responsible to negotiate any and all agreements with the contractor(s) I select and that HUD suggests that the Agreement with the

contractor should include a provision for binding arbitration with the American Arbitration Association on any dispute.

 • I understand if I change a contractor for any reason, I may be obligated under the terms of the original contractor’s agreement and I should seek legal advice before taking such action. If I disagree with the contractor regarding the acceptable completion of the work, I can request an inspection by the fee inspector to determine if the work has been properly completed. If an agreement cannot be made with the contractor, the lender may hold the money until such time as an agreement is reached or an arbitrator’s decision is rendered.

The contractor should always use his or her own agreement that meets CA state laws, and at least includes the mandatory 3-day rescission period required in CA.


@203k consultant





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? 

Got a 203k project giving you "fits" contact www.203k911.com. If you are looking for quality 203k software for consultants to speed up the underwriting process..

877-207-6565  state your name when asked please, it is dialing me at the same time.

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Fred Griffin Florida Real Estate
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

     Our Tallahassee Board of Realtors is holding a 3-hour class on "renovation loans" this Wednesday.  These are popular loans here, because we still have a large inventory of banged-up foreclosures.

Jun 12, 2016 03:25 AM
Mike Young

Let me know if you want a 203k consultant present and I'll see if one of our guys or gals can be there.

Jun 12, 2016 05:07 AM
Fred Griffin Florida Real Estate

Mike Young

   Thanks for the offer.  The Education Committee has already set the schedule for Wednesday.   Maybe next time!

Jun 12, 2016 05:49 AM
Carol Wilson
Your $imple Home - Toronto, ON

Hi Mike Young, you have left me puzzled.  What I received is a clear description of the problem: sometimes the builders don't complete their work after people have bought new construction.  You showed us how we have contractual obligations and are somewhat stuck if the builder should turn out to be less than ethical.

I'm left wondering what is your point.  Do you have a particular call to action you want to make?

Jun 12, 2016 03:29 AM
Mike Young

There are clear ways to correct the problem of course. go to www.203k911.com then to the News button and I explain how to fire a contractor under this program and other similar program. I wanted you to be puzzled. The borrowers ask for our help in finding a contractor then fail to do their due diligence. It is a shame but there are time when you just have no choice but to fire them and start with another contractor. 

Jun 12, 2016 05:10 AM
Les & Sarah Oswald
Realty One Group - Eastvale, CA
Broker, Realtor and Investor

203K loans are the best resource for home renovation. However, I can't emphasize enough the importance of due diligence. Check their referrals, past experiences, workmanship, BBB rating, etc.  A contractors are not created equal.

Jun 12, 2016 04:44 AM
Mike Young

Nice comment Les and Sarah, thank you. These are all great suggestions. In the case I'm describing all that wouldn't have yielded any info that would have steered us the other way, however. The contractor was as good as gold, then all of a sudden they lost it all. 

Jun 12, 2016 05:12 AM
Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate Services

Yes, Indeed I have had issues with contractors doing good in the beginning and then flaking out and I will no longer refer them.  One such contractor you know 

Jun 12, 2016 08:03 AM
Mike Young
203kOnLine.com, covering the USA - Stallings, NC
FHA 203k Consultant 916-758-1809

It is odd that they can be so good one day and so bad the next day. Part of it is that they spread themselves too thin to the point they are no longer providing the level of service they did to anyone of their current clients.

Jun 13, 2016 12:23 AM