DRAW PROCESS

Let’s start off with, what is a draw process?

Think of the draw process as the lender making progress payments to you as work is being completed. Rather than the lender giving you all of your funds from the get go, construction funds will be dispersed over the course of the project. Some lenders will give you the funds to get started with work for “Draw 1”. Others will want you to pay out of pocket to start the process and reimburse you as you move forward. Keep in mind that every lender has a different way of doing this.

How to get through your draw process seamlessly?

• Have a very detailed scope of work!
  • Be sure that you are taking time to think the whole project through and including as much detail as possible into the scope of work, this will help you avoid confusion when it comes to the money disbursed.

• Have a plan for what is going to be done in each draw.  “If you fail to plan, plan to fail”
  • Some lenders may ask for a breakdown of draws and work to be done in each draw.  Other lenders will work off of the scope of work but having a schedule in place will make it much easier for you when it comes to planning and receiving your funds from the “draw process”.  Additionally, it helps you keep your contractors on schedule.

• Make sure that you have someone there to meet the inspector, also known as the “Point of Contact”
  • A lot of times, lenders will hire a third party inspection company to take photos of the entire project and most times they have no idea what you are drawing on. It is highly recommended that you meet them there or have your point of contact (your contractor) be on site & make sure that they are getting photos of what you are trying to draw on.

• You will only get money for the work completed
  • Just because it’s started doesn’t mean that you will get the full amount allotted for that item in your SoW. Oftentimes you will get a percentage of the funds released for each item. 
  • For example – You have the appliances ordered and sitting in the house but if they are not installed then you will only be getting a percentage of the draw.
  • Another example would be if you have 1 item on your scope of work called “Flooring” you will be buying the floors followed by paying someone to take care of the installation.  The reimbursement of funds will be based on the amount of flooring that is installed throughout the project.

• Don’t be surprised when the lender holds back some money for a draw fee and wire.
  • Typically the lender will hold $150 – $300 for the inspection and they will also charge you a wire fee for sending you the funds.  

• Conflict Resolution –
  • If you disagree with the report, it is ok to bring this up with the Draw Coordinator. Make sure you document everything and have all supporting information such as invoices, images and descriptions of work content

• Changes to the Scope of Work – 
  • Sometimes changes need to be made to the SoW, it is best that you document the changes as soon as possible and inform the draw coordinator so it can be updated for the future inspections. 
  • If the dollar amount decreases, that amount still remains on the note until paid off. If the dollar amount increases, chances are that increase will have to be covered by the contingency or come out of your pocket 
  • Keep in mind – If you do work that is not on the SoW, you will not get money for it.