What's this type of deal called?

Question

Or is this type of deal even plausible?

ex.  somebody is selling 50 lots in an uncompleted subdivision. you build on the lots and they are paid off as the homes are sold.

say sale price of $10k per lot, they would receive $10k from the sale of each home, plus interest maybe?

Bill Gulley · Answer

It's common for a land owner to "subordinate" the lot to the contractor's lender for construction financing. This allows the property owner to retain title and have an open sale contract with the contractor. It allows the contractor to obtain the use of the land to build at no real up front expense as the lender will usually require clear title for construction financing. This is done with a subordination agreement between the owner and the lender without the owner being on the note.

It could also be done as Ann mentioned as a seller financed deal, but the owner will need to provide the subordination agreement with clear title.

At settlement, the lot sale is filed first from the owner to the contractor and then title from the contractor to the homebuyer providing a good chain of title and the bank lien is cleared.

A subordination can also be made to the contractor if no funding is needed and that serves as collateral for the build. Then when the home is sold the owner is paid off.  A subordinated-build contract.

Ann Bellamy · Answer

Sounds  like seller financing to me .  Seller could hold a mortgage or deed of trust, with partial releases negotiated for each sold property.