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.