How to sell a home while under construction with a builder?

Question

I purchased a lot in FL to build. SIgned and hired a builder, who is 50% completion of the home. My plan is to sell the home for profit once completed. I have not yet listed the home for sale.

In the meantime, I have a party who is interested to buy now, before the home is listed and completed.

I own the lot free and clear. I have a construction loan which is paying the builders cost. I am under contract with the builder, which is going great (good working relationship).

How would I structure a transaction to sell the land and home pending completion to a buyer? Any ideas would be appreciated. Thank you.

Ricardo R. · Answer

Hey Michael,

Sounds interesting... there are a few ways you can handle it depending on what you and the buyer want:

• Standard approach: Finish the build, then sell Easiest for paperwork and lenders because you stay on as the owner until the home is done, then sell as a completed home. Buyer might put down an earnest money deposit now with a purchase agreement that closes when the certificate of occupancy is issued. Keeps your construction loan simple because it stays in your name until the end.
• Easiest for paperwork and lenders because you stay on as the owner until the home is done, then sell as a completed home.
• Buyer might put down an earnest money deposit now with a purchase agreement that closes when the certificate of occupancy is issued.
• Keeps your construction loan simple because it stays in your name until the end.
• Assignment of contract (less common with construction loans) If your lender and builder allow it, you can assign the purchase contract to the buyer now so they close when it’s done. Some lenders won’t like this because the loan is tied to you, not the buyer, so you’d need lender and builder approval first.
• If your lender and builder allow it, you can assign the purchase contract to the buyer now so they close when it’s done.
• Some lenders won’t like this because the loan is tied to you, not the buyer, so you’d need lender and builder approval first.
• Sell the lot now + construction agreement with buyer You sell the lot to the buyer right away. Buyer signs a new agreement directly with the builder to finish the house. This means your construction loan would need to be paid off when you sell the lot, so financing has to be lined up.
• You sell the lot to the buyer right away.
• Buyer signs a new agreement directly with the builder to finish the house.
• This means your construction loan would need to be paid off when you sell the lot, so financing has to be lined up.

Standard approach: Finish the build, then sell

• Easiest for paperwork and lenders because you stay on as the owner until the home is done, then sell as a completed home.
• Buyer might put down an earnest money deposit now with a purchase agreement that closes when the certificate of occupancy is issued.
• Keeps your construction loan simple because it stays in your name until the end.

Easiest for paperwork and lenders because you stay on as the owner until the home is done, then sell as a completed home.

Buyer might put down an earnest money deposit now with a purchase agreement that closes when the certificate of occupancy is issued.

Keeps your construction loan simple because it stays in your name until the end.

Assignment of contract (less common with construction loans)

• If your lender and builder allow it, you can assign the purchase contract to the buyer now so they close when it’s done.
• Some lenders won’t like this because the loan is tied to you, not the buyer, so you’d need lender and builder approval first.

If your lender and builder allow it, you can assign the purchase contract to the buyer now so they close when it’s done.

Some lenders won’t like this because the loan is tied to you, not the buyer, so you’d need lender and builder approval first.

Sell the lot now + construction agreement with buyer

• You sell the lot to the buyer right away.
• Buyer signs a new agreement directly with the builder to finish the house.
• This means your construction loan would need to be paid off when you sell the lot, so financing has to be lined up.

You sell the lot to the buyer right away.

Buyer signs a new agreement directly with the builder to finish the house.

This means your construction loan would need to be paid off when you sell the lot, so financing has to be lined up.

Most investors in your shoes go with option 1: lock the buyer in with a purchase agreement now, take a non-refundable deposit if you can, and then close when the home is complete. It keeps the builder contract and construction loan clean; I hope this helps maybe helping you layout your options and helps you a bit, I sent you DM on BP hope you are able to assist. Thank you.

Bill B. · Answer

$10-20k non-refundable deposit (goes towards the purchase price if sale goes through.) gives them the option to buy the property for “X” dollars any time up to 60 or 90 days after certification of occupancy is issued.

How to sell a home while under construction with a builder?

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