FHA 203K rehab loan. Need Answers!

[Anonymous]

So I finally got a contract on a property where the seller will accept the FHA 203k Rehab loan. I have had 3 contracts rejected because of the 203K loan I am using. Now that I have the contract I have run into another hurdle. My contractor has given me one price, and then the FHA consultant came to see the property and is saying that I will need an additional $100K on top of the contractor's estimate. Has anyone ever experienced a situation like this, and if so, did the deal fall apart, or were you able to overcome this issue.  The FHA consultant would not write up the plan review because he felt that the contractors estimate would not cover what was needed and it was too low. The contractor is my friend and he is passing on his contractors discounts to me and offering me some very reasonable prices on the labor to help me out. My contractor was explaining how he could get things at one price and the consultant was saying his estimates were too low and kept asking my contractor if he was charging labor. If my contractor is not worried about the amount for labor why is he so worried, but that is trival at this point. An example of the difference of opionions are like this for instance.  My contractor says that he will only need to pull a building permit, and all other sub-contractors will pull thier own permits and they included that charge in thier overall estimates that were submitted.  My contractor estimated the building permit he will pull at about $1000. The FHA consultant is saying permits alone will probably run $20,000, so right there it's a big difference.I  think it is a matter of opinion surrounding what type of material, and fixtures etc will be used.  The consultant said the windows will also run about $20,000 for the building but my contractor quoted about $10,000. Someone please offer any advice or experiences. I would hate for this deal to fall apart at this point because of a difference in the rehab numbers.

[Anonymous]

In order to help with any questionable doubts on contractor, permits, bids, materials, consultant, etc.,

as a home buyer, simply perform your due deligence.

Obtain proof of clear title, clear survey, flood zone certificate on property, with your earnest money contract in

hand check with the proper entity whether City or County for any possible property violations, permits and fees

required.

Have your Contractor provide a detailed bid fully explaining work to be performed, description of materials,

break down of labor and material costs, include permits and fees, Engineer and Architect fees, if any, draw request

inspection fees, third party inspection fees, any Contractor's overhead or administrative fees, liablility insurance, bond, etc.

To this add the 10%, 15% or 20% contingency reserves required by HUD/FHA including any Contractor's cost

allowances, if any.  If there are no time constraints, obtain bids from two other Contractor's using same method or info.

Such information should be of great help to you as the Borrower/Buyer and in complying with HUD/FHA competative bid

requirements and in case Contractor on board is not able to complete work, you as the home owner will have enough

funds left in escrow to hire another Contractor to complete the work. Information also helpful in detemining appraised value

and permanent home owner's insurance, etc.

It is best to find out all costs or as many as possible "up front" and not during the construction/rehab phase when

it will be too late. I have seen many construction/remodeling/rehab projects run out of funds before completion

with home owner having to come up with the funds to complete the project or deal with foreclosure.

Keep in mind, you are the ultimate person responsible for hiring the Contractor and making sure that the project is completed.

The Loan and the Contractor are only the tools made available to you to get the project completed.