Is getting a contractor before calling the consultant a good idea?
I've done many more 203(k) loan projects than most consultants, with over 6,000 with my boots on the ground. I can tell you a short story below explaining why it is NEVER a good idea to have the contractor out there first.
A lender once called me, letting me know they had a bid for $187,000 to repair a home. She provided that bid with the order, and I made the appointment to view the home. I was also instructed to put the bid into our software. It shouldn't take long to turn this one in.
I arrived at the home to meet the wife, who was about eight months pregnant and very excited to complete the home repairs with a room addition for their older child so they would have room for the new baby in their room.
I made my inspection and had to add a bunch of work that the contractor failed to address. They were only interested in the room addition, while we must also meet Minimum Property Standards. I used the contractor's bid to help create the "scope of work" for the project. Then I did my job... I provided an independent bid for the job.
To my surprise, after adding new tile flooring and countertops in the kitchen, updating the guest bathroom, and installing new smoke detectors and GFCI outlets, my bid came in at $87,000.
I called the contractor to see if he was doing other work not listed on his bid. He didn't respond. I informed him that I added quite a bit of work to the scope of work and explained what it was. He then asked, "Where did you come in?" I replied, "$87,000, and without hesitation, "I'll do it for that amount."
What does this tell you? It tells me a few things:
1. Getting a contractor bid for a room addition may not be the best way to proceed unless the contractor knows the MPS (Minimum Property Standards) and considers the whole project.
2. Having a contractor bid from your consultant's scope of work will save time in the process. This way, all contractors you may have bid the job use the same list of repairs.
3. The consultant MUST provide an independent bid. This is a requirement of the HUD guideline.
4. If your consultant requires a contractor's bid before going to see the property, you aren't getting the service HUD intended. Call someone else.
In this case, we saved the client $100,000, and it would have been criminal for this young couple to saddle themselves with an additional $100,000 in debt.
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