Why does it take a 203k or renovation loan so long to close escrow?
The short answer is that it doesn't take that long if everyone races to the finish line. If you use a proven team you should close a 203k in about the same amount of tiem as a 203b (Standard FHA loan). The problems come up when the team isn't allowed to function unobstructed. What I mean by that is simply do your job and do it as fast as you can and let the others do the same. Some take a little longer than others. I'm doing one right now the lender has called several time... but. there is no well, and no one has ever pumped the septic tank and there are no diagrams of the leach lines that show them on the subject property... yes, we have to get that straightened out.
203k Do's -
1) Place the consultant order... once we make the appointment we tell everyone that this should take about a week to get our 1st draft. Actually place the order. I can't tell you how many times per week a lender will call me and ask, "We have 203k project, what are your charges?" Had they gone on to our wonderful order blank and checked the boxes, the answer is right in front of them in writing. Wow, isn't that novel. Our order blank is set up to give you all of your GFE information automatically when you place the order.
In case you haven't done a 203k, our fee is based on sliding scale so to quote a price, I need to know the amount of construction and the distance to the property to calculate the mileage... so I need the address.
There is a handy "comment" line where you can provide instructions like... verify the costs to me prior to making the appointment please.
Get the consultant in on the project 1st... as soon as you know you have a 203k or homestyle renovation project order the consultation. We'll tell you what reports you need to order. Typically you will need a WDO (pest report), a well test if it exists, and a septic inspection or sewer lateral inspection.
2) The consultant has to see the property, write the scope of work then bid the job... this is designed by HUD to take about 2 weeks. We do it typically in about a week. If you wait that week you will likely never have to call us.
3) The appraisal can be ordered in most cases with the consultant's bid... you say your consultant doesn't provide a bid, then he or she isn't doing their job. All consultants aren't created equal so ask to insure yours will provide a bid with the scope prep.
203k Don'ts -
1. Never have a few contractor bids first... before the consultant as they take about 3-5 weeks and then you order the consultation, you have just added 3-5 weeks to your closing.
I actually was in a seminar the other day when the LO told everyone to get a couple contractor bids first... NOT, this will hold you up 3-5 weeks and they will likely miss items that we must also repair. They wonder why they can't close them faster.
2. Don't call the teammates every hour to see how they are doing... work on your part of the transaction and race to the finish line. Calling constantly is a wate of everyone's time. When I get a call asking me "when will we have your report?" after I've already told them at the time of the inspection that it takes us about a week. It is just annoying and counter productive.
3. What can you do to insure your loan closes at the shortest possible time frame? Simple get your consultant involved sooner in the process.
4. Many lenders will get the client paperwork started and wait a week or so then tell you to call us. They have already pre-qualified the buyer, so there is no need to hold off the consultant involvement.
uptown 10/1/2023
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