203k Full Renovation Loan Guide: Time Extensions & Termination.

If you are coming into the 203k Renovation Loan saga now make sure to read my Phase I, Phase II, Permits & Draws posts before you read this. Today we are talking about the dreaded time extensions and terminating your GC which I hope for your sake you don’t have to do.

In the beginning of our build we didn’t have a draw minimum. After the first two draws of $8k (Draw #1) and $7k (Draw #2), our lender upped our draw amount minimums to $14,000 each to push the GC to get more work done as he wasn’t moving at the speed they wanted. On the third draw of $13,580 (Draw #3) the lender was growing impatient with the GC’s lack of progress so they upped our minimum draw amounts to $25,000 and denied contingency amounts that were too low. This was horrible as we fronted those contingency amounts and still have yet to receive that money back. We were able to just make it work for the next draw (#4), but this really put a strain on our project because the GC didn’t have the funds to float that much money. Around this time the GC was having his own personal and financial issues and should have bowed out of the project, but instead he stayed on telling us we could make the next Draw #5 ($25k) if we put out our own money, which we would be reimbursed. We felt that we really didn’t have a choice and since the checks were all made out to me anyway we were comfortable fronting the funds. When the next ($25k) check came back (July 31, 2015) the GC signed it over to me and we got back our money minus the 10% holdback, which we still haven’t gotten back. At this point it was becoming clear that our GC couldn’t handle the project; he was barely responsive to our requests and 10 months had passed since we closed on the house. The 203k build is supposed to be completed in six months and everyone involved was growing impatient and frustrated. Thank the lord for time extensions…

203k-loan-guide(Finally have windows & doors installed)

Time Extensions
You can request time extensions with the lender through your consultant each time. They approved multiple time extensions for us, the GC usually just submits a letter to the consultant explaining why you need another extension.

GC Termination
When the windows and doors were delivered in June, he kept them in our open house for weeks without installing them until July 30th. We pretty much had to beg to get them put in so our home would be closed in before the weather turned really bad in Florida. Since the last check came back in July 2015 no work has been done on our home. The GC blamed the lack of work on needing a letter from the architect and engineer to address tie strap issues. Finally, we received a letter from them that had supposedly taken a month to get and we delivered it ourselves to the building department. Weeks passed with the GC blaming it on waiting for the building department. At this point we were getting pretty upset, so I called the building department and spoke to the inspector who told me that he was waiting on our GC to call him out to the property so he could finish inspections. He also voiced concern with timing of our project and how the GC hadn’t cleaned up our property for a month, leaving roofing materials all over the ground. This was all I needed to hear to know that we needed a new GC. It had gone on long enough and I realized we were being taken advantage of because we were naive to the process and hadn’t been involved enough. This is when I started to research terminating our GC and finding a new one.

In August 2015 I got our attorney to review the contract we had with the GC and the extension request letter that our attorney believed extended the contract. The extension expired September 15th so by not extending it with the GC your contract is essentially null and void (according to the lawyer). The lender wasn’t very helpful but they said if you want to terminate the GC you just write them that they are terminated, submit a copy of the letter to them and it is considered done. Sounds so easy, ha. What I wanted to ensure is that the GC couldn’t come back on us for anything and ensure we did everything correctly. Once the GC is terminated they are given an Exit Inspection with the consultant (you don’t have to be there but you should be if you have issues with their work) who verifies the work they completed and the lender releases 10% holdback on that work for the GC. They really shouldn’t allow this to happen yet since you do not know for sure on the quality of his work, etc. Again, we trusted the consultant to be inspecting everything (since thats his JOB!) yet we later found out he basically just glances at work and approved the funds because there was a lot wrong with the GC’s work that he blindly approved and signed off on his exit inspection. We felt very helpless and like we couldn’t trust anyone, even the consultant who is supposed to be an impartial third party looking out for our best interest over the GC’s. Moral of the story is if you terminate the GC partway don’t allow the exit inspection until the end of the project!

Luckily a close friend gave me a new GC they trusted implicitly so we had to go through all of the paperwork again to get them approved by the lender and have them bid the project based on the work left to be completed (this took about 3 weeks). It is hard to even write about this because we are currently living it right now and it is the most stressful experience I have ever gone through. After 13 months and living in our parents house we are beyond the word frustrated. The new GC has discovered so many things the old GC skipped corners on, didn’t do properly, finished without inspections, etc. that is going to cost us even more money to fix those things than what is left in the bank escrow. The old GC also hasn’t been forthright with subs information so we don’t know who did our work, which causes a ton of new issues for us.

We have a meeting with the building department tomorrow to try to sort out the permit/subs mess he left us with and are still holding onto his 10% holdback check as his defective work exceeds the amount he was owed back. In short, it is a complete shitshow and I am praying that it gets cleared up so we can get started back on the house and maybe move in by Christmas?! I will let you know how it goes. xx, Beth

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One Comment

  1. We are SO right there with you– ugh! ALL of this is happening to us as we speak. We are about to issue an official letter firing the original GC and I was wondering if you could share any PROPER language on this… our FHA inspector dropped the ball and approved a bunch of shoddy work for a draw and he’s not helping too much on this “official letter” and what it should say in order to protect us from any liens or other debt the GC has incurred while LYING to us, not paying subs, not ordering materials (that he has already taken draws on)… Any advice?

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