201k Hard To Get Paid.
I have a 201k running on a property I purchased. The contractor did all stipulated work as per contract. Now at the banks inpection they come with four different issues not on the contract. now my contractors money is on hold untill the issues are fixed. (heated water, hand railings, fuse boxes in two sepatrate units.)
could they hold the contractors $$? Can they sew me for not paying them upon complition.?
I am guessing you are referring to a HUD 203k rehab loan.
HUD requires all work to be inspected and approved by a HUD approved inspector before they will release funds.
If the contract with your contractor calls for acceptance or approval of work before final payment is made, then it behooves your contractor to get the extra issues resolved so he can get paid. Things that were not in your original scope of work may require a change modification and an adjustment in the price.
Your 203k loan officer has the HUD regs and should be able to answer all your questions.
The 203K loans usually will allow a reasonable number of draws so that you and your contractor are not out of money for the whole project (just the amount of work in question).
You want to set it up so that say one draw comes when the roofing and siding are done. Another comes with the drywall and paint being competed and so forth.
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We have done that many many times.. It is really a form of escalation of purchase price clause or a clause similar to what it used by retailers in a mall where the owner gets a piece of the pie.
I did three last month that were similar to that but for 2-5K.
i.e. "If we sell for 200,000 to 210,000 we will give $2,000 to the seller and if the property sells for $211,000 or more we will pay $5,000 to the seller."
With hundreds of rehabs under my belt it is easy to convince the seller that we know what we are doing and that there is a chance for them to make a bit more money should the fix and flip turn out as well as we hope it will.
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Great job Loon! Frequently it is persistence and follow through that get the best deals..
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