Reflecting on 2023, Looking Ahead to 2024
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An essential part of managing construction loan risk is to align invoiced work with the project timeline and budget. The work should also be performed to meet building code and consumer expectations. Many construction lenders lack the time and experience to evaluate the quality of work done by the builder. That’s why it’s crucial to know what to review in third-party construction inspections, as they are a critical part of a successful construction loan management program.
Often called construction progress inspection or draw inspection, a construction site inspection definition is best described as a review of construction work and progress to ensure the project is in compliance with the construction plans provided and in consideration with the size, worth, and essential items outlined in the plans. Third-party inspectors are certified and experienced in mechanical and electric codes, legal issues in construction inspection, concrete and masonry, and structural integrity.
We’ll share some of the elements of a construction site inspection report after we first look at the types of inspections and the stages a third-party inspector follows to complete a report.
There are five major site inspection types including a new construction home inspection, subdivision inspections, multifamily inspection, commercial inspection and site development inspection which deals with in-ground utilities, roads, signs and lights, sound barriers, gates, common areas like parks and parking lots. Also, site development inspections are often conducted during the other inspection types as well.
So what are the steps an inspector will go through to ensure the project is running smoothly, in compliance with the construction plan, and to create a detailed report?
First of all, the inspector will receive a copy of the draw package requesting payment from the borrower, the contractor, or the bank. Upon obtaining all of the necessary documentation, the inspector will review the draw records, past and present, to gain an in-depth understanding of the state of the project – the timeframe, the construction schedule, and the scope of work completed thus far.
Related: Three Example Issues Uncovered by a Third-Party Draw Inspection Report
An on-site examination of the construction project is the next step after reviewing the documents. The inspector uses a construction site inspection checklist to examine and verify the progress of the mechanical, plumbing, and electrical phases of the project as well as an assessment of framing, roofing, drywall, sheathing, and more. The inspector will then submit a construction site inspection report verifying or disproving the viability and accuracy of the draw request. The inspector will also include funding recommendations in the report.
In some cases, there may be a need for a construction dispute inspection where the third-party inspector is called upon to produce an unbiased report that will settle any disputes between contractors, lenders, and customers.
Performing a third-party construction site inspection is extremely important regardless of the nature and scope of the construction project. A highly skilled and certified third-party inspector is a critical resource that will vouch for the work completed, and deliver a detailed construction inspection report that both identifies concerns and helps to move the project forward. Knowing how to read and interpret the report is a critical construction loan management skill.
Contract Simply provides process automation software to mitigate risk in construction loans. By reading documents, coordinating approvals, and tracking payments, our software creates efficiencies and identifies opportunities to limit exposure for construction lenders and borrowers. Built in Austin, Contract Simply’s award-winning software cuts days from the construction back-office operations while ensuring compliance and reduced liability for everyone involved. Get started with a live demo today or check out our overview video.
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