Always Get a Written Contract

You’ll have the opportunity to meet many people that represent several different professions during the 203K Loan process. All will have suggestions and recommendations that are specific to their role within the program. One of the most important “players” in the 203K game will be the contractor. One of the most important documents you’re be asked to sign during the rehab will be the contractor’s agreement. Here are some important points to keep in mind when working with the contractor.

A contract spells out the who, what, where, when, and cost of your project. The agreement should be clear, concise and complete. Before you sign a contract, make sure it contains:

• The contractor’s name, address, phone, and license number, if required.
• The payment schedule for the contractor, subcontractors and suppliers.
• An estimated start and completion date.
• Job site visitation specifications and protocol.
• Contractor’s statement of insurance and bonds.
• The contractor’s obligation to obtain all necessary permits.
• How change orders will be handled. A change order—common on most remodeling jobs—is a written authorization to the contractor to make a change or addition to the work described in the original contract. It could affect the project’s cost and schedule. Re-modelers often require payment for change orders before work begins. (contact me for more info as it relates to the 203K Loan)
• A detailed list of all materials including color, model, size, brand name, and product.
• Warranties covering materials and workmanship. The names and addresses of the parties honoring the warranties—contractor, distributor or manufacturer—must be identified. The length of the warranty period and any limitations also should be spelled out.
• What the contractor will and will not do. For example, is site clean-up and trash hauling included in the price? Ask for a “broom clause.” It makes the contractor responsible for all clean-up work, including spills and stains.
• Oral promises also should be added to the written contract.
• A written statement of your right to cancel the contract within three business days if you signed it in your home or at a location other than the seller’s permanent place of business.
• During the sales transaction, the salesperson (contractor) must give you two copies of a cancellation form (one to keep and one to send back to the company) and a copy of your contract or receipt. The contract or receipt must be dated, show the name and address of the seller, and explain your right to cancel.

Our role as a 203K consultant helps protect your interest in the rehab. We’re here for you…but, you should always seek the advice of legal council with specific questions regarding contract law.

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