When does a property get kicked into the 203k program?

[RSW]

I have been doing a lot of FHA appraisals lately. Who would have thunk it? My question is this: Say a home has MPR’s of more than $5,000. Will this kick the property out of the the FHA program or will it be kicked into the 203k program? Who makes the decision to flip it over to the 203k program if this is the case?

 

[TJSum]

Good question, I posted a similar question last Saturday (cost to cure) and still am looking to see if it is in writing anywhere as a specfic number, or just a judgement call.

Another question, if the limit is a cut and dried figure, what happens if the cost 2 cure does not exceed the limit until after the "called for inspections" results are in, I guess then the UW would make that decision?

 

[Mr Rex]

It does not get automatically changed to 203k. Many lenders don't offer anything but 203b (regular FHA). One of the problems with 203k is that the funds for repairs are not dispersed until after the repairs/upgrades are complete (or phases of the repairs/upgrades), which puts the folks in the situation of having to come out of pocket for the repairs or find a contractor willing to wait until the funds are dispersed. Not to mention that for full 203k, a 203k consultant is involved and charges from $500-$1200 around here to produce the 20k consultants report. I am looking into providing the 203k consultant function.

 

[Thomas Fiehler]

Mr Rex is correct. The 203K program is not an automatic program and not every lender will participate in them. Some just don't like the paperwork but that will likely change since they likely WILL like the work now. There are limitations as what can be completed under the 203K program. You cannot build an ingorund pool but you can replace the liner; they do not allow additions (I believe) bue you can finish an attic. I've appraised properties that you would swear the best use is to demolish the structures but they were renovated and the work turned out quite nice.

 

[RSW]

Thanks, Rex and Tom! I have done several FHA's lately that the MPR's are more than $5,000 and I really feel sorry for the homeowners. I can only report what I see and not let it get to me. It's hard to do sometimes.

 

[ghrousseau]

Mr Rex is correct. The 203K program is not an automatic program and not every lender will participate in them. Some just don't like the paperwork but that will likely change since they likely WILL like the work now. There are limitations as what can be completed under the 203K program. You cannot build an ingorund pool but you can replace the liner; they do not allow additions (I believe) bue you can finish an attic. I've appraised properties that you would swear the best use is to demolish the structures but they were renovated and the work turned out quite nice.

Thomas..........you can under certain circumstances build additions. I just did an FHA audit review on a 203K loan we closed and sold to CW. The borrower cashed out to 103%(includes the financed MI premium.) They are adding a MBR and BA off the rear and doing new siding, EE Windows, and a few other items. The escrow account is about $49,000. I'll try to get a little more detail on the program and post up.

Keep in mind though, this home was in average condition and required no repairs per the FHA appraiser. The AV was based strictly on the current property as is with the current GLA as measured. There is a 203K consultant involved and plans/specifications from the approved contractor. Great deal for this borrower and much better than the home equity LOC route because they have a low rate loan in place, and will likely have a positive equity position when the work is done................providing their local market doesn't continue to drop.

 

[Mike Boyd]

It does not get automatically changed to 203k. Many lenders don't offer anything but 203b (regular FHA). One of the problems with 203k is that the funds for repairs are not dispersed until after the repairs/upgrades are complete (or phases of the repairs/upgrades), which puts the folks in the situation of having to come out of pocket for the repairs or find a contractor willing to wait until the funds are dispersed. Not to mention that for full 203k, a 203k consultant is involved and charges from $500-$1200 around here to produce the 20k consultants report. I am looking into providing the 203k consultant function.

Rex...you have to get APPROVED to be a consultant. I took a special course for it and was approved back in 1999+-. However, that was at a time when the FHA loan limits were too low for anything in this area and I never got a single assignment. For some reason, I let that approval lapse. Part of the approval process involved performing a hypothetical assignment. It was not easy.....much more difficult than any appraisal. So, unless things have changed, you might want to look into that course.

 

[ABIGAIL]

203 K

I did an FHA apprasisal 2 weeks ago and now they want it in the 203k program. What FORMS do I need to include in the original appraisal. I have the FHA inspectors repair list. What is the typical fee for 203K appraisal?

 

[ABIGAIL]

203 K

I did an FHA apprasisal 2 weeks ago and now they want it in the 203k program. What FORMS do I need to include in the original appraisal. I have the FHA inspectors repair list. What is the typical fee for 203K appraisal?

 

[Caterina Platt]

Abigail,

Do they want before and after, or just after valuation? I would charge accordingly based on that aspect.

You basically will perform this as a proposed remodel appraisal, and instead of contractors plans, you read off the HUD Consultant's report.

You need to check that the proposed result will meet FHA MPR's (generally, with a good consultant involved it's a given, but doesn't hurt to double check).

You will state in your report that you have reviewed the FHA 203K work write up developed by John Consultant, Inc. for $XX,zzz dollar amount. Make your valuation 'subject to' completion of the improvements and repairs in the work write up.