On Apr 27, 8:45 pm, "aemeijers" wrote:
"John A. Weeks III" wrote in ...



In article .com,
TheEv wrote:

I have a simple question:

I own, in full, a lot of land I am going to build a house on. Will
construction loan lenders favor me because I have equity already in
the land?

Actually, it complicates things greatly. If the loan was to
go bad, they would have a hard time repo'ing the house unless
they also had control of the land.



Nonsense. Owing the land and then having a house built on it with
construction
financing is done all the time. He's in exactly the position he
should be in for
someone that wants to build a custom house on a lot. The lender will
put a lien on the
property and they know how to foreclose if it goes bad. The money is
released
in stages as the work progresses. When its done, the loan is paid
off, usually with
a traditional mortgage.




Builders are increasingly
refusing to build houses on land that they do not own. You
may end up having to sell the lot to the builder, then buying
the house as a package. Or you may end up having pledge the
lot against the loan as collateral. All you can do is ask, and
every deal is different.

I've heard the 'sign the lot over to the builder' tale on here several
times, but still never heard of it in real life, at least here in flyover
country. Personally, if a builder tried that on me, I'd tell him where to
go.

And how about if the builder goes bankrupt along the way, after you've
signed
over the land to him? Here in NJ, a good size regional builder just
went bankrupt
and there is a long line of folks that handed over deposits for houses
in varying
stages of construction. These buyers are losing their deposits, as
they are
just unsecured creditors. Many lost 20K+, worst I saw so far is
losing $125K on
a half built house.






At most, I might put it as security on the construction loan with the
bank. I'd also never use a McBuilder, or finanancing from any company
related to the builder. (just like I'd never use a buy-here, pay-here car
lot, and for the same reasons.)

A real custom builder will have NO problem building on customer owned land.
The risk is the bank's, not his.

aem sends....- Hide quoted text -

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