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Old 09-10-2009, 10:48 AM
 
286 posts, read 1,302,682 times
Reputation: 151

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Hi there,

I'm in the middle of a 203k loan - at the remodel phase (yes, we actually closed with this type of loan last month! Whew!).

Okay, so we're doing our remodel and as with any type of work that involves tearing down walls, new plumbing & electrical - surprises come up. As required, we had a 10% contingency built into the loan. We're 3 weeks into the work and are quickly seeing the 10% being eaten up by overages and other unexpected costs. There is a very good possibility that once we are done with all of the work, we will go over the 10% contingency fund.

What happens then? How will the contractor get paid? Do I have to go back to the bank (ugh, yes it's with Bank of America - I know, first mistake) and have the overage built into the loan which would modify our entire loan? Or can we just pay the contractor cash at the end and call it a day? Are there some other options?

I've been trying to call my one and only contact at BofA only to get an outgoing message that says "If you are hearing this message, we are experiencing extreme call volumes and cannot take your call at this time. Please try again later <click>" and it hangs up. There is almost ZERO chance of getting anyone on the phone.

Any suggestions? Thank you!
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Old 09-15-2009, 09:48 PM
 
286 posts, read 1,302,682 times
Reputation: 151
There's nobody here who can answer this question??? Really???

I feel like I'm in Ferris Bueller's homeroom class... Bueller... Bueller... Bueller... LMAO

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Old 09-15-2009, 09:56 PM
 
28,461 posts, read 78,568,953 times
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Paying cash is going to be much simpler. If literally could not afford to finish the job I might suggest trying to get more from the lender, but that could delay things and in renovation time = money. If the contractor knows you are running out of money they might bug out and then you'd be stuck.
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Old 09-16-2009, 02:31 AM
 
Location: Laguna Niguel, CA
768 posts, read 4,186,001 times
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Sounds like a great contractor, the most important step in the 203k loan is making sure the contractor is a reputable one who has insanely good references. Most contractors, no offense to anyone here who is one, are not good at estimating costs, the time it'll take to complete something, or exactly how much "material" is needed. There are exceptions, but I've dealt with 100's of contractors over the years and the above seems to be the norm.

In your situation you could pay cash, which would be the quickest and less complicated way... although if the contractor was underestimating costs before, you'd really need to make sure how much more money is needed or you could see yourself paying more than what they are even asking for now. You can also go back to your lender if you can get them on the phone (remember Bank of America just took on 10's of thousands of new mortgage's to service from Taylor Bean & Whitaker, so they have been really slow on their back-end processing with mortgage payoffs, 203k disbursements, and similar post-closing activities), I've never had to go back and re-do a 203k loan for a higher amount but if there is going to be a problem finishing the repairs the lender will certainly want to know and will help in getting it accomplished (even if it's just to let you know that you'll need to put up the additional funds).
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Old 09-16-2009, 11:51 AM
 
286 posts, read 1,302,682 times
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ShanetheMortgageMan - that's exactly the problem. Our GC was so inadequate to prepare the bid that he didn't foresee an appropriate amount of labor time or materials. Even simple materials for a bath renovation (he 'forgot' that bathrooms need to have exhaust fans - so the material and labor cost for that is now an 'overage'). I had 3 bids origianally, and in retrospect all seem to be lacking major aspects of the work to be done. When I checked references on my GC - he came out to be a sparkling diamond! So much for those references...

I'd been scouring the 'net trying to find similar cases and haven't found much either. Seems very rare when a lender would renegotiate for a higher amount. I'm afraid at this point our GC is going to get greedy and the price is going to skyrocket out of control for 'added cost of labor'.

I agree with you and Chet that paying cash is going to be the easiest and fastest solution. Any other advise would be greatly appreciated.
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Old 09-17-2009, 01:28 PM
 
Location: OK
2,785 posts, read 7,019,300 times
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Don't they send out an inspector anymore who works up a comprehensive list for a 203K loan??
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Old 09-17-2009, 03:05 PM
 
286 posts, read 1,302,682 times
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Yes - we had a very experienced & highly recommended HUD Inspector who came out and completed a bid request form. I'm learning that out GC is extremely unable to complete a working budget (no surprises there) and has several items billed to the wrong line item, which in turn put that line item WAY over budget when they should be billed elsewhere. No offense to any other GC's who may be reading this board, but the one I'm using is quite incompetent and is giving the rest a bad name. If I could get rid of him, I would in a heartbeat.
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Old 09-17-2009, 03:10 PM
 
28,461 posts, read 78,568,953 times
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Man I really feel bad for you. In my experience the process of filing out the estimates and other 203K qualifications helps to weed out the screwy contractors. Especially when things are slow (as they are now...) I would think that the number of "good guy" GCs that would be eager to have worked with you on such a project would have, like cream, floated to the top.

In my area (suburban Chicago) when things were booming the best CGs were reluctant to do 203K estimates, but now some of the best of the best have the crews working on anything that will pay the bills.
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Old 09-17-2009, 03:17 PM
 
286 posts, read 1,302,682 times
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I know - it's a nightmare. I told him to stop working today until we could agree on what is a true overage and what isn't. I've caught him telling the HUD Inspector an overage for XYZ was $500 and earlier he had told me (quoted on the phone and approved) at $450! I told him this yesterday and his response was that he must have been NERVOUS in front of the HUD Inspector and messed up. He promises he will credit me the $50 difference.

I went back to my loan officer at BofA and asked the likely hood of filing for a new GC. His response was a subtle cry and some moaning at how long the process would take. Not to mention that my house would have to remain in the un-constructed manner it is now until we got a new GC. CRAP. Now I just have to coax my GC into just doing the work and getting the heck out of my house.

If you know any good GC's, feel free to PM me their names. I'd be VERY appreciative to have them in my back pocket - you know, just in case...
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Old 11-16-2009, 08:01 AM
 
8 posts, read 40,454 times
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What a pain. I still haven't closed on my 203k streamline - but found out during underwriting that M&T wholesale was using a 20% contingency - I had my estimates based on 15%. The mortgage broker final argued that 20% was a bit much. I had gone through the house making notes and going to Lowes and home depot putting together my own material estimates for a ball park idea.
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