Browse the full Resources Index
Once a loss draft department has opened a file on an insurance-funded repair, many servicers do not simply hand over the full amount and wait for the work to be done. Instead they tie disbursement to a draw schedule, releasing funds in stages as the repair progresses and verifying that progress along the way. This structure mirrors the way construction loans are typically managed and exists to protect the lender’s collateral interest in the property, since the home itself remains security for the mortgage throughout the repair period, regardless of who is doing the work or how the claim was valued.
A typical draw schedule releases an initial percentage of funds when the contract is signed and materials are ordered, a further percentage at a defined midpoint such as dry-in or completion of exterior work, and the balance upon final completion. To verify that a stage has actually been reached, many servicers send an inspector, sometimes a staff employee and sometimes a third-party inspection service under contract to the lender, to walk the property and confirm the work matches what has been billed. This inspection is separate from, and unrelated to, any inspection an insurance adjuster or an appraiser might conduct as part of the claim itself, and the two inspectors rarely coordinate or even communicate with one another.
Weather-dependent trades create real friction with rigid draw schedules in a climate like Minnesota’s. A roofing contractor who completed tear-off and dry-in in October may find gutter or siding work delayed into spring by snow and cold, and a draw schedule written for a warm-weather timeline does not always anticipate that gap gracefully. Contractors who do a significant volume of insurance restoration work tend to be familiar with communicating these delays to a servicer’s loss draft department, but a homeowner managing the process for the first time can find the coordination burdensome on top of everything else a storm claim already requires.
Third-party inspection services used by some lenders typically charge a fee for each site visit, which is generally deducted from the held funds rather than billed separately to the homeowner, and scheduling these visits can add its own lag time to an already sequenced process. A homeowner eager to move to the next payment stage sometimes finds that the inspector’s availability, not the contractor’s progress, is the actual bottleneck holding up a draw. Rural and outstate Minnesota properties can face longer waits simply because fewer inspectors cover a wider territory, and a routine visit that might happen within a day or two in a metro area can take considerably longer to schedule further from population centers.
The draw schedule, the lender’s inspector, and the servicer’s release of funds all operate independently of the appraisal process. An appraisal establishes the scope and cost of covered damage; it does not set the terms on which a lender chooses to release its own held funds, and an appraiser generally has no role in a lender’s construction-draw inspection. Homeowners navigating both processes at once sometimes find it useful to keep the two sets of paperwork clearly separated, since the loss draft file and the insurance claim file are maintained by different departments answering to different obligations.
This article is general education about how the appraisal process commonly works. It is not legal advice, and specific procedures can vary by state and policy.
Russ Lis is a working property insurance appraiser and umpire based in Minnesota, serving clients nationwide. Contact Appraisal Resolution.