Real Estate

203 (K) Consultants and Lien Exemptions

Do you think your title is clear when the contractor leaves? Consider how the 203 (k) Consultant views the project. Tracking lien exemptions is one of the 203 (k) Consultant’s most important functions, yet most Borrowers are unaware of what this means or its importance.

The 203 (k) consultant and the supervised loan.

In a “full 203 (k)” loan, the 203 (k) Consultant is the person responsible for delivering the money to the validated registered Contractor, through the Withdrawal Request forms, during the life of the construction loan. Every time the Contractor, or the Borrower, calls the Consultant to visit the site, there are 2 forms that absolutely must be signed: the Withdrawal Request form and the Lien Release. Lien laws are specific to each state, and GA recently tightened its lien requirements (2008), so lenders rely on a property lien exemption that keeps their bases covered and lien rights extinguished.

Giveaway requests Pay everyone on the site.

There are up to 5 giveaways for each project, this includes a change order inspection, all of which require an exemption link to be processed by the lenders giveaway center. Over the years we have learned that requiring the contractor to provide lien waivers for ALL of their subcontractors is KEY to ensuring clear title at the end of the project. When the Consultant conducts the final inspection and the Mortgage Completion Letter is completed, the Lender verifies the title before delivering the Final 10% Withholding to the Contractor, just in case things are not as optimistic as they seem. We have solved many link problems over the years, and most of the time, the links are placed by someone we have never seen on the site. Like the electrician or HVAC company that hits the place like a ton of bricks and then goes to the next job, all the time thinking the check is on its way. What the contractor often doesn’t realize is that failing to pay the subcontractor in a timely manner not only keeps them out of their 10% withholding, but puts their names on a non-use list with the lender … your best interest for pay your subs.

One 203 (k) consultant at each renewal

We firmly believe, and are frank, that the 203 (k) Consultant is MANDATORY on ALL FHA 203 (k) Streamline loans, not just the Full 203 (k). Generally speaking, a Streamline loan costs $ 35,000 or less, and banks see it this way … ‘How much trouble can someone get into with just 35k?’ – Experience has taught us that the answer is A LOT. When you look at the renovation industry so far, it has been plagued by scams, arrogant investors, and homeowners acting as their own general contractor, or worse, as an architect. Having a 203 (k) Consultant on every FHA loan is an important step in rebuilding this country’s housing stock and regaining a strong housing market, one home at a time.