Chapter 43 Construction Supervision Procedures

2 Links for Chapter 43 Contracts Completion Notices Bids Inspections Loans Appraisals Change Orders Building Permits

3 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

4 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

5 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

6 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

7 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

8 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

9 Contracts Contracts specify: –Completion date –Percentage and date for payments –Insurance carried by the owner –How the contract may be ended

10 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

11 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

12 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