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?

Evan

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. 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.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708
Newave Communications http://www.johnweeks.com
================================================== ====================

"John A. Weeks III" wrote in message
...
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. 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. 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....

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 -

- Show quoted text -

On May 3, 2:14 pm, TheEv wrote:
Thank you all for your help.

To be more specific, I'm acting as the owner / builder of my project.
I've actually
hired a ex-builder, who is now out of the business, but wants to come
back into
it as an official builder. I've hired him to oversee the project and
organize contractors
just as an official builder would do, but at a fraction of the cost.

How would this same scenario I've outlined above change as the owner /
builder?

Thanks a lot!

Evan


The scenario is the same. The only issue may be that a lender would
be more comfortable making a loan where someone who is a real general
contractor is in charge. How much they might factor that into making
a loan, I don't know. I'd also have to wonder how anyone is going
to do the GC job at a fraction of the cost of someone else. Like any
other jobs, you'll find a cost range among contractors, but if their
doing it real cheap, I'd wonder what surprises you're in for. I'd be
real sure I checked out the GC thoroughly, because one mistake and the
cheap GC could cost you more than you think you've saved. And I hope
you have a good written contract with the GC.

On 3 May 2007 12:14:24 -0700, someone wrote:


.... I've hired him to oversee the project and
organize contractors

So you have hired a "construction manager". That is an established
way of doing business, though usually on big projects.

However, the queation still arises, will he get prices and scheduling
as good as the more established GCs in your area? The "fraction" that
you are saving on him could be pretty meager if all the subs charge
you 10% more being as you are not a regular customer.


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