The Title Company, Builder, Lender, & your New Home
During the construction period, your lender, builder and Focus Title work closely together toward the goal of a brand new home with a brand new mortgage. The lender hires Focus Title to insure that the money being loaned is getting to the people who are doing the work, in exchange for a legal waiver of lien rights.
Before construction begins, Focus Title is hired to pay out the full amount needed to complete your home. Instead of paying all of the money to the builder at the closing, your money is paid out periodically, as needed. These periodic payments, called draws, are a series of checkpoints for the lender, Focus Title and you to monitor the construction progress.
Before the first draw, your builder gives Focus Title a cost breakdown* of the project – sort of a road map for Focus Title to follow. The cost of the work is listed by categories, such as excavation, plumbing, carpentry and electrical. Each subcontractor and supplier is listed; along with the amount that each will be paid.
Several times during construction, your builder will ask your permission to request money (draw request*) from the lender, to be paid through the escrow account for work completed to that point. Focus Title or the lender conducts an inspection of your new home to determine if the work shown on the draw request has been done.
You or your architect should also inspect the home before approving each draw, to make sure that it is being built to your satisfaction. Contractors and suppliers have a legal right to file a lien against the property if not paid for their work and materials. When your money is used to pay the amounts specified in the draw request, Focus Title collects lien waivers* from the appropriate contractors and suppliers. By giving the lien waiver, the contractor gives up the right to file a lien against the home for the work shown on the waiver. When the project is completed, the general contractor gives Focus Title an Affidavit of Completion* and final lien waivers from all subcontractors and suppliers. The final inspection is performed to determine that all work is finished. In most communities, an occupancy permit is issued by the local building authorities. You may then move in and begin decorating.
NOTE: This article may be re-printed with permission only. You are encouraged to distribute this to home owners during the construction process.