What Lenders Need to Know About Lender Inspections

Lender inspectors at commercial building construction site.How Do Lender Inspections Help Lenders?

A lender inspection is purely an inspection to ensure that building projects, especially renovation or rehabilitation projects, are remaining on course. These inspections are sometimes done before each scheduled draw period.

Lender inspections are commonly issued toward multi-family apartment properties, and ensure that lenders are keeping their investments protected. While larger lenders might have in-house inspectors, small to medium lenders may rely on third party inspectors.

What Will A Lender Inspector Look For?

A lender inspector seeks to protect a lender’s investment, so they will look for any warning signs that a project might result in a loss instead of a profit for the lender. Warning signs for lenders include off-track or shoddy projects.

Appropriate Use of Funds

If a lender inspection finds that funds are not being used according to expectations, an inspector may raise a red flag. Additionally, an inspector will ensure that projects are done to quality. If a renovation is done poorly and the inspector foresees that additional funds are needed to correct the issue, this may concern an inspector.

On-Track Project

Projects that are off-track can result in huge losses for lenders. Additional construction time means additional bills for expenses like personnel and utilities, while delaying income from tenants.

Safety Compliance

An inspector will raise a flag on unsafe and careless construction practices. They may warn an investor about an unsafe construction site before construction regulators like OSHA even have the chance to shut a project down.

Should I Foreclose on a Property That Fails a Lender Inspection?

Off-track projects equate to higher expenses and delayed income. Typically, if an inspection fails, the borrower may have already stopped making payments. However, many lenders will not prevent a borrower from withdrawing during the draw period as long as they have kept their payments current. Inspection is simply another tool in the toolbox for lenders to evaluate and make decisions.

If a lender decides to foreclose a property, especially a property in the midst of renovation, lenders must wade through a complicated foreclosure process. A foreclosure processing firm like Total Lenders Solution can work hand in hand with lenders, so that teams can focus on their customers.

Keep Your Team Educated About Foreclosure Law

At Total Lender Solutions, we advocate for lenders looking to maximize recoveries on defaulted loans. For over 15 years, our team of highly experienced real estate professionals and legal experts has transformed complicated processes into clear resolutions for institutional and private lenders. We work as a vigorous extension of your team to provide comprehensive solutions and seamless communication, from pre-foreclosure and notice of default to the final sale phase. Our dedication and persistence when it comes to the foreclosure process ensures that our clients feel confident in reaching a successful outcome. Contact us today.

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