A Guide to Construction Draw Inspections

When you take on a commercial or residential construction project, you can expect a construction draw inspection to take place. A draw inspection is one of the simplest inspections involved in major commercial or residential construction projects and revolves around your builder and your lender.  

Why is a Draw Inspection Necessary in Construction Lending? 

Construction loans are not fully advanced at the time of closing, rather the lender advances an amount to pre-fund an ‘interest reserve’ account, which will be used to make the loan’s monthly interest payments until construction is complete.  

  • The borrower is required to provide a budget to help the lender track how much money has been advanced from each line item in the budget. 
  • The construction draw schedule determines how and when construction loan funds are distributed.  

What is a Construction Draw Inspection?

In the construction industry, draw inspections are a best practice used by most lenders to validate progress in conjunction with disbursing funds. The lender hires a professional inspector to visit the construction site and assess progress. This allows the construction lender to follow along with the builder and project owner to ensure the loan proceeds are going into the collateral on the loan, and to identify progress concerns as early as possible. 

The inspector is looking to show where the project is in relation to the timeline that was set out, checking the accuracy compared to the original draw request, and reviewing the budget.  

What is Included in a Draw Inspection?

When completing a draw inspection, the draw inspector visits the site and performs many specific tasks. However, the following components are critical to ensure the successful completion of the inspection: 

  • Site Verification – The first thing a draw inspector must do is to verify it is the correct property, which can be done by a photo of the address posted on the property, a building permit identifying the property, or meeting the owner/builder at the site location. 
  • Site Visit – During the site visit, the construction superintendent (on commercial projects), should expect to spend time with the inspector to answer any questions that the inspector has. These questions most commonly focus on work that has been completed, the upcoming schedule, and potential delays. 
  • Photos – One of the primary components of a draw inspection, photos provide proof of a thorough inspection should a claim arise. From a risk management perspective, photos can prove what was there on the day of the inspection—and what wasn’t. The more photos, the more equipped the draw inspector is to dismiss a frivolous claim or help answer any questions the lender may have. 
  • Detailed Comments – The draw inspector’s comments validate the inspector’s findings, can help to explain any differences between what is completed and what is not, and help lenders understand a project’s progress and percentage completion of each line item. 

What Are the Benefits of Construction Draw Inspection?

A draw inspection helps to mitigate risks inherent to construction lenders through regular on-site inspections with experienced draw inspectors who become the eyes and ears for the lender on the job site. 

Based on the findings of the draw inspection, the lender can validate the draw request, disburse the right amount of funding, and ensure that the funds do not go beyond what is needed by the project. 

A good inspector makes everybody’s job easier by: 

  • Allowing the lender to know where the project is compared to the timeline they were given. 
  • Ensuring the builder that they are receiving payment for work completed so that they have the funds to continue to the next phase of construction. 
  • Aiding in the smooth and timely completion of the project for the project owner. 

What Should You Consider When Selecting a Draw Inspector?  

Construction projects, and, particularly, large commercial projects, can be complex to manage. A professional draw inspector is crucial to the long-term success of the project, using the right tools, knowledge, and certifications to get the job done quickly and reliably. Construction projects are funded by high-risk construction loans that require a long time to process. A construction draw inspector is typically hired by the lender to help ensure timeliness by identifying construction issues and preparing change orders that can modify the scope of the project. 

Keep Your Construction Project on Track with McSteen

With 50+ years of experience in the construction industry throughout Ohio and now surrounding counties in Pennsylvania, Michigan, Indiana, and Kentucky, McSteen is well-equipped to tackle your draw inspection needs. We get what you need fast to ensure there is no delay in funding a draw.  

  • Simplified quoting with one statewide price per site visit. 
  • Professional report by our professional team, including a completed draw schedule and internal and external progress pictures. 
  • Two-step verification between our in-field inspector and in-office review. 

Contact us today for more information or to get started. 

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