I get phone calls from homebuilders from time to time that are in distraught. They sold a home that they owned. Took that cash and decided to build their own dream home after purchasing the land and putting the plans together. The plans get approved by the planning commission or other local agency that controls the building of homes in their community and they are ready to move forward. After 6 months, they are out on their timeframe, budget and new home. What is one to do? First off, come up with a new gameplan! Investors are out there to help you out, but many of them are going to step in and help you with the project. What can you expect?
First off, the investor will have their own inspector look at the job already completed to check for the structual soundness of the home. For example, if the foundation was done properly, how valuable is the structure on it?
The investor will have their own inspector inspect the property in phases to approve of the work being completed in that phase.
You won't receive a "lump sum of cash", but rather incriments as the project goes through its phases.
An approved and licensed contractor will need to be on the jobsite! I see many people that are building their own homes and contracting it, however, the new investor won't let this fly. Especially now that you have shown that you can't control the costs of the job.
The investor will want to have a lower loan to value, typically around 70%. What does that mean? If you add up what you owe in materials and what the new cost of the loan will be, divide that by the projected value of the project (property) when completed. If the loan to value is above 70%, it could be considered a "higher risk loan", since you don't have much "vested" in the property. Lenders are all to familiar with borrowers walking away from a new deal when things don't go as planned and the deal goes sour.
Feel free to call me and run your scenario by me for California and Hawaii deals, I might be able to help you :)
Scott Gormley
Broker/Owner
Oak Valley Mortgage
2006 Chico Assoc. of Realtors Affiliate Chairman
Direct: 530.592.8362
Fax: 530.267.5555
Website: http://www.CALoan.com
Blog: http://activerain.com/blogs/lendingmagician
"You find the perfect home, we'll find the perfect loan!"
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