Loan-funded construction projects usually require a series of onsite inspections. As the lending institutions provide the funds needed for the construction project, it is in their interest to make sure the funds are used according to the plan of the construction project and that the job is advancing at the estimated pace.
Site inspections are done in order to document the progress of the project and either reveal deviations from the construction project projects or irregularities or provide recommendations. The main role of the inspection is to answer two important questions: are the funds enough to complete the project, and is the construction on schedule? The bank inspector is a third-party agent hired by the lending institution to carry out these tasks.
What are the different types of inspections?
Construction inspections are tied to different phases of the construction project, and the major ones include initial inspection, draw inspection, and final inspections. The initial inspection is done before the commencement of the planned construction project. The purpose of this inspection is to determine the state of the construction site and specify a reference point for forthcoming inspections.
Next is the draw inspections. Before the lending institution approves a draw request, they will require a bank inspector to do an onsite inspection so as to determine that the initial funds disbursed have been used in agreement with the budget and project plan. Finally, the final inspection is done once the construction project is completed. The lender needs this to determine that the construction project has indeed been completed in accordance with the plan of the project.
What is an inspection report?
The borrower provides a status report on the construction project's current progress when presenting a draw request. Then, the inspector is tasked with determining whether the infor
mation submitted in the report matches what was on the ground at the construction site.
Most times, the inspection reports include a detailed analysis of the cost statements, evaluation of any existing change orders, picture evidence of the site conditions, any inquires the borrower or contractor made to the lender, a detailed report of the percentage stages of construction, and more. Also, depending on the scope of the construction projection, the reports may include various insurances, taxes, and permits.
What is the inspector workflow?
What are the steps that will be taken by the impactor to make sure that the construction project is going well, in compliance with the project plan, and to construct a comprehensive report? For starter, the bank inspector will get a copy of the draw package, which requests payment from the lending institution. After receiving all the essential documentation, the inspector will go through the draw records to get a deep understanding of the situation of the report.
After that, the next step is the examination of the construction project. After the thorough examination, the inspector will then submit the report verifying/disproving the accuracy and viability of the draw request. A recommendation will also be included in the report.
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