Cost-to-Complete

How it is calculated.

Start with the approved budget by line item. Subtract the value of the work in place on each line, which is the line's budget multiplied by its percent complete. Add the change orders the lender has approved and any overrun already known. The sum is what the project still has to spend. Set it beside the undisbursed balance and the borrower's remaining equity, and the loan is either in balance or it is not.

Where the draw inspection fits.

Percent complete is a field fact, and the inspection is where it comes from. An inspector who marks framing at 80 percent when it is at 60 understates the cost to complete by the difference, and the loan looks healthier than it is until the next visit. What is percent complete in a draw inspection? explains how the figure is set and why it is a line item figure, not a whole-house guess.

Why it matters for lenders.

Cost-to-complete is the lender's exposure in one number. A project that is 50 percent drawn and 40 percent built has a gap that only grows if nothing changes. Supervisory guidance for construction and land development lending asks lenders to track the budget against progress through the life of the loan, and the OCC's handbook on commercial real estate lending describes the cost-to-complete analysis as part of monitoring a construction loan. Stored materials, retainage and the contingency line all move the figure, so administrators keep them visible on every review.

How RAZE handles it.

RAZE's report gives percent complete per line item with the photos behind each figure, so the administrator's cost-to-complete math rests on documented work in place. The lender keeps the budget and the decision.