Buying land for STR Build
I am looking to buy land & build a STR. I would like to use a new construction loan so that both the land & build are in one loan & less of a down payment.
If I use a realtor to purchase the land, will I have to pay them a percentage of the construction loan? IE: If I spend 80k on land & get a loan to build 400k home, will I owe the realtor fee's on just the 80k land or will I owe on the construction loan. Since I would be working directly with a builder to build on my own property, I have no need for a realtor beyond purchasing the lot.
Appreciate any insight!!
Hey @Christina Kinard, If you use a realtor to purchase land you pay nothing. The Seller of the land hires a listing agent, they agree on a commission to charge the seller. Let's say it is 6%. So if the agent you are working with brings you (The buyer) they will be paid 3% and the listing agent will get the other 3%. Of course commission is always negotiable and all but for sake of the example that is how it works.
Now for off market property things could change. But 9/10 times the commissions that go to realtors come out of the seller's proceeds.
Spot on Brett!
Hi @Brett Voorhees @Donald Rogers thanks for insight. I understand that portion but lets say that I buy the land with a construction loan rather than a just a lot land loan. In this instance, I am rolling my 80k land purchase and 400k construction loan build into one loan, would I have to keep working with my realtor and pay them at the closing when my home is built and my mortgage loan is created?
Quote from @Christina Kinard:
Hi @Brett Voorhees @Donald Rogers thanks for insight. I understand that portion but lets say that I buy the land with a construction loan rather than a just a lot land loan. In this instance, I am rolling my 80k land purchase and 400k construction loan build into one loan, would I have to keep working with my realtor and pay them at the closing when my home is built and my mortgage loan is created?
i dont see why. they are only involved in the land sale transaction. they get % off that purchase from the seller. their participation ends there.
@Christina Kinard Technically that all can be negotiated but most likely no. Us agents only get paid for the purchase or sale of "Real" property. That does not include loans. So I see how it can be a bit confusing.
Hi @Christina Kinard, financing and property ownership are two different things. Most Realtors are paid when property is sold, regardless of financing. So in your case your Realtor would likely get paid based on the land purchase since that's what they're assisting you with (buying land). In most cases the listing agent will offer your buyer agent a commission and you won't pay your Realtor directly. If you're buying directly from an owner, you'll need to discuss compensation with your agent.
You may be thinking of other new construction situations where a builder owns the lot, but you're buying a new construction home on that lot in the transaction. In this case your contract is for the finished home (not just land), and your Realtor would likely get paid a % of the price of the home. Keep in mind that your Realtor would be representing your best interest all the way through closing on that new construction home (not a small task).
Finally, Realtor commissions are ALWAYS negotiable. A good real estate agent will save you more money than they cost you by helping you avoid pitfalls, saving you massive amounts of time, and negotiating on your behalf.
Hey Christina! That's a really great question and it looks like the answers you have already gotten are good ones. As an agent who deals with building STRs quite frequently (Smokies), your agent should only be entitled to the commission being offered in the listing.
I list a good number of pre-construction cabins, where we have land, floor plans, furniture, and builder contract already lined up so the end buyer just has to come in with the construction loan like you are doing. It makes things more streamlined than piecing it all together, and we build the commission into the package for the buyer's agent. But that is for our packages, since you are putting it together on your own it shouldn't be an issue.
Hopefully I could provide some insight there! Keep me updated, I would love to see what you build... Asheville is a beautiful area!
@Christina Kinard. as a loan officer, I second what Brett and Christian said above. The agent would receive commission from the seller of the land. And if the builder was providing the land, the agent would receive commission from the builder based on the total price of the transaction. Happy to help you with a construction loan, including the land, if you need.
Everyone above is spot on - the realtor is paid by the seller and whatever commission is being offered in the MLS ( typically 2.5 - 3 % ) the commission is paid based on the price of the land you are buying and has nothing to do with the loan amount.
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Quote from @Mack Lengel:
Hey Christina! That's a really great question and it looks like the answers you have already gotten are good ones. As an agent who deals with building STRs quite frequently (Smokies), your agent should only be entitled to the commission being offered in the listing.
I list a good number of pre-construction cabins, where we have land, floor plans, furniture, and builder contract already lined up so the end buyer just has to come in with the construction loan like you are doing. It makes things more streamlined than piecing it all together, and we build the commission into the package for the buyer's agent. But that is for our packages, since you are putting it together on your own it shouldn't be an issue.
Hopefully I could provide some insight there! Keep me updated, I would love to see what you build... Asheville is a beautiful area!
how often are people doing this? are people getting reasonable equity after building for something like this? I am trying to find out typical LTV for a SFH property that you build with a construction loan but its not been easy trying to find.