What is a bank draw inspection in real estate development?

What is a Bank Draw Inspection?

In real estate development, a bank draw inspection is used during construction projects, particularly when these projects involve multiple disbursements of funds from a lender. These inspections are performed by neutral third-parties such as architects and inspectors to ensure that the construction work aligns with the stages for which funds are being released. They provide lenders with comprehensive assessments of construction progress, verifying that the funds disbursed correspond to the completed work stages.

The process involves inspecting various construction stages, such as foundation and site preparation, framing and structural work, installation of mechanical and electrical systems, and the application of interior and exterior finishes. The final inspection ensures that all construction work is completed according to the approved plans and regulations.

The neutral third-parties who verify that the work completed on-site matches the amount requested in the draw by the contractor help mitigate risks, ensure compliance with agreed-upon milestones, and maintain quality control throughout the construction process. They provide a way for banks to verify completion percentages of the project, ensuring the appropriate release of funds to contractors based on the verified progress.