What is RenoFi's contractor due diligence?

Whether you’re well on your way to applying for a RenoFi Loan, just starting to prepare, or still researching, if you’re looking to learn more about RenoFi’s Contractor Due Diligence, you’re in the right place! Preparing to apply for a loan can be overwhelming, but learning more about what’s involved can make the process a lot easier. 

One of the most important aspects of preparing to apply for a RenoFi Loan to finance your home renovation is Contractor Due Diligence, a check that the RenoFi team completes before connecting homeowners to a lender.

In this guide, we’ll explain more about exactly what Contractor Due Diligence is, why it’s important, and what’s involved. 

What is Contractor Due Diligence?

Contractor Due Diligence is RenoFi’s process of vetting and verifying the contractor you’ve chosen to complete your renovation project. RenoFi will collect documents and references from you and your contractor to make sure your contractor is fully qualified to complete your renovation. 

If RenoFi finds any red flags, you may not be able to move on in the overall RenoFi Loan process. 

Why Does RenoFi Complete Contractor Due Diligence?

RenoFi Loans are a unique kind of home equity loan designed for renovation projects, and therefore require a more thorough application and analysis than traditional home equity loans. Renovations carry more risk than traditional home purchases when it comes to loans.

On top of the risk for lenders of homeowners not paying their loan back on time, there’s the risk of incomplete construction and/or unqualified contractors as well that can hurt homeowners. RenoFi’s process is designed to avoid these potential outcomes.

In reality, most homeowners have not gotten multiple quotes before hiring a contractor, or if they have, they haven’t comprehensively vetted them.

And we understand that - contractors are busy, it’s hard to get a call back, and you may not even know what to ask a contractor before hiring.

That’s why this Contractor Due Diligence is an invaluable part of the RenoFi Loan process, as our experience makes us uniquely qualified to vet contractors more thoroughly than the average homeowner. A homeowner may compare a contractor to one or two others - at RenoFi, we are comparing your contractor to the hundreds of others we’ve seen on a daily basis.

The service we provide is designed to lift the burden off the homeowner a little bit, although we still 100% strongly recommend that all homeowners get multiple quotes from contractors.

RenoFi’s Contractor Due Diligence is just one part of the RenoFi Underwriting process that’s designed to minimize risk for you as a homeowner. 

RenoFi will also answer specific renovation financing questions, evaluate your renovation plans and other documents, and facilitate an “as-completed” home appraisal. Once you’ve finished this review, RenoFi will connect you with the best lender, and you’ll fill out their loan application to get fully qualified for a RenoFi Loan.

Read more about the full RenoFi Loan process here. 

What Does It Include?

So, after you connect with a RenoFi Advisor and decide that a RenoFi Loan is a good choice for you, the first thing that you’ll need to do is begin uploading documents for the RenoFi team to review. You can see a full list of the documents you’ll need to apply here. 

While some of this information you’ll upload is related to your personal financial situation, like your W-2, one big piece of it is about your contractor. This piece is for Contractor Due Diligence.

Here are some of the things RenoFi will evaluate regarding your contractor:

• Legal history
• Project history
• Team experience
• Reference calls

We’ve found that checking these items, among many others, help us properly evaluate the contractors that homeowners work with. Our team has evaluated hundreds of contractors, and we have a trained eye on what to look out for to make sure your project is in good hands. 

What Do You and Your Contractor Need to Submit?

As a homeowner, all you need to provide is your contractor’s contact information. That’s it! (For the Contractor Due Diligence piece, that is). 

As for your contractor, a RenoFi Underwriter will send out a form for them to fill out, asking for all of the information in the list above and more. Your contractor will then be required to fill out the form and send it back to us. 

We know that contractors are incredibly busy and may find it hard to take the time to submit all of this info, or may not understand why it’s necessary. 

If you or your contractor have any questions, RenoFi is always happy to answer them. We don’t mind helping contractors with this process, or offering more explanation as to why we require certain items. 

How Can You Know If Your Contractor Will Pass?

As a homeowner, even if you’ve done all the right things to ensure you’ve found the right contractor, and you know all the signs of a bad one, you can’t be 100% sure that your contractor will pass RenoFi’s Due Diligence process. 

That doesn’t necessarily mean they’re a bad contractor, it just means that based on our experience, your contractor may pose a certain level of risk to you as a homeowner and your upcoming project.

However, there are a few things to look out for that our RenoFi Advisors say are the most common reasons why contractors don’t pass:

• Limited experience for scope of work presented

We often see very seasoned contractors, but sometimes those contractors are experienced in limited capacities. They may have been an electrician for a long time but that doesn’t mean they can renovate a kitchen from start to finish.

• Missing credentials/licensing

Sometimes we see contractors who are not licensed or not fully insured. This is typically an easy fix but it is a red flag if the contractor needs to scramble to update their insurance or license.

• No recent and applicable references

We like to see references that are recent renovations and had a project completed that was commensurate to the scope of work we are reviewing. If a contractor can’t provide a reference from the last two years of a project similar to the one they plan to undertake, that’s not a good sign.

If you’re worried that your contractor may be missing one of these three things, consider reaching out to a RenoFi team member before starting the process to gain some clarity. 

All in all, the Contractor Due Diligence process exists to make sure that you, as a homeowner, are set up for a successful renovation, and a successful RenoFi Loan application.