How does NACA expect for contractors to start without a deposit?

[purdynerdy]

Moving onto my rehab phase.

How does NACA expect contractors to work without a deposit? This is an industry standard.

I understand that there is a material draw you can do, but what about getting architecture plans, permits and dumpsters for demo?

I can’t start the renovation without architecture plans or the permits. Contractors in my area are cash flow and are hesitant to put up their own money to start a project then wait for HAND (who are notorious for delays) to pay them.

How do we get around this? Is a material draw for permits and plans permitted?

[Nelsont]

Well the contractors that are already naca approved have agreed to do this. Generally speaking the contractor would have to be able to obtain a construction loan. The contractor would not use their own funds unless they are a larger outfit with substantial cash reserves.

Have you looked into FHA 203k approved contractors because there are many more of them and the naca rehab loan criteria is similar.

[purdynerdy]

I have. The one I’m interested in working with a 203k contractor.

I’m just curious how this will all work. It was difficult enough trying to find a contractor to work with NACA. Delaying their payment will be the last thing I would like to do.

Did you do a rehab?

[Nelsont]

I did not. I happened to find a flipped house that met my needs. But before I found naca I was looking into the possibility of a 203k loan.

[purdynerdy]

Ok.

I’m just trying to navigate this all. I ran into several contractors that require a deposit and it’s limiting my options.

I even had contractors from the NACA approved list email me and state that they don’t do NACA because of their slow reimbursements. It’s really a disserve to the members who want to revitalize a home in a neighborhood.

[TTrumble]

Hello purdynerdy,

Anyone who says today that NACA is slow to pay contractors is feeding you a bunch of hogwash.

Roughly a year ago, the HAND department switched over to an electronic payment system in which funds are directly transferred into the contractor’s account rather than by check. As long as the work was done and the documentation submitted properly, contractors get paid in a matter of days.

In short, contractors on have to show they are legitimate businesses with a business license, business liability insurance and a company bank account, then just do the job completely and properly for everything to go smoothly in dealing with the HAND department.

What surprised us when we initiated that system is what happened when the new payment system required that the contractor have an actual business checking account in their company name. Many found themselves suddenly disqualified because they were one-man operations that just commingled funds in their personal bank account.

What a lot of people don’t realize is that there is a huge, long-standing issue in the construction industry with “contractors” who are nothing more than a guy with a pickup truck and some tools. Shoddy work with a lack of accountability and even cases of the contractor simply disappearing with whatever funds they could get in advance have run rampant in some cities. That’s why we are so strict about things where contractors are concerned and the real reason you hear a lot of sour grapes. We just simply demand that they be genuine professionals who are willing to do the job the right way and be held accountable for their work.

Tim Trumble
Online Operations, NACA
ttrumble@naca.com

[purdynerdy]

@Ttrumble

I always appreciate your replies. They are insightful. But you can’t believe every contractor who has gripes with NACA HAND department are sour grapes who do not want to follow the rules. The electronic payment may be fast, but the administrative side to process the draw request can be slow. I’ve experienced NACA HAND delays myself.

My prefered contractor is reputable and has an extensive portfolio with investment properties, 203k’s and is NACA approved. His main complaint is Hand’s slowness and I will likely be his last NACA client.

[purdynerdy]

Looping back to this.

My rehab with NACA has been less than ideal. Also 1 year post close and it’s not finished yet.

“Roughly a year ago, the HAND department switched over to an electronic payment system in which funds are directly transferred into the contractor’s account rather than by check. As long as the work was done and the documentation submitted properly, contractors get paid in a matter of days.

In short, contractors on have to show they are legitimate businesses with a business license, business liability insurance and a company bank account, then just do the job completely and properly for everything to go smoothly in dealing with the HAND department.”

It’s DEFINITELY not true! NACA HAND does not pay contractors in a timely manner. It takes so much to get the attention of the department. I try emailing, calling, posting on forums/social media, evaluation forms, webinars, escalation department….and it still take FOREVER for someone to get back with me. I’m not missing paper work. I have a great contractor. I make sure everything is done and completed properly.

How do you expect NACA members wanting to do a Rehab to even find a contractor to even want to work with NACA? I specifically remember searching for a contractors on the NACA provided list and over 50% of them refused to work with NACA anymore.

I’m so ready to be done. Thinking about a Rehab with NACA -RUN! Don’t do it!

[Author]

Posts