@Lee N. asked me more questions in a direct message, but I think the answers are relevant to anyone looking at this discussion, so I'm posting my answers here:
Lee's questions: Once I get deeper in this process, I may have further questions, especially about picking contractors and how to shorten the closing time. Was yours long and tiresome or worth the time? What is the scope of rehab work that would likely be approved by inspectors? How about those that need permits (external modification, adding rooms, bathrooms, garages, etc.)? Would they be handled by the same inspector or a different one?
My answers:
Hi Lee - our closing process was a nightmare, but that was because it was a HUD property, and HUD was especially difficult to deal with for our property for some reason. Non-responsive, and passing the buck - we had to get the "owner" to turn on our water meter, and the "owner" was HUD, and they insisted that we had to deal with it even though the City of Seattle said we couldn't. Lots of other drama there, too.
I knew a couple contractors that I was able to work with, but contractors is an entirely other potential mess. I'd suggest lining up contractors now, you can't spend much time scheduling contractors to get bids after you've found a property, you'll lose too much time during the closing process. You want to find a few that have experience with remodel loans. I can't recommend the ones I used because of problems we had, so you should keep asking around and check ratings / reviews, etc. Today is harder than before because in our market prices are higher, they're busier, etc.
Closing time as I recall was usually 45 days instead of 30 days. The challenge you have is that you have to try to figure out what repairs are needed and how much they will cost (i.e. get bids) within a very short period of time, PRIOR to being locked into the P&S (usually 10-day period) - just in case the repairs / costs are way more than expected and the property isn't worth the final price. It's not a perfect process. You can generally get extensions if needed, but obviously the owner has to approve.
When you mention inspectors, I think that needs to be clarified - inspectors are city / government, and they have nothing to do with limiting any scope of a project you want to do. Their job is only to make sure you are following legal code based on city, county and/or state building codes. The BANK will determine the total you can loan (including purchase and remodel), and then the contractor would give the bids for the work to be done. An appraiser would then determine if the After Repair Value (ARV) of the remodel work allows the value of the house to fit the bank's LTV requirements for the loan they are giving you before the bank will approve the construction bid and finalize the loan.
Technically, the inspectors aren't part of the process until you have already closed on the property. Once you're ready to begin work, you have to get permits, and then you begin work. That should be done by the contractors anyway. And you kind of want permits - you need the work to be legally permitted for a number of reasons - 1) insurance can deny claims if your property wasn't permitted, 2) inspectors pass permit work because they have determined it meets proper code, so that's actually a GOOD thing to make sure the contractor didn't screw anything up that might give your property problems down the road, and 3) there are records of all permits on every property, so if you don't get a permit and make any substantial change to the property, it isn't hard to find that out, and it's especially problematic when you want to sell the property later on - properties for sale that have modifications that weren't permitted now are risky properties to buy because who knows what might be wrong with it and what additional costs the city might require to get permits, or if they will even allow a permit and force something to be torn down or un-done, etc. The permits substantiate the value of the work done, and hence, the value of the property as it appreciates.
There are different inspectors for different trades. Building, plumbing & electrical inspectors - sometimes mechanical if you're installing new HVAC, maybe others, depending on the remodel. Generally speaking, they are assigned to geographic areas, so you'd get the same ones unless they were re-assigned, on vacation, or some other reason they were unavailable. For instance, we got 3 different plumbing inspectors as we fixed things that were called out because the first got re-assigned, the second then on vacation ... etc.
Now, there are also Bank inspectors - these guys are 3rd party guys, maybe ex-contractors, and they come in only when you (and your contractor) want a draw. Their job is only to inspect the current work and then mark down what percentage of each construction category is finished so the bank can release those funds. In our experience, they were fairly loose about things - they weren't really there to police anything, they just wanted to figure out how much they could tell the bank they can pay out at that time. They don't talk to the city inspectors, they don't try to nit-pick if you're doing the job right, etc., that's not their purpose (unless something significant is BLATANTLY OBVIOUS that isn't right).
Hope this helps!
