Congratulations, you’re almost done! You just need to wrap up the last few loose ends with the construction and settle the finances.
This section will explain the final inspection process, walk-throughs, and the project handover process which will finalize the construction portion of your project. We’ll also cover the tasks necessary to close out the finances both with your general contractor and with your lender. And lastly, we’ll briefly cover the much anticipated move-in process (if you were building new or moved out during a major renovation).
The final home stretch of the construction process is a combination of observations, inspections, and paperwork. Not only do you need the house to be safe, dry, and functioning for you and your family, you also need to finalize things with the city, the bank, and the contractor.
FINAL INSPECTION & CERTIFICATE OF OCCUPANCY
Getting your Certificate of Occupancy (C of O) is the first step in finishing your house. A Certificate of Occupancy is a document that signifies your house is safe, meets all local codes, and allows you to move in. It means your house officially and legally exists.
Any renovation that creates a change in the number of rooms, or a change in the use of the spaces will require a permit, and thus a check on whether a Change in Occupancy has been triggered
For new construction and additions, the building inspector who has been making regular inspections throughout construction will come out of a final inspection when the home is nearly complete. The inspector’s interest is in making sure the house meets local building codes which protect the health and life safety of users, not so much the cosmetic quality and workmanship of the work.
If approved, the inspector’s signature of approval allows the building department to issue you your Certificate of Occupancy. If not approved, the contractor will have to fix the items not approved and request another inspection later.
A Temporary Certificate of Occupancy can be issued on projects where a portion of the home is safe to inhabit but the rest of the project still has work to do. These certificates are short term (typically 90 days) but allow you to occupy part of the house if you’re hard pressed to do so. Just make sure you check with your homeowner’s insurance to see what is covered and when coverage starts. You don’t want to run into a situation where a fire or water damaged your stuff from construction activities still going and come to find out your stuff isn’t insured.
Usually, for major renovations that create a change in the number of rooms or in how the rooms are used will require a permit and trigger a review to see whether a Change in Occupancy has been triggered. This is typically the case when converting a single-family home to a two-family home. Be sure you check with your building department to make sure you’re getting the proper paperwork regardless of the scope of the project.
PUNCHLIST & FINAL WALK-THROUGH
Most likely you’ve been visiting the site, attending site meetings, communicating regularly with your contractor about the work, and spot-checking the quality along the way. When your contractor is nearly finished with all the work, it’s time to make a final walk-through.
A final walk-through is best performed after all the work has been finished and the areas are thoroughly cleaned and ready for move in. It’s impossible to comment on the quality of the work if the area is still dusty, messy, and tools are still everywhere. Ensure the contractor has the new construction areas cleaned inside and out before your scheduled walk-through.
Conduct your final walk-through with the contractor (and architect/designer if they are providing construction administration services). This typically occurs at Substantial Completion (or a time when the home is safe to live in) and usually occurs shortly after receiving your C of O.
Note on Substantial Completion: Your construction contract will spell out what occurs at Substantial Completion. Sometimes Substantial Completion signifies when any retainage amounts that have been previously withheld from each progress payment are to be paid. After the retainage payment is paid, you most likely have one last payment due to the contractor which should be a smaller amount and should cover the work for the punch list items.
Go through every room. Look at every detail. Use a flashlight and look everywhere. Turn on all equipment, switches, and devices to ensure everything is working properly. As you notice imperfections or things that aren’t working, you and your contractor (and architect) will make a list of things to be fixed. This list is called a punch list.
As you make your walk-through, it’s always good practice to ask your contractor to go over suggested maintenance procedures for keeping the house in working order. It’s in his/her best interest to make sure you understand this as it is a good preventative measure for getting call-backs during the 1-year correction period.
The contractor will then arrange to fix all items on the list in a reasonable time frame. The schedule may be based on ordering materials and scheduling subcontractor work so try to be accommodating but also persistent in getting everything fixed quickly. Try to ensure that at least the major and messy repairs are done before you move in. And make sure ALL the repairs are done shortly after you move in.
About the same time the contractor is fixing the punch list items, he/she should also have all final documentation together to give to you. These documents are usually listed in your construction contract but typically include product cut sheets, guarantees, warranty paperwork, lien releases, and sometimes record-drawings.
Your contractor should hand those over to you in an organized way – a binder, a cd, or digitally via a shared online storage folder. Review the documentation to make sure you have everything. You don’t want to be living in your house and not have the instructions for the programmable thermostat when the weather starts to change.
In addition to handing over documentation, your contractor should hand over all of the keys to the house and transfer any utilities previously in the company’s name into your name. This process signifies the contractor’s completion of construction activity.
FINAL PAYMENTS & MECHANIC’S LIEN RELEASES
After wrapping up the construction process with your C of O in hand and having completed the punch list walk-through, it’s time to start the closeout process with the finances. At this point, the contractor, subcontractors, and suppliers have all supplied and finished their work. If your contractor hasn’t been doing so already throughout the entire process, you need to obtain lien releases from each and every subcontractor and supplier on the job, and lastly the contractor, too. You’ll only be able to collect these releases if all monies have been paid and accounted for by each party.
Each state is different but liens may be filed on your property well after construction has finished. Some states allow liens to be filed up to 6 months after work is finished. There’s nothing worse than having a lien placed on your property well after you’ve moved in and already gave final payment to your general contractor. So make sure you obtain lien releases from all parties involved. (It’s also usually a requirement to submit copies of lien releases to your lender in order to settle your construction loan.)
After the punch list items are fixed, all the documentation handed over to you, keys in hand, utilities transferred, and lien releases obtained from all subcontractors you can make your final payment to the general contractor (and make sure you receive a lien release!).
SETTLE FINANCIAL OBLIGATIONS
To close out a construction loan:
If you chose a single-close (all-in-one) construction loan, you’re ready to roll it into a permanent mortgage. If you chose a double-close construction loan, you’ll need to go through the loan qualification and approval process again to obtain a mortgage.
Either way, you’ll need to gather the necessary paperwork your lender requires to get the process moving. Here’s the typical items your lender will need:
- Final Draw Request – You and your lender probably agreed to set aside a certain percentage of the funds in the loan until everything was finished. You can now request this money. (This is also great for all those extra after construction expenses like movers, landscaping, new furniture, etc)
- Final Lender Inspection – After requesting the last of your money, the bank will send an inspector to come out and make sure all work has been performed according to the drawings.
- Copy of your Certificate of Occupancy
- Lien Releases – The lender’s security is at risk until all contractors and suppliers are paid and have released the property of liens.
- Verification from the Title Company – Because the property is the only guarantee that the lender has in case you default, they want the title company to confirm the property is still in your name and that no other liens or restrictions take precedence over the loan.
- Evidence of insurance – A homeowner’s insurance policy is usually a requirement of lenders to protect their investment and reduce risk.
After you’ve submitted these items to your lender, you may have the option of changing loan programs or your interest rate, depending on your lender and their loan programs.
If you financed your project in personal loans, hard money loans, or home improvement loans your close out process may not be as involved. Check with your lender to confirm the close-out procedure for your specific loan.
The move-in time is such an emotional time. All your hard work up until this point has finally paid off. Your dream home is finally becoming a reality – RIGHT NOW!
Whether you hire movers or do all the moving yourself, cherish this time to really take it all in and congratulate yourself on a job well done. Not many people succeed in building their dream home. And you just did it!
You have a slight advantage in the move-in process if you’re building a new home because you know months ahead of time what your house will look like and when it will be ready (hopefully). You can plan ahead and envision what the spaces will look like, how the furniture will be arranged, and what the color schemes will be.
The months leading up to move-in are exciting and busy times. You should take inventory of your current possessions and decide whether your furniture and furnishings are acceptable for your new spaces or if you’d like something new. Prepare your current possessions for the move and also consider bargain hunting or shopping for new furnishings if you want to do so.
Shortly after you move in, make sure you register your products, fixtures, and appliances so that the warranties start. Remember that paperwork the contractor gave you? Put it all in a safe place and register those products! At the same time, your contractor may have left you with extra leftover materials from the project. Stockpile these extra floor planks, tiles, siding, and paint in a safe place where you’ll remember later. That way if you ever need to do some rework, you’ll have extra material to use.
ACTION ITEMS FOR THIS SECTION
- Schedule final inspection by the building inspector.
- Receive your Certificate of Occupancy.
- Conduct a final walk-through of the project with your contractor and architect/designer (if applicable).
- Receive final documentation from the contractor including warranties, product cut sheets, etc.
- Make sure any utilities are transferred into your name.
- Receive keys to the house.
- Make final payment to the contractor.
- Obtain lien releases from all subcontractors, suppliers, and your general contractor.
- Get written verification from the title company that the property is still in your name and that no liens exist.
- Get or update your homeowner’s insurance.
- Finalize the mortgage or loan arrangements.
- Move in!
Need more help? Here are additional resources related to this section.
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- Checklist: Final Completion Evaluation Form
Over To You…
Yeeesssss…. the home stretch. All of your hard work has paid off. Now close out those last few loose ends with your contractor, your banker, and the government.
You’re finally there. How does it feel?