Feasibility Studies Explained and Why You Should Consider Requesting One

 

If you are a realtor working in the rehab market, or a buyer considering the purchase of a property with a 203k renovation loan, a Feasibility Study performed by a HUD 203(k) Consultant could be the best investment you make.

 

Many distressed or foreclosed properties do not have power or other utilities turned on prior to purchase. They also are more likely to have been abused, neglected or vandalized.

 

Many resales have problems the owner may not be aware of or has been “working around” for a period of time.

 

A Feasibility Study, while not being a “Whole House Inspection”, can identify major safety and health issues (which are required to be corrected by the FHA and HUD), provide you with recommended improvements that are based on the Consultant’s knowledge and experience, and consider any “Wish List” of upgrades and improvements you may be considering.

 

By using the 35 Point Checklist.pdf, which helps identify and suggests corrective measures for common defects and problems, the Consultant can give you some assurance that unforeseen problems and surprises discovered after the project has started, are kept to a minimum.

 

Once these items have been identified, the Consultant will provide you with a report listing each item in order, beginning with the health and safety defects and ending with the discretionary “Wish List” items. A value is assigned to each item that, when totaled, should reflect a fair and reasonable expectation of what the renovation will cost.

 

This will enable you, and/or to make a realistic assessment of whether or not the property is right for you and if what you want to do is viable or not.

 

The Feasibility Study will cost $150-250, as opposed to $350+ for a “whole house inspection”. It is up to the buyer to determine if a whole house inspection is needed but, for less money, a Feasibility Study may be a better gauge of whether or not the property will meet your needs and be a good candidate for a 203k loan.