Rehabilitation Inspections

Rehabilitation Inspections (203k, Fanny Mae, etc.)

Feasibility Analysis Inspection

A Feasibility Analysis involves inspecting a property to establish any defects which will need to be remedied to meet the Minimum Property Standards required by the rehabilitation lender (HUD, HomePath, FHA 203, etc.)

Work Write-up Inspection

A Work Write Up provides the documentation needed by all parties of the loan process.  The lender will need information and assurances from and about the property, the contractor, the HUD consultant, and the buyer.  The underwriter and appraiser will need the specifications of repairs to be completed.  The loan servicing agent will need funding documentation.  All parties will need a clear picture of the changes, which the systems & components of the home must undergo including their costs, scope, and timing.  The Work Write-up is the reference documentation for the duration of the rehabilitation process.

Phase Completion Inspection

A phase completion inspection determines the percentages of completion of the various construction phases.  For example, the roof demolition might be 100% complete, while the rough plumbing stands at 50%, and the framing of partition walls at 65%.  The consultant determines the percentages of completion, and submits his findings & photo documentation to the lender for release of construction funds to the contractor.

What is a Rehabilitation Inspection?

There are several types of inspections performed during a normal rehabilitation.  When people ask about a rehabilitation inspection, they are usually asking about the initial inspection to determine the feasibility of securing rehabilitation financing to improve or repair a home (see Feasibility Analysis Inspection) or they may also be referring to the draw request inspections to release funds during the rehabilitation process (see Phase Completion Inspection).

How does it work?

The three chief components of a rehabilitation project include the feasibility analysis inspection, the work write-up package, and subsequent draw request inspections.

The first step is the feasibility analysis inspection.  This analysis forms the basis for the subsequent work write-up, by providing the list of needed corrections to meet the minimum property standards.  The analysis is helpful to both buyer and contractor in determining the scope of work to be accomplished with rehabilitation funds.

Once a scope of work or “Contractor’s Bid” has been reached, then the next step is to incorporate the scope of work into a Specifications of Repair document.  When agreement is reached between the buyer, contractor and consultant, then the full Work Write-up package is created by the consultant, and submitted to the lender.  With this package, the lender is in possession of all necessary documentation for moving ahead with rehabilitation financing. 

Within thirty days of close of loan, progress must begin on all HUD rehabilitation projects.  As the work progresses, the consultant is invited to request payments for the contractor.  These payments or “draw requests” are documented following standard industry protocol, and submitted to the lender for draw against available funds.

Of course, in addition to these three functions, the consultant is a constant resource during the construction process, and can prove invaluable in assisting the buyer and contractor to be aware of deadlines, and in understanding various construction options.

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