203k nightmare- contractor from hell

[Stephanie Dean]

I recently bought my house using the full 203k loan since the house had some possible structural repairs that needed to be done on the raised foundation. The repairs needed to be completed were not astronomical compared to some of the other houses I had looked at and had everything else I was in need of.

My problem has not been the house but rather everything else. I had a hard time finding a contractor that would come out for such a small project (the house is less than 800 square feet) as well as work with the 203k requirements.

Well had a bad feeling from the start but in order to not lose the house, I went with the HUD consultant that my lender recommended and then with the contractor that he recommended. After the loan was approved and we were able to look more in depth at the repairs needed, we were in much better shape than originally thought and the budget would be able to cover everything and possibly add a few more minimal repairs to the list. Then the issues starting coming up with the first inspection and the contractor did not have the plans submitted with the permits. The county did not put a stop work order in but my contractor thought so and stopped work for over a month while my mom and I took the time to draw our own plans.

Things kept snowballing from there, with my contractor stating that he ran out of the necessary funds to perform the work ahead of being paid. So my HUD consultant had the draw check include more than the repairs that were completed to be paid out so we could continue the work and get ahead for the next draw check. Well of course, I was not comfortable with that and let my bank know I was not comfortable paying for work that was not completed as it goes against the contract and I feared the repairs would not get done as stated. They told me there was nothing I could do, but that I had to pay him even if he decides to run off. He assured the bank that everything would get done according to the contract. Of course nothing was done with that draw check that it was accounted for. Well he didn't run off, but instead put in a change order after he demolished my bathroom and said that all of the funds have to go the rebuilding of the bathroom and not the other required repairs that were in the original bid.

I did not sign off on those changes and they were not approved by my bank either. Our contract states that any repairs made that are not in the original without a change order would fall as the contractor’s risk and responsibility. Now with this last breach of contract, I was able to have my evidence he was not following the contract and was able to terminate him.

Of course since I ended our contract he wants to put a lien for the remaining amount of the budget for work that has not even been done. I know that this is a false lien and will be corrected in due time, so I’m not worried about his threat. It has now been over a month and he has still not responded to any requests for receipts and paperwork regarding the budget and work that was completed.

My main issue is that this whole project was to only take three months to completion and I would be able to move in during month two after the foundation and subfloor was repaired. (Side note- it has only partially passed inspection and needs to be redone as it is not level just by sight and feel, it’s that off.) So with the floor needing to be redone and now I have no bathroom, I am still not able to move in. At the end of our 6 month timeframe to get all repairs done, I terminated the contractor. It has now been almost 7 months and the bank says I have to still wait 2 more months to ensure that he has not placed a lien and the title isn’t clear before I can even have another contractor start work. By the time the project will be completed, it will be almost a full year if I can get the new contractor to finish within the original two month timeframe and finish the scope of work.

I only had two months of double bills saved, not a entire year. I’ve had to take out another loan just to pay for minimal living expenses and I am about to exhaust it way before the year is up. Now that the weather is warmer, I plan on living in a rundown trailer in front of my house as I can’t keep paying for both houses on one income.

Does anyone have any recommendations as to how I can proceed with repairs and keep my house? The bank is not letting anyone else or myself come in to start repairs and it’s just wasted time and money. This program is to prevent new homeowners from being taken advantage of and protect them on their investment. If I lose my house before even moving in, then it will have been the complete opposite of it’s intended use.

(Oh and I do plan on taking my contractor to small claims court, as an attorney has advised me that civil court costs will run more than my budget allows.)

Any other suggestions would be helpful.