Our goal in our draw process is to allow your builder to spend as little time as possible with paperwork so you can concentrate on completing a great project. At the same time the bank needs to balance the risk of being overdrawn on a project that may run out of funds before it’s complete.
Broadly, the draw process is:
The builder submits a sworn statement to the title company and lender simultaneously
Lender orders inspection based on sworn statement submitted
Title company reviews draw request and requests lien waivers from whomever is getting paid
Once completed the lender reviews the inspection to ensure it’s consistent with the funds requested (% complete, etc.)
Bank processes the draws based on each individual line item and not the whole budget
Bank wires funds to the title company
Title company processes draw and disperses funds to each party once authorization received from client and lien waivers are received from contractors who are getting paid. So the client has full control over all funds being dispersed.
Keys to a successful draw:
The sworn statement is completed correctly and completely
Costs stay within your budget.Any changes potentially mean the client may have to send funds to the title company. Any increases in the budget on individual line items or the entire budget need to be covered at the time the cost overrun occurs.
Make sure items being requested to be paid are completed and when the inspector arrives at the project. Items cannot be “on site” but not installed to get paid out.
No Line shifting.Line shifting is when a cost overrun is pulled from a line item that has not yet been paid out.For example, take $5,000 to cover the cost overrun in plumbing from the flooring budget which hasn’t even been tapped.The risk in line shifting is that budgeted funds will continue to be pulled to cover items over budget leaving no money left to finish the project.