[34:59.7]

Well, a couple things I look for is good construction loan agreement, of course, a good strong note and deed of trust are really, really important. Title insurance endorsements are really important too. You know, they’re the one of the risks you have is construction lender is that in most states, these particulars and others, the mechanics, their liens all predate and revert back to when the work first began on the project.

So if your deed of trust is recorded after the first work began, everybody that walks onto that project and does work is ahead of you in priority. And so it’s important to make sure that the land is undisturbed. Nothing’s been done. When you record your deed of trust, it’s also important that you get mechanics lien coverage on your title policy.

But it isn’t a one time buy. You’ve got to not only buy the mechanics lien coverage, but you also have to buy date down endorsements because otherwise you’re only covered to a certain point in time. So you want to build in. If there’s going to be 12 assate 12 draws to Olife alone, you got to buy 12 date down endorsements and periodically you got to go back to the title company and bring the date of the policy forward in these little one month or two month increments.

So you’re covered for mechanics lien during that period of time because otherwise if the project goes south, you’re going to get sued and those contractors are all going to claim that they’re ahead of you in priority and that you’re number 12th on title instead of number one on title and it’s a mess.

And Dennis, isn’t it true that in a lot of states the mechanics liens are really the number one in priority on the legal side, I would Say.

It’s the number one risk in construction because if you’re watching your draws carefully and you’re checking the vibe on the project, et cetera, you’re going to smell trouble before it happens. I wouldn’t say it’s your largest risk at all. And it’s a manageable risk through, through the title insurance process.

But you’ve got to make sure you get those date down endorsements and the like and make sure you’ve got a good clean title, good strong loan documents and the like going into it. The other risks I think are probably larger. This one’s a very manageable risk because if you’ve got First American on the hook to ensure you in first position come hell or high water, you could take that to the bank.

I mean, they take you while for them to pay your claim because insurance companies like to drag their feet. But at least the end of the day you’re going to get paid and mechanics are not going to be able to prime you and get ahead of you. Dennis, who can do those docs?

I’m not up here to sell myself.

Is there a person who could possibly.

Do this construction lending and you know, performance guarantees and, and things of that kind and the like. So don’t just go to your average real estate lawyer and have him draw up a note and deed of trust, you know, with some kind of hold back agreement. No, no, you need a good set of strong construction docs and the like and they’ll look at your other things, your fund control agreement and your, they’re going to vet the, you know, they’re going to make sure there’s an assignment of the general contractors agreement and there’s an assignment of the architectural agreement.

Because if you have to step in and take over that project, you don’t want to have to renegotiate the general contract with the contractor because he’s going to go, all right, now my chance to really make some money in this deal. So he said, you know, you’re not, you don’t own my contract, therefore I can tear it up and charge you whatever I want to charge.

And so it’s real, but it’s hard to bring somebody else onto the project, you know, midstream. So if you’ve got the assignment of that, that contract and an agreement with the GC that if you take over that project, you step into the shoes of his client, then he’s got to honor that contract as if you were the original contracting party.

So that’s a smart move. Same thing with the architect Architect says, I don’t know you. I’m not going to give you a copy of the plans, but if he’s assigned them to you, he now works for you. If you step into that project, you always have to think about what can go wrong in this project. What am I going to do if it does go wrong?

You want to be able to control the GC and the architect. And I think that’s really important with a good set of construction loan docs. And we see that. We’ve seen that in projects that have gone bad, lenders that haven’t done that assignment. And so the headaches that it causes after the facts are tremendous.

So that’s a great piece of advice.

Yeah. And we could have probably easily renamed this panel to the New Construction Risk Panel, but it appears that’s what we’re, you know, we’re really getting the questions on. And it’s very important points. I want to land the plane here on two final topics. So one is I just want to give Mark Cassidy at the end, this is a question I’ve gotten as well.

We have a number of folks that I’ve met in the course of this conference who, when it comes to valuation, some of them are not even using appraisals. Right. Or they’re just looking at assessor data and kind of making a determination themselves that can introduce some risk into the process as well. And so maybe you could just speak to, you know, why would an appraisal, and the right kind of appraisal, especially for as is and as completed, right.

Two values on that appraisal, what would be the best practices around that? And just for the lenders out here, what are you looking for in proper analysis for an as completed or I’m done with my construction and it should all match up.

Probably the main thing is a lot of detail. The more detail, the better. We want everything laid out. It really almost in a sense, it’s a contract that the appraiser is saying, look, given this hypothetical situation, this is the value. So the more you can define the hypothetical situation down to how many trees get planted, shrubs, whatever, it’s all cost.

And you’re trying to equate cost against the value of the property. And you want to see the appraiser go in there and look at other properties. Sometimes it’s a blend of existing properties and new properties they’re going to compare it to. But you want to, you want to be able to follow any appraisal if you walk away with questions or if you’re more Confused reading it.

I hate to say it this way, but there’s probably a good chance you’ve got a confused appraiser, so you. The simpler it gets. I like to quote Albert Einstein. If you can’t explain it simply, you probably don’t know enough about your subject matter. And I think that’s a good key key to follow. If you read an appraisal and you can understand what exactly the subject property is, how it was, how it was analyzed, how the comparables make sense and apply to this, to this property.

In this case, a cost approach, how you have other cost, you know, data that confirms these types of project costs, and it all syncs together where you can clearly understand it. It should come down that simple.

Where you can read it and it makes a lot of sense, but definitely a lot of detail. And what is exactly being appraised 100%.

I’d like to end the panel with each of you giving your final thoughts. And what I’d like you to do is come up with one key takeaway. We honestly only got to about 50% of the content and questions that we had for this panel because it’s a huge topic. So again, you can meet all these guys after and ask questions.