Lets say you have a 2 million dollar construction budget and you’re building a house. And you are expecting to draw down in approximately 4 to 6 draws including the construction lien holdback. What is the best method to get your draw approved and advanced? Some lenders will send out a Quantity Surveyor who will report back at what percentage the job has been completed. So the report will say something like “40% completed” and you will likely get a draw on your construction budget based on that percentage. The QS report can be extremely detailed about cost control, tender of contracts, contract status, contract changes, it’s a very detailed account.
This report will cost approximately $2K per visit (I don’t know exactly what they charge or how they arrive at the fee for the report) and, in my opinion, the report is more detailed than is really necessary for infill residential construction projects. I haven’t used a QS for projects financed with IFC but I have had lenders call and ask me about what method we use to get draws advanced. From my point of view it doesn’t really matter that much what percentage point the work in place calculates because the trade won’t get paid till the job is done. It’s not important to the Lender until its finished. Typically we won’t pay the trade till the work is in place, completed 100% and we have inspected satisfactory. Advancing for material deposits might be an exception. Plus the work will also have to pass the building departments inspection and they inspect all the structural and plumbing work in place. Of course the finishes after the drywall is outside of the building department but generally speaking, the builder will be able to tell if the finishing materials are being installed properly. Most builders know their trades. It’s important to know your trades and know what quality of work they are capable of outputting. And every job site is unique and every borrower/lender relationship is different.
I like the Cost to Complete method much better for infill construction. The builder puts together a construction budget based on quotes that he has received from trades. If the builder has start up capital then we advance the draw to the builder or we will pay the trades directly. Generally the inspection will cover 3 or 4 trades at one shot.
Disclaimer: I am not saying that the QS report is unnecessary and I am not making any recommendations against a QS report. I don’t even know exactly what the QS report costs. I am using an estimate based on numbers I have heard from Lenders. The Quantity Surveyor report is a valuable report for many projects and it may be a required report for some lenders.