What happens if a draw inspection shows less work than requested?

Why the gap happens.

A shortfall between the request and the site is common and usually not sinister. The usual causes:

• The request went in early, timed to the builder's payroll rather than the work.
• The budget was front-loaded, so early lines are billed ahead of progress.
• Materials were billed as stored but are not on site, or are somewhere the loan agreement doesn't allow.
• A change order moved work between lines and was never approved, so the request and the budget no longer match.
• The project has slowed or stopped.

The first four are paperwork and timing. The last is a credit problem, and repeated shortfalls are one of its earliest signals.

What the lender can do.

The options are the lender's, set by the loan agreement and credit policy:

1. Fund what is documented. Release the amount the inspected percentages support and carry the rest to the next draw.
2. Hold the draw. Wait for the work to catch up, then order a re-inspection.
3. Return the request. Ask the borrower to resubmit against the actual progress, or to document an approved change order.
4. Escalate. When the gap is large or recurring, review the budget balance, the schedule and the borrower relationship before funding anything more.

The FDIC's research on multiple-draw construction loans found that negative inspection reports are associated with a higher likelihood that banks deny draw requests: the report is meant to change the decision when the evidence calls for it.

Why it matters for lenders.

Funding ahead of the work leaves a loan with less collateral than its balance assumes, and the NCUA's examiner guide reminds credit unions that disbursements have to track real progress. Write down what happens when inspected progress falls short, apply it the same way every time, and keep the report with the decision.

How RAZE handles it.

RAZE documents; the lender decides. The report shows percent complete for each draw sheet line with the photos that support it, so a gap is visible line by line rather than as a single total. If a reviewer needs more evidence, rejecting the inspection sends it back to the inspector with the reviewer's reason attached, and the full history of status changes stays on the record. RAZE does not approve, deny or fund draws.