During the home construction period, the lender, builder and Knight Barry work closely together toward the goal of a brand new home with a brand new mortgage. The lender hires Knight Barry to insure that the money being loaned is getting to the people who are doing the work and supplying materials, in exchange for a legal waiver of lien rights.

Before construction begins, Knight Barry is hired to pay out the full amount needed to complete the home. Instead of paying all of the money to the builder at the closing, the money is paid out periodically, as needed. These periodic payments, called draws, are a series of checkpoints for the lender, Knight Barry and the homeowner to monitor the construction progress.

Before the first draw, the builder gives Knight Barry a cost breakdown (budget) of the project – sort of a road map for Knight Barry to follow. The cost of the work is listed by categories, such as excavation, plumbing, carpentry and electrical. Each subcontractor and supplier is listed together with the amount that each will be paid.

Several times during construction, the builder will ask the homeowner for permission to request money (draw request) from the lender, to be paid through the escrow account for work completed to that point. Knight Barry, the lender or a construction inspector conducts an inspection of the new home to determine if the work shown on the draw request has been done.

The homeowner should also inspect the home before approving each draw, to make sure that it is being built to his or her satisfaction. Contractors and suppliers have a legal right to file a lien against the property if not paid for their work and materials. When the money is used to pay the amounts specified in the draw request, Knight Barry collects lien waivers from the appropriate contractors and suppliers. By giving the lien waiver, the contractor gives up the right to file a lien against the home for the work shown on the waiver.

When the project is completed, the general contractor gives Knight Barry an Affidavit of Completion and final lien waivers from all subcontractors and suppliers. The final inspection is performed to determine that all work is finished. In most communities, an occupancy permit is issued by the local building authorities. The homeowner may then move in and begin decorating.

The cost for the escrow service depends on the amount of involvement the lender requires Knight Barry to have, but averages about $350 for a typical home in Wisconsin. All of the forms mentioned in this article can be downloaded free of charge from the FORMS section of www.knightbarry.com.