Q: How do draw schedules work?

A: Lenders don't want to pay for work that isn't done yet. If it's a big job and the contractor can't complete it for some reason, the lending company will want to protect itself. Most lenders require that construction loans include a draw schedule that ensures they pay only for work that has been completed. For instance, if the foundation and framing are budgeted at $75,000, the check issued at the completion of framing cannot bring the total amount paid to that point to more than $75,000. A good draw schedule not only protects the lender and homeowner, but will be welcomed by a professional builder who does work on time and on budget.

Strategies for getting the most from this important step

The vast majority of builders are happy to provide prospective clients with a list of people for whom they have recently built homes. They encourage prospective clients to call these references and ask about their experience and level of satisfaction.

References may also include financial partners, trade contractors, materials suppliers, and other colleagues who can provide perspective on their professionalism and track record of performance.

Homeowners who fail to check their builder’s references do themselves a disservice.

After all, a reference check is an easy way to avoid trouble and an important confirmation that hiring a particular company is a good choice.

Reference call etiquette

Like you, our past clients are highly successful people who lead busy and productive lives. When calling a reference, be direct and respectful of their time. Let them know who you are and the purpose of your call, and ask their permission to speak to them at this time.

For example, you might say, “Hi Bill, this is Bob Smith. We are going to be building a home near you and are deciding which builder to use. Gary Poster at Poster Construction suggested I call and ask you a couple of questions about your experience with their company. Do you have a minute to talk?”

If they say this is a good time to talk, consider these questions as a starting point for learning about your builder. 

Questions for current or past clients

What kind of home was built?

Was the home finished on time and on budget?

Would they recommend the builder to others?

Additional questions can include:

• Is the company organized? Do the company’s managers deliver on their promises?

• Does the company keep deadlines and schedules? Small things, like being on time for meetings, can strongly influence homeowners’ satisfaction.

• Was the home finished as expected? This reflects the builder’s skill at writing detailed specs and setting realistic expectations.

• Were the builder and his team pleasant to work with? Any construction project is a team effort, and the best contractors have good working relationships with everyone, including architects, interior designers, subcontractors, and other professionals.

As a final question, consider asking, “Is there anything else I should be asking or you want me to know?

Lastly, be sure to thank the builder’s reference for their time and information.

If you do uncover a problem, don’t jump to conclusions. Instead, get the builder’s side of the story. For instance, if the home went over budget, a follow-up conversation might reveal that the homeowners made a lot of costly changes after things were underway. These types of follow-up conversations set the stage for honest communication.

Any reluctance on the part of the builder to provide references is a red flag. A forthcoming attitude is a good sign that the builder values transparency and is secure in his or her reputation.