3 Land Mines to Avoid When Moving a House Using an FHA 203(k)


Moving a house to vacant land.

An older home is being either torn down or moved. Your client has chosen to purchase the house and have it moved. She wants to finance the deal with an FHA 203(k) Mortgage. The borrower owns the land and has an agreement with house mover to relocate the building. The land is raw, meaning no utilities exist on the property.

Here are 3 potential issues that make this deal prime for land mines.

[hr]Shared Liability

There is an increase in liability when two contractors work on the same project. The house moving contractor is responsible to the borrower to relocate the building. His fee (the cost for the home) includes an agreement for the mover to set the home on “his” foundation, meaning that the general contractor will now potentially inherit whatever settling/shifting/cracking the newly located house produces. Care should be taken that a clear line of liability is established between the mover and the general contractor.


IMG_2188Will the newly located house appraise? Not all costs associated with a remodel are recoverable. Utility tap fees, service lines and the special permitting requirements for “developing” a finished lot could be a potential money hole. This scenario should be tackled by a seasoned veteran contractor, not a new-be or a home owner providing self help.

Budgeted Costs

Bidding cost on a project that isn’t visible is a challenge. That fact could mean that more line items on a typical Work Writeup will be “budgets” and not hard cost bids. Take the cost of drywall repair as an example. Moving a home will certainly create stress on the home’s frame. When the home is moved, the drywall will crack. But how much? To be fair with the general contractor, some of the bid will be budgeted items, leaving the door wide open for mistrust and a challenge to determine a fair repair cost. This could set up a drain on the contingency fund very quickly.

The FHA 203(k) will allow funding for moving a house to vacant land. In my opinion this type repair/rehab is one that has the most potential for cost overruns. What are some other potentials you’ve run across when working with a “203(k) house move”?


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