Remodeling your house with money from a bank loan? Homeowners Beware!

Remodeling your house with money from a bank loan? Homeowners Beware!

Homeowners that rely upon their banks to monitor construction loans and disbursements to contractors are in for a rude awakening.

Many banks that offer construction loan monitoring and assistance in oversight of the construction project have little or no expertise due to the fact that many of these loans are monitored by young inexperienced bank officers. While homeowners are told that milestone payments will be verified by their construction loan officers prior to funds distribution, that lender oversight is often worthless.

In the past, when bankers were professionals that had backgrounds in finance and years of experience dealing with sophisticated loans and real estate developments, their expertise was invaluable and actually helped to protect their customers projects from being drained dry by unscrupulous contractors prior to completion.

Today with the current sad state of most banks, many of the bank employees are inexperienced and about as competent at assessing a real estate development deal as they would be running a rental car agency. I.e. If the damage to the car exceeds the size of the circle that rental car companies supply to their employees, the renter is responsible for repairs. Unfortunately, banks cannot provide a standardized reference for construction project milestones so that the bank personnel evaluating the loan disbursement has any guidance, and they lack the knowledge to comprehend the request for a draw. In other words, the banks do not generally have trained or experienced personnel that are competent to determine if a project disbursement is appropriate.

Mike Panish, Construction Expert Witness, receives many calls a month from homeowners involved in construction fraud situations where the building contractor has absconded with their construction loan funds and left them with an unfinished project and no money left. Mr. Panish has been retained in many contractor fraud claims across the country that have involved poor oversight by lenders.