What is a feasibility analysis or report?That is a great question as many, and I mean many, lenders get it confused with a consultation. Or worse yet the second half of a consultation.
Let's start with the order. A lender typically calls in with an order for a feasibility report. This product is a quick trip to the site, no more than thirty minutes on the site for a SFR and a report that is generated about an hour after we return to the office. This report is a thumbnail sketch of the work to be completed to bring the home to the FHA Minimum Property Standards. Nothing more. Not enough for a contractor to use to create a bid. This is a tool to help determine the condition of the property with regards to the Minimum Property Standards that includes health and safety issues as well as most, if not all, structural issues.
Where the break down occurs is when the lender calls everything a "feasibility report" and actually is ordering the "consultant report". The consultant report requires a much more extensive inspection of the property and a detailed scope of work, sometimes referred to as the SOR (Scope of Renovation). This report should be detailed enough for the contractor to make a bid short the final working drawings.
There may be adjustments after the final working drawings are provided, if they are necessary at all.
In one case we are asked to take a single story home about this same age with a front porch all the way across the front and create something that looks like this photo - to do this right we would need working drawings that might take a few weeks to get drawn up.
In most cases the lender and borrower wants to close the loan about the same time that these plans might be ready to look at. Is it feasible? Yes, if the cost isn't prohibitive. Shall we order a "feasibility report" or do you want to close this loan fast and order the consultation?
I recommend ordering the "consultation" and this will move the project fast forward to a close. What we do is meet with the client at the site. We already know their budget figure. If it appears they are way off the mark we flip it to a "feasibility" provide a report the borrower can actually use to renegotiate the purchase price. Then, if they are successful we go back out and do the "consultation" with the new parameters.
I see many lenders calling us out for a feasibility report when they are trying to close fast. That isn't going to do it. However they may actually mean to call us out for a 'consultation'. They each have their place so you really need to know the differences.
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