patrick.net

Not yet here. Granite countertop and stainless steel stuff is still hot. There're not much homes available at least in my targetting area, and they ask 2005 price. People are not buying. Let see what's happening to those homes sit on the MLS for 200 days or something. My observation so far for the area suggest me that nothing much is gonna happen. Few of them lower asking price though, most of them are sturbon like hell and never give price cut out. Then the listing will magically disappear from the MLS or got auctioned off. As far as I knew of, one home by the road is supposed to be auctioned off at last 4th of May. And nope, not happened. Still there, price hasn't drop a bit.

People there surely are underwater, but already rich enough to hold homes till rebouncing happens, whenever it might be. So, I don't expect 203k stuff in the area. But I am pretty sure that there're some areas where that thing is a buzz word.

I just finished a home using a 203K.

It is the ONLY way to buy a home with an FHA insured loan that is not "up tp" the FHA move-in ready standards. The 203K re-hab is not needed by rich people.

The way it went in Reader's Digest version:
1) Find home, make offer, get offer accepted.
2) Have an FHA Consultant do a home inspection with you and both of you fingure out what you MUST do (FHA Standards), and what you WANT to do (home value improvers are ok, luxury stuff is not). He will create a big summery report that will show the MUST and WANT items.
3) Get bids for ALL of the work. You can use a General Contractor or you can use individual sub-contractors. I suggest using a General so the bid will be all inclusive to delivering the job completed.
4) PAY FOR an FHA 203K rehab approved appraisal for (as is) and for (as repaired) values.
5) The (as is) value will be the first hurdle. If the as-is value is not there the seller can lower the price or it's off.
6) The (repaired) value then has to come in no lower than the total of the purchace PLUS the bids.
7) Now, you have the home in escrow all this time, and it will take 45 to 60 days in escrow because the 203K check list is very very detailed.
8) You will order and pay for lots of inspections and services to get the home FHA compliant while it is in escrow. If you do not buy the house the money is lost. I mention this because the inspections and services required by FHA are pretty stout.
9) Once the loan is funded and you own the house the work can begin. The home is purchaced with a normal FHA loan and a seperate 203K loan is set aside (increased over the bid amount with a reserve of 10%) to make repairs.
10) Each time the contractor has completed a portion of the job and wants to be paid by a draw, he has the 203K Consultant that you hired come out because he is the eyes and ears for the bank. An easy to follow work-sheet makes this step pretty smooth.
11) The Consultant will cost about $1,200 spread out over the job -- but you pay for it -- in the loan or in cash.
12) When the last draw is made there is a 30 day wait for the 10% contractor's retention.
13) Any money unused or left in the reserves is placed at the end of the note so as to not change the payment schedule or require writing a whole new loan.
14) If you are in central California I have some good contacts that did my deal and it went pretty darn well.

my guess would be it's due to the increased number of foreclosures, like you said. These houses are probably beat up, and the banks probably look at it as an alternative way to selling the house at a higher price.

Figure a 400k house was foreclosed on, it sits, gets a mold problem, and now will only sell for 250 because it needs to be gutted. That's 150k loss for the bank. You are gonna need to fix it up anyway, so if they can get you to finance 100k in renovation, now you are looking at a loan of 350k. Granted, not all of that money goes to them, but they get fees and interest on an additional 100k that they wouldn't have gotten should you have bought the house as is.

I don't have any insider info about it - that's just what makes sense to me. If I was the bank, this is what I would be pushing.

The 203k is the new "buzz word" because there's never been a more perfect RE market for it until now. In April 2007, there were only 293 FHA 203k loans funded nationwide but in April 2011, there were 1,534 FHA 203k loans funded nationwide. In a mere 4 years, there's been a 500% increase in FHA 203k loan. 203k = "buzz" .... probably not but rather on its way to becoming one of the more popular mortgages available and will be so for quite some time. We are now just seeing the beginning. Amazing things can be done with the 203k!

I've been actively looking in parts of California for over two years and have seen more and more houses REQUIRING 203k loans. The official line is banks are trying to protect themselves since the houses NEED a lot of work done to be habitable. For example they may have significant problems with rot, or the kitchen/bathroom is not in a usable condition, etc. What is effectively happening is that house prices are being kept higher, since it lets people who don't have the means to do the repairs in the bidding, AND it forces the work be done NOT by the homeowner (read - makes work for the contractors who have friends or connections). I see it as yet another form of the stimulus era that we are living in.

So now people are going to go into additional debt to mitigate the poor condition of these houses due to the banks' warehousing these REOs to get a higher price? By the way after buying the house and doing the repairs with 203k loan the house is STILL overpriced.

A real estate agent told that me that with 203k's, you had to use FHA approved contractors. Anybody know if that is even close to the truth?

The only FHA approved contractors are FHA lenders. Remodeling/General contractors are not approved, endorsed or certified by HUD/FHA. They used to be, but HUD stopped that program back in 1995, through Mortgagee Letter 95-97. However, contractors can be Certified 203k Contractors, as a method of validating their knowledge, understanding or experience with the 203k.

Landru3000 says

A real estate agent told that me that with 203k’s, you had to use FHA approved contractors. Anybody know if that is even close to the truth?

If the 203k loan is required, then part of the closing process is determining which contractors will do the repairs - they have to be licensed AND approved by the bank. The borrower gets a loan for the house plus the cost of the repairs determined by the contractor. You can just imagine the level of collusion.

Just last month an agent refused to submit our conventional offer on a house which required a 203k loan - even though we had cash to do the repairs.

FOHO -

FOHO says

If the 203k loan is required, then part of the closing process is determining which contractors will do the repairs - they have to be licensed AND approved by the bank. The borrower gets a loan for the house plus the cost of the repairs determined by the contractor. You can just imagine the level of collusion.

Mortgagee Letter 00-25 states the lender is NOT to approve contractors for the 203k but rather to assure that an acceptable contractor has been chosen/selected by the borrower. Lenders do not approve contractors, according to Mortgagee Letter 00-25. The consumer/borrower approves, selects and hires the contractor.
Also, not all contractors need to be licensed. There are some states and areas that do not require licensing for remodeling/general contractors.

203kContractors says

FOHO -
FOHO says

If the 203k loan is required, then part of the closing process is determining which contractors will do the repairs - they have to be licensed AND approved by the bank. The borrower gets a loan for the house plus the cost of the repairs determined by the contractor. You can just imagine the level of collusion.

Mortgagee Letter 00-25 states the lender is NOT to approve contractors for the 203k but rather to assure that an acceptable contractor has been chosen/selected by the borrower. Lenders do not approve contractors, according to Mortgagee Letter 00-25. The consumer/borrower approves, selects and hires the contractor.

Also, not all contractors need to be licensed. There are some states and areas that do not require licensing for remodeling/general contractors.

It sounds like you're trying to drum up business here for yourself. I'm not talking about the lenders, it's the selling bank that is requiring the 203k loans.

FOHO -
You stated that the contractors "have to be licensed AND approved by the bank." Regardless if you are referring to the lending bank or the selling bank .... doesn't matter because Mortgagee Letter 00-25 states lenders do not approve contractors. Also, the seller of the property does not care who does the rehab work, because all the rehab on the 203k is performed AFTER the sale and closing has occurred. Unless I misunderstood you, why then would the seller care who does the rehab work for the buyer? Answer ... they don't. According to HUD form 92700-A, it's the consumer who selects, approves and hires the contractor.

You are missing the point - and concentrating on the trifle technicalities. Best of luck.

Can anyone recommend a wholesale lender? I can't find anyone who does them.

From Hud's website regarding 203K loans,
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/203k/faqs203k .

--Is a contractor required to do the work?

No. However, if the borrower wants to do any work or be the general contractor, they must be qualified to do the work, and do it in a timely and workmanlike manner. It is very important that the work be done in a time frame that will assure the completion of the work that will be agreed upon in the Rehabilitation Loan Agreement (signed at closing). A borrower doing their own work can only be paid for the cost of the materials. Monies saved can be allocated to cost overruns or additional improvements.

--Can the borrower do their own work write up and cost estimate?

Yes, but only under the Streamline (k) program ($35,000 max for improvements).

So under certain scenarios, you don't need a general contractor to compile a cost estimate or do the work.

west coast says

Can anyone recommend a wholesale lender? I can’t find anyone who does them.

Hud.gov has a Lender List search( Select 203K at the bottom), http://www.hud.gov/ll/code/llslcrit.cfm .

All American Mortgage of Merced did mine. Ask for Scott Crawford. He is honest, smart, and busts his ass.

@bobby bubble,
I humbly disagree, but I could be wrong. I think these are the only avenue to buy a distressed home and get repairs since banks will not loan above actual value, as is needed to do a home improvement on a fresh purchase ... PLUS, FHA will not lend against a distressed home. So, even if a person has the 20% downpayment that would keep them from using FHA help, they would then have to pay for all repairs up front and hope for a refi to cover the debt after the fact. With a 203K the value is pretty much set by the process to help protect the buyers intrest. It is very intrusive and direct, so stupid people will not spend a million polishing a turd. In my opinion.

Landru3000 says

A real estate agent told that me that with 203k’s, you had to use FHA approved contractors. Anybody know if that is even close to the truth?

Did anyone give a direct answer for this or are we to infer a no from kannoox's long story?

zzyzzx -

I directly answered this question earlier. Please read my post above. Here's what I stated, "The only FHA approved contractors are FHA lenders. Remodeling/General contractors are not approved, endorsed or certified by HUD/FHA. They used to be, but HUD stopped that program back in 1995, through Mortgagee Letter 95-97. However, contractors can be Certified 203k Contractors, as a method of validating their knowledge, understanding or experience with the 203k."

The contractor is not approved by FHA or HUD directly ... like, there is no list of checked-out contractors or anything like that .... BUT, the contractor does fill out a resume of sorts, for the LENDER to use to make sure the contractors are up to snuff. If you use a General, then they are on the hook. If you use yourself as general and use subs, each one must submit a resume (not a resume, but whatever it is). They check references and make sure you are not part of the company doing any of the work. It is very much a proctology based loan.

Id rather eat gravel than sit around waiting for someone buying one of my houses to get a 203k loan. They take on an average about 3 months. If they go through which most times they don't

There used to be ways around doing a 203k which is a last resort. It takes on an average 3 months to build a home same time it takes to do a 203k.

If you want to find the third ring of hell do a 203k. I have tried it many times. It is so much frustration. So much running. So much trying to prove things. You will never do one again after you have tired it.