Escrow For Construction Loans –
What’s the significance of title and escrow during the closing of a construction loan? How does escrow services guarantee that the contractor will be paid once the work is concluded? Before issuing the loan, the required lender must first authorize the project’s owner. After this, the contractor must submit a pay application that has been approved to the lender. The lender then notifies the title company that funds must be released to the contractor.
The title company will establish an escrow account where they will deposit all loan proceeds that have not yet been disbursed. Additionally, either party must purchase a policy of title insurance to defend the funds. After these steps have been completed, it is time to commence payment. The contractor must contact their lender to request a loan draw. Once this is approved, construction can commence, and funds will be disbursed proportionally as work is completed and progress payments are made on behalf of both parties by the project proprietor.
Title and escrow is responsible for managing the escrow account that contains all construction escrow funds, which include any closing costs paid by the borrower and the loan proceeds. The company releases funds to the lender to cover their fees and deposits them on behalf of both parties into a financial institution. During this time, Title and Escrow will also manage any other financial institution deposits made by either party to guarantee the fulfillment of all project contracts.
Construction Loan Agreement
The construction loan agreement will outline the funds required to pay contractors and other construction expenses. A paid escrow hold-back may be required of all contractors prior to submitting their final draw request at the conclusion of the project. This is done to ensure that any necessary repairs are completed before you are eligible for additional loan draws. Title and escrow will evaluate all documentation, including lien releases from subcontractors, prior to submitting it to the lender for approval once all contractors have completed their work and submitted their final draw requests.
Title and escrow will provide title insurance to the lender, and may also obtain coverage for the general contractors. Frequently, lenders require that a construction loan be secured by a title insurance policy, which protects the loan in the event that problems arise with the property. Before purchasing property or beginning construction projects, Title and Escrow will also manage construction disbursements, ensuring that all contractors are paid on time. Before your lender assumes ownership of the commercial property, the company will also conduct a title search.
Title services are necessary to guarantee that no other title holders have a claim on the property. The deposits for the project will be deposited into escrow accounts, and the title company will provide escrow disbursement services. To learn more about title and escrow services for your construction project or loan, contact us now at Secured Trust Escrow.
