Thank you for the response to last week’s blog. I was overwhelmed and unable to respond to all of the comments and decided to try and answer them this week. If you ever need an immediate response, feel free to call me.
The issue of unpermitted work is nationwide and may impact any residential loan program. I spoke with fellow mortgage originators at banks, mortgage companies, credit unions, etc and everyone agrees that there is increasing scrutinization on this and the issue is not going to go away.
One of our fiduciary duties as professionals is to put the client ahead of the commission and do everything we reasonably can to insure the client’s safety. The old saying that there is some control in all benefit and some benefit in all control applies to this situation. Everyone comes out ahead when potential health and safety issues are addressed. In addition to the complications that unpermitted work might cause on a sale or refinance, one of the posts made an excellent comment about the potential insurance ramifications that could result in a claim not to be paid due to unpermitted work. Regretfully, some homeowners have purchased a property with unpermitted work and are now stuck dealing with it.
There are many solutions to this problem. Visit the local building department and see what is required. The scope of work to bring the property into compliance might be (I am an incurable optimist) relatively simple and inexpensive. The homeowner may be able to handle it on their own. If the work scope is more complex, particularly when the issues are electrical, HVAC, plumbing, the homeowner would probably be time and money ahead to hire a licensed contractor. While I have seen homeowners efficiently handle a complex punch list of items that needed to be fixed, most of the time it reminded me of watching someone try and herd cats.
The FHA 203K mortgage is a great solution to this for either a purchase or refinance. Is it more complicated than a regular mortgage? Of course. But it is the best answer to the question.
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