Chapter 43

Construction Supervision Procedures

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Links for Chapter 43

Contracts

Completion Notices

Bids

Inspections

Loans

Appraisals

Change Orders

Building Permits

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Loan Applications• Although loan applications vary, most contain:

– Plot plan

– Prints of all drawings

– Specifications

– Heat loss calculation room-by-room

– Proposed sale price

– Copy of earnest money agreement

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Appraisal Requirements

• Individual appraisal requirements include:– Total number of lots in subdivision

– Evidence of acceptance of streets and utilities for maintenance

– Copy of recorded plat and covenants

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Appraisal Requirements

• Master appraisal requirements include:– Location map and copy of recorded plat and

covenants– Letter from builder including

• Number of lots in area owned by the builder and number of lots proposed to be built

• Number of homes presently under construction and number completed and unsold

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Change Orders

• Change orders should be submitted to the FHA on FHA Form 2577

• Changes in cost should be indicated

• It must be signed by builder, purchaser, and lender

• Make sure they are well-prepared

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Building Permits• A building permit identifies:

– Major structures to be built– Legal description and location of property– Information about the applicant

• A building permit includes:– Two sets of plans– A fee depending on the estimated cost

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Contracts

• Building contracts become a binding agreement between the client, general contractor, and architect

• Fixed-sum is when the contractor agrees to complete the project for a certain cost

• Cost-plus is when the contractor agrees to complete the work for the actual cost plus overhead and profit

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Contracts

• Contracts specify:– Completion date

– Percentage and date for payments

– Insurance carried by the owner

– How the contract may be ended

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Completion Notice

• A completion notice is posted in a conspicuous place when work is substantially completed

• It is recorded in a local jurisdiction

• Loan payments can now be completed

• Private inspections are sometimes required

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Bids

• Bids are used to get the best price for the best quality work

• Bids become legal documents for completing the project

• Be careful to identify every aspect of the project that is to be included in the bid specifications

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Construction Inspections

• Regularly scheduled inspections occur at various phases during the project to protect the safety of occupants and the public

• The lender also inspects the product to ensure proper material and procedures are being used so funds can be released