Using the Right Contractors for FHA 203K Loans

Using the wrong contractors can kill a 203 K transaction. I cringe when I heard someone say they have a friend who is a carpenter.

Some of the problems: No insurance, possibly not licensed, not willing to submit paperwork that a lender needs, need money up front or can’t get started, not knowing the building permit process, below average work quality, not showing up on time, poor communication, not sticking to the bid price and the list is endless.

Sara was one of these folks that had a friend, I guess a friend of a friend. Even though I strongly recommended that she use a licensed contractor, she had made up her mind she was going to use her guy. She went forward with the purchase agreement and had made arrangements for the bid for the work so that I could get the application done.

At the time of the application I gave her a detailed list of what we need for the carpenter she wanted. For days I communicated with Sara about what was necessary from the carpenter. The bottom line, after nearly 4 weeks, he contacted her to say that she should get someone else.

I then did a 3 way call with Sara and her Realtor to first find out if an extension could be gotten on the purchase agreement, as we were literally starting from scratch. In the mean time I gave her a couple of contractor names to check on their availability.

Sara eventually closed, but it took 6 weeks longer than it should have, but an important lesson learned. Unfortunately this story is repeated too many times.