Draw Inspections

Loans often have strict requirements, and construction loans are no exception. Banks cannot simply give the contractor the full loan amount at once. Construction loans are often for hundreds of thousands of dollars, so naturally, lenders want to know that this amount of money is being spent on construction and not other purchases, such as fancy cars or vacations.

That’s why lenders require draw inspections, which are performed by experienced third parties. The money for a construction loan is disbursed in draws, or installments. For example, you may get $20,000 once the foundation is completed, another $30,000 once the walls are up, and so on until you get the final inspection. 

Why Are Draw Inspections Important?

Any time there is a lot of money at stake, there is risk involved. This is especially true for construction loans, since the money can only be used for a home or other construction project. The lender wants to ensure the project gets completed so they get their investment back. That’s why construction loans require inspections. If the job is particularly large, there will be even more requirements, such as extra steps and inspections, in place. 

Draw inspections help lenders lower their risk. With regular inspections in place, lenders get peace of mind. The final result is a project that matches what the lender approved. 

What Does a Draw Inspection Entail?

When it’s time for your draw inspection, an inspector will come to the construction site to assess the progress you are making on the building. They will look at what you have reported and compare that to the draw request to see if you’re ready for the next round of funds to be disbursed.

The contractor should be on the job site during the inspection to walk the draw inspector through the site and answer any questions. It’s a good idea to be friendly to the inspector and work with them to ensure they accurately report on the important items that will determine the release of loan funds. The inspector will perform the following activities:

  • Track each line item by percentage.
  • Take photos of the work completed as well as all materials present on the job site.
  • Assess the quality of work.
  • Provide the lender with payment recommendations.
  • Inform the lender of any builder needs or questions. 
  • Perform accounting of cost statements and funding. 
  • Review the upcoming schedule and look for potential delays.
  • Review any change orders. 

On commercial projects, the inspector will also verify necessary items for the project, such as permits, licenses, taxes, and insurance. They will also track invoices and compare them to the materials and work performed.

Contact Us Today

Draw inspections are needed to verify progress on a construction site in order to ensure that the loan funds are being spent wisely. Need a third-party inspector for your project in northern California? Contact J Bixler Inspections today to schedule an inspection.