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Started By
Message
Buying a lot from a builder
Posted on 11/30/14 at 7:11 pm
Posted on 11/30/14 at 7:11 pm
How does this usually work? We are interested in a lot in a subdivision owned and being built out by a builder.
We will check out the specifics of course but I'd like to get an idea of what to expect.
Does the contract with the builder usually cover the lot and the house? How does payment work? Earnest money in addition to construction or construction-to-permanent loan?
Also, how long does the builder usually allow before construction begins? I know these things can work a million different ways, but any info would be great. TIA.
We will check out the specifics of course but I'd like to get an idea of what to expect.
Does the contract with the builder usually cover the lot and the house? How does payment work? Earnest money in addition to construction or construction-to-permanent loan?
Also, how long does the builder usually allow before construction begins? I know these things can work a million different ways, but any info would be great. TIA.
4
Posted on 11/30/14 at 10:20 pm to Sigma
From my understanding, you don't usually just buy the lot under one loan and then have a construction loan in these type of circumstances. The builder has the lot available and will build a house on it for you. You close on the whole thing at one time as if you just bought any other house. Up front earnest money is required, but you don't really do anything until the house is built as far as loans. The contractor is basically funding the build and then selling it to you.
Posted on 12/1/14 at 7:14 am to Sigma
I would imagine the builder is not going to sell you a lot for you to sit on very long if it's a desirable community. The CCR's of subd may have restrictions for timeline as well. Always always always read covenants before you build in HOA/restricted development. This sound like the type of community where purchasing the lot means you are ready to start drawing or have plans ready to be bid out and start construction.
If you're going construction to perm you'll need to know total cost of project and submit to lender. If approved, you'll be required to put 10-20% down of that cost. First draw from lender will be to secure the lot. From there your builder will make random draws based on % of completion of the property. Once completed and appraised, lender will convert to permanent loan
Your first step should be a very informal idea of a total cost and get preapproved for that amount. Builder will require it anyways.
Posted on 12/1/14 at 7:55 am to KG6
quote:
n have a construction loan in these type of circumstances. The builder has the lot available and will build a house on it for you. You close on the whole thing at one time as if you just bought any other house. Up front earnest money is required, but you don't really do anything until the house is built as far as loans. The contractor is basically funding the build and then selling it to you.
This is how it worked for us. We basically got with a builder/developer, selected a lot, a house plan (custom plan we had drawn), he gave us a bid/cost, and that was basically it. We actually put no money up front. Everything was handled at closing just as if buying a completed new home.
Posted on 12/1/14 at 10:55 am to ItNeverRains
quote:
Always always always read covenants before you build in HOA/restricted development. This sound like the type of community where purchasing the lot means you are ready to start drawing or have plans ready to be bid out and start construction.
This +1000. DO NOT buy or even THINK about building until you read every damn word of the covenants, design guidelines, and restrictions. Don't assume that your desired style, detatched grammaw cottage, three story boat garage, backyard chicken tractor, or trampoline/treehouse/enormous playscape will be allowed on your lot.
Too damn many people move into restricted neighborhoods without fully understanding what is and is not allowed. Save yourself & your neighbors lots of grief by being informed.
Posted on 12/1/14 at 1:13 pm to Sigma
there's like a bazillion missing pieces of information here.
Posted on 12/1/14 at 3:31 pm to ItNeverRains
quote:
Always always always read covenants before you build in HOA/restricted development.
I wish everyone would actually do this before buying a lot or house.
Posted on 12/1/14 at 3:39 pm to Sigma
quote:
How does this usually work?
In my experience the builder will require a deposit to begin construction. You'll agree on a set of plans and price.
Pro: It is easy to finance b/c the builder finances the construction and you just buy the home after construction is complete.
con: I've seen the builders able to charge more for a package deal b/c it isn't like you are getting multiple bids. They are usually dictating the terms and you are along for the ride.
Pro: The builder will most likely keep you in line with the allowances so you don't overbuild for the subdivision.
Con: You will most likely have less control over the design of the home. Most of the time builders have plans already chosen or he may limit what you can do. Sadly this can somewhat be a positive b/c many first timers to construction have no idea what works and doesn't work.
Posted on 12/1/14 at 3:45 pm to Chad504boy
quote:
there's like a bazillion missing pieces of information here.
Very true. As a realtor I would suggest the OP get a realtor. I would bet the farm he'll get more bang for his buck by doing so.
Posted on 12/1/14 at 4:40 pm to LSUtigerME
quote:
LSUtigerME
Did you all build in a new subdivision? This is how it worked for us when we built a house in a new subdivision in Texas.
However, we have looked at building a house on a lot in the NOLA area (not really a new subdivision, just would buy a lot that had a house on it pre-Katrina that was torn down) and what we are finding is that all the builders want you to get your own construction loan and the banks will only lend 80-85 percent of construction costs.
Posted on 12/1/14 at 4:51 pm to LSUFanHouston
quote:
However, we have looked at building a house on a lot in the NOLA area (not really a new subdivision, just would buy a lot that had a house on it pre-Katrina that was torn down) and what we are finding is that all the builders want you to get your own construction loan and the banks will only lend 80-85 percent of construction costs.
Seems to be the norm around here (SE LA). Few if any decent to high end contractors will carry the loan for you. Genuine, true custom is going to require you to get a construction loan in these parts. There are plenty of builders willing to float the loan, but you will have extremely limited options (a semi-custom sort of build). Pick from a book of plans, pick from a specific range of materials/finishes, etc. No changes allowed.
No thanks. I'd rather assume the risk, carry the loan myself, and get exactly what I want...and be able to fire the contractor if his quality is sub-par. Or to refuse his subs if they're not up to snuff. Lots of shady junk passed off as okay in the homebuilding business, sadly. I live in a new neighborhood and am constantly amazed at the number of owners who never come out to see if they're getting what they paid for on a new build.
Posted on 12/1/14 at 5:39 pm to ItNeverRains
quote:
quote:
there's like a bazillion missing pieces of information here.
Very true. As a realtor I would suggest the OP get a realtor. I would bet the farm he'll get more bang for his buck by doing so.
Have an appt set up with a realtor for tomorrow.
We met with the selling agent for the subdivision today and it turns out that a developer actually owns the lots and has allowed the builder to sell the remaining, with the idea that they would then build the homes. So a lot-only purchase is possible.
The agent told us they would do either if we are interested, but hinted that we would save some money buying the lot from the developer and then contracting with them to build the home. We are leaning to just buying the lot, but could there be something here that we should be afraid of? The ability to wait to build the house is very appealing to us.
Posted on 12/1/14 at 5:52 pm to Sigma
I've never done it but looked into building myself and the only thing is the loan is a little more complicated when you split it up. You have multiple closings, multiple loans that roll together at the end if I'm not mistaken, etc.
Posted on 12/1/14 at 5:55 pm to KG6
The way I understand it is the construction loan pays off the lot in the first draw. We would be doing a construction-to-perm, so one closing for that, plus one prior closing for the lot.
Posted on 12/2/14 at 9:49 am to hungryone
quote:
Seems to be the norm around here
Yeah. I'm not looking for a super high-end custom house - Was looking for something pretty nice but probably not the last house I'll ever have. It seems the builders down here that self-finance construction and then sell completed house... yes... the houses are very cookie cutter. I saw one, for example, that had three floor plans to choose from. There were no "options" that would change construction, and there were three things you could choose: color of walls, color of tile, and color of cabinets (choosing between 2-3 colors for each).
That's not nearly enough choice.
Posted on 12/2/14 at 9:56 am to LSUFanHouston
quote:
I saw one, for example, that had three floor plans to choose from. There were no "options" that would change construction, and there were three things you could choose: color of walls, color of tile, and color of cabinets (choosing between 2-3 colors for each).
That's not nearly enough choice.
Agreed--the choices are quite limited, and the quality of materials didn't meet my standards. I didn't go crazy high end, but I had certain non-negotiable quality standards for materials. I wanted to be able to specify everything, down to the last doorknob. Plus, too many of the semi-custom choices are middle-of-the-road, design-wise. WTF is up with everything in shades of brown, khaki, and beige? Blech.
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