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I see these listings from time-to-time - that a property has basically been purchased, and a builder is planning on building a new house on the lot. But it's listed as "for sale" now. Are they waiting until it's sold before they build? How does one go about buying one of these? I assume that if you already own, you'd have to basically carry two mortgages while it gets built, or pay cash for the new house?
One can take out a construction loan. It's a short term loan. Some have an option at the end which will roll it into a mortgage.
That makes sense if I were purchasing a plot of land on my own and building a house, but how does it work if someone is listing a "to be built" house for its final sale price? I am expected to take out the construction loan and roll it into a mortgage? I mean it seems like the guy is saying, "hey pay us the full price now and in a year you get a house".
You'll go to contract, obtain the construction loan, develop a draw schedule with the bank for release of funds to the builder. It is my understanding that it can cover the cost of the land. The homes we've built have been for clients who already owned the land.
Up here in Orange county the builder will buy whatever parcels are available and start to build a home and advertise it with the same model home that they have already built somewhere else. The pre- approved prospective buyer than puts a $10,000 refundable deposit that would be applied to your closing costs. That is my wife and I are doing now. You would go to closing a week or so after the house is completed. Hope I answered your question.
I don't know if you have your contracts with the builder or not yet but make sure that you ask them to specify what type and brand of materials they are using.
I had my house built years ago by a private builder, and I made sure I knew the brand of siding and the model,the roof shingle specs, the brand of air units, etc. Because you want to do your research and make sure you are getting decent stuff and not the usual builders' grade materials that will not last. This is important stuff to know.
If you are building with a community builder, they should have a spec sheet with all that stuff. If not, ask them and get it in writing. Be a real pain in the rear about it.
*before* signing contract with the builder, make sure u have:
1. spec list of what/how this house will be build,
2. upgrades u want to pay for, negotiate it *before* u sign the contract, so u can get discount price. after that, it's real $$$. not really because builder is greedy, but to deal with change, even it seems to be a small change, it's costly.
u don't need to get into the whole constriction loan thing, it's on the builder.
Agree completely with you on knowing exactly what materials etc. they are using. A good, reputable builder will show you detailed specs on everything they plan on doing/using..plus you should be able to choose color schemes and other upgrades they offer. Also, all new construction homes now (at least up here) have a 1 year top to bottom warranty and a 6 year warranty on major systems (electric, plumbing etc). Good luck!
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