The role of the 203k contractor in Texas…
In Texas there are no licensing requirements for a general contractor. Most of the 203k rehab projects have general contractors that run the project and most often will have sub-contractors that work for them. The sub-contractors that do perform work that require a license are: plumbers, electricians and AC contractors. The license is required to pull a permit but we must also be able to verify the license before final approval can be issued.
The borrower is responsible for contractor selection. One of the key items to focus on when selecting a general contractor is to find one that sees your vision and understands the work that you want to have performed on the property. Good communication skills are necessary! Successful contractor selection leads to a successful project.
Each lender may vary slightly as to what they what is required to be reviewed but in general most want to see:
- Credentials including work experience
- Business licensing such as DBA or LLC
- Website for reviewing projects and further company verification
- Licensing information where applicable by state – Example: Texas has none at this time…however any sub-contractors used on a project where their trade requires it will need to show copy of their license.
- When the actual license cannot be provided…there is a website that a consumer or lender can log onto and see the status of the license. The site requires full name of contractor and company along with license number and all can be verified online.
- Examples of projects contractor has been involved with, specific dates of the projects and client references. The client references will need to have valid contact information including email and phone number.
- Proof of $1 million in general liability insurance
- Also, it is required that Borrowers and Contractors complete an agreement that outlines the rights and responsibilities of each party. This is something that we will send out specific to the project.
- A detailed bid itemizing out work that is to be performed. The bid should be broken apart by labor and materials and be very detailed. Keep in mind this bid is sent to the appraiser and they will complete an appraisal that reflects the after improved value of the property so the bid needs to be specific to what grade of materials will be used. The more detailed the better.
When walls are being moved and/or the footprint of the house is being changed, your contractor will need to provide plans and/or a drawing to show how the structure will look upon completion. If the project is minimal the drawings can be pretty basic. However let’s say you are adding a second story onto a home then you are going to need actual architectural drawings to support the work and vision of the project.
One item in particular to note is that various cities have different permitting requirements. It is imperative that your contractor understands the city’s requirements and the turn time that particular city is taking to turn requests for permits. Requesting permits is typically something the contractor will take charge of so having one that is familiar with this process is important to getting the project started smoothly.
Need some help finding the permit guidelines…here are some helpful links:
McKinney, TX Development Services
Frisco, TX Building Inspection Division
Fort Worth, TX Permits and Plans
While on the issue of permits one other item to take special note of is if the home you are interested in is in an historic district. This can and most often does come with its own set of approval requirements. Not approval from the lender but actually submitting the project to the historic district for approval. The approval from the historic district can be a lengthy process just depending on what historic district and the changes that you are wanting to make to the property.
As you can see from this article contractor approval and understanding the role of the contractor when dealing with the 203k loan in Texas is a very important factor. Your involvement and your communication is necessary for a smooth project from start to finish. Of course we will make every effort to ensure that all parties are updated as the project progresses but you are our eyes and ears on the project so we encourage active communication across the board.
I’m always amazed by some of the finished projects and can’t wait to help you renovate your new home or even your existing home. Call me today and let’s talk about your project!