What are stored materials in a construction draw?

Where stored materials show up.

On a pay application, stored materials have their own column. The AIA G703 continuation sheet, for example, carries materials presently stored separately from work completed, as its instructions describe, so the draw shows how much of the request is for materials not yet in place. On simpler residential draw sheets, a borrower may list them as a separate line or a note on the request.

On site or off site.

• On site: materials delivered to the property. An inspector can photograph them, compare them with invoices and note how they are protected from weather and theft.
• Off site: materials held at a supplier, fabricator or storage yard. They are harder to verify, so lenders that fund them usually ask for more: a bill of sale or title to the materials, insurance that covers them, a storage agreement and sometimes an inspection at the storage location.

The risk.

Money for materials goes out before the work exists. Materials can be damaged, stolen, moved to another job or never installed. The FDIC's construction and land development examination procedures warn that front-loaded budgets, where early draws overstate the work done, can leave too little money to finish the project; stored materials that are funded and then never tracked to installation create the same gap.

Why it matters for lenders.

Decide in policy whether stored materials are fundable at all, on site only or also off site, and what documentation each case needs. At the next draw, check that the materials funded last time are now installed. When an inspection finds them missing, see what happens if a draw inspection shows less work than requested.

How RAZE handles it.

The lender sets the required questions and photos on each RAZE order, so a draw that includes stored materials can require photos of the materials and where they are kept. Every photo carries GPS coordinates and date and time stamps, and photos link to the draw sheet line items they support. The inspector documents what is on site; the lender decides what the evidence supports. See what a draw inspector looks for.