have come to a meeting of the minds on the pricing for my first presale. they own the lot. live in new jersey and will be selling their home and moving to nc. they want to sell the nj house, close on it and come down to nc right after that closing and pay cash to close on the house i will be building. what is the best arrangement for financing this type of construction. i have been told two ways. they deed the lot to me and i get a construction loan. the other is that they get the construction loan. i would like to know the positives and negatives of each way. of course i have wondered what would i do if they don’t sell theirs before i finish the new one. it must be less complicated than i am making it. any help would be appreciated. also if anyone has a presale contract and allowance schedule they have found to be comprehensive i’d be grateful for some help on that. actually any pointers regarding presales would be appreciated.
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I build in central Texas. Been building here for 6 years. In Texas it is a felony for a builder to allow a customer to deed a lot to him so he can get the interim loan. Check the law in your state. the (they get the interim loan is by far the best method). There are many reasons why. Here's a short list
The bank (look around for a good one, preferally good to you. remember you are the repeat customer.) will qualify them, and require a fair amount of down money.
they are now married to the house and the loan to pay for it.
they cannot back out for any reason. what is there for them to back out of, they own the house even before it exists.
the horror stories are true, people do back out, especially right after you have their purple shag carpet installed that you now will have to remove, throw away and reinstall something that regular humans would approve of.
remember, be careful with your pricing, and dont do anything for free.
here's my analogy: go to McDonalds order a big mac, pay and then tell the clerk that you forgot to order fries and can you have them for free. Customers will ask for things for free. It is because they see you as a rich builder they really think that we make 50% or more.
I always show my customers exactly what i made on their house. Most are stunned at the low amount.
there's many more reasons to do it this way, Hope I helped.
Leigh