Any lenders working this weekend???

Financing, Hard Money Lenders, Private Money
1

Hello,

I just found a very equitable, half completed large luxury home. It’s located here in East TN near my home in a FLAT deed restricted neighborhood. The Builders wants to walk because the Mrs. found a place on the beach in Naples FL.
That’s the short story, contact me anytime, I would like to have paper on the table for him Monday morning. My need is acquisition , and completion funding.
My numbers leave me at 47% finished with proper construction and fixtures,including the pool. :biggrin

Thanks,
Dave Norris

2

Hi Dave,

        This is a very complex investment for what could be mediocre returns.

The state of Tennessee is a Contractor License State so you can’t buy this and finish it yourself unless you just happen to be a licensed contractor yourself. If you just happen to qualify as a contractor it could take you 4 to 6 months to get a license by the time you take the test, buy your license bond, pay your license fee’s, buy liability and workers Comp and finally receive your license.

This partially finished home can’t even get a loan on it until you can get a permit on it, and that would require designating a licensed contractor under contract to re-apply for a building permit under his license and company name.

There is a lot of due diligence that has to take place including review of existing contracts and scopes of work for work completed. A determination as to whether you want to use any of the existing subs to complete the project? You have to maker sure the subs are licensed, carry workers comp and liability insurance, have been paid in full for their current work and have supplied partial or full lien releases for labor and materials.

You will need to make sure there are no outstanding construction claims or liens / lawsuits filed and will need to get every sub who has ever worked on the home to sign a statement acknowledging they are paid in full and have no future property (Home) claims. You will need to do this same thing with all the material suppliers and service providers.

Then you will need to verify everything already built has been installed correctly and have been inspected and approved by the building department. This includes wet and dry utilities, taps, property lines survey, curb cut location, review of the plans, conversation with the architect and civil engineer, review of excavation and compaction and the soils report for soils testing.

Then you estimate 47% completed however that will need to be reduced to a paper estimate and supported by construction cost data like RS Means. New contracts with new written scopes will need to be issued and a critical path schedule supporting schedule written and included with all subs paper work.

The general contractor will get a premium for stepping in mid term and untangling the mess so you will pay a premium for his costs of service. In fact it may be hard to get a general to take a hard contract on the mess which may force you into a cost plus agreement.

Then your going to need to specify your finishes to subs so they know what products their bidding / pricing their contract on and what gets installed. How does the interior look? What colors are installed and where? Color Wall?

Then as the owner of this build you will need to provide a Home Warranty as per Tennessee State Law, you will need to select and pay a home warranty provider company to comply with sales requirements. You will also be responsible and liable for builder defects for upwards of 10 years so you probable want to build this in a LLC and specifically get both builders risk insurance and builder defect insurance if available for 1 home.

Then you will need to set up your loan for completion, probable a construction loan as this has never been completed and has no permit final or occupancy certificate. A construction loan would probable pay for both lot, existing improvements and provide the lions share of completion costs.

A typical builder makes a margin on every home, that margin is determined by comps, land value and square footage values.
But the builder also pays marketing and advertising fees, realtor commissions for sales and closing costs before getting any available balance as profit. If the current owner is fair about his price you might make something however if the current owner wants a premium with what he has expended in capital then this could be tight.

I would guess you need a 3 to 4 month escrow just to get your general lined up, re-submit for a new permit and get lender requirements in place to close. This will be a very time extensive project because of the requirements to protect your self before you close.

This is definitely not the project I am interested in as I now primarily do commercial development and building of new projects.

Good luck,

             GR
3

Thank You Gold River!

I was anticipating about 75% of the issues you mentioned. However, The new home warranty and a couple others are deal breakers for me.
I verified the permit, septic and the approval of the documented build out…all the way to the landscaping and pool permits…oh and the fencing lol.
All the subs were contacted and would provide r.o.ls’, afterward I approached the contractor and he would sign off also. Then I spent about 6 hrs at the courthouse.
I have a builder that I originally subcontracted to when I had my excavating business. He has become a large commercial contractor, he agreed to assist me free of charge. We met at the site this morning and he confirmed something I realized about 3 in the morning yesterday. The garage was designed to be a suspended slab over the finished basement. I deduced the real story was there is a major flaw with that. That led me to question how experienced the original design/build team was. I found this was his 2nd project.

Again Thank you for your response,
Dave Norris