Closing on a Piece of Land

So, as you know, we’ve found a great piece of land.  8 acres in a prime location for us.  It’s perfect placement!  We’re currently in the process of setting up a closing date.  Mind you it’s been two months since we started this process.

There’s quite a few ways that you can go about buying and building.  For one, we could’ve gone the traditional route, going through an agent, finding a piece, and paying commission fees if not covered by the seller’s agent.  Instead, this didn’t work out for us- since we couldn’t get financing for the land in time for the proposed closing date… twice!  We could’ve gone with a land loan through a bank, but like construction loans they would’ve taken about 2 months to process.  I personally find this to be extremely ridiculous!

Or you could go through a private sale, using your own lawyers and such.  This is what we did.  Originally, we were going to use the same lawyer as the seller.  I knew this lawyer personally on a different ground, so I thought it would be ok.  After much discussion and debate- we felt it better to use our own lawyer- and frankly, he’s amazing and I’m glad we went that route.  The seller’s lawyer has been pretty difficult to deal with.  Once we got our own lawyer it was like the seller’s lawyer got upset when I’d try to talk to him- but then he’d turn around and talk to me directly after saying that all discussions should go through my lawyer.  It made a lot of sense (I hope you hear the sarcasm in these words…).  Anyways- our lawyer was cool though, as he knew we were very new at this and certainly didn’t know what we were doing right or wrong.  He’s been a breath of fresh air and I’d recommend him to anyone!

That aside, our closing date is supposed to be this coming Monday.  Originally, we were notified that we could close on November 15^th since all the paperwork was complete and ready to be signed.  I told our lawyer this and he said that under no circumstances are we to sign without him viewing the documents (well duh, that’s why we hired you, haha!).  So I continued to follow up with the title company that was used to make sure that our lawyer got all the paperwork.

He didn’t receive it till Wednesday (November 24^th) this week, the day before Thanksgiving.  I emailed him once I got the phone call and told him, first off – I want him to have the time to go through this without feeling stressed out or anything and I felt that they didn’t give us enough time to move money from savings to checking… granted I’ve already done this and we are ready to go- I still have to go to the bank to get a “bankers check” for the closing itself. 

This is why I love our lawyer- he emailed them back and said that he was leaving soon for Thanksgiving and that since the paperwork took so long to receive, there was no way that he’d have time to review all this before the closing on Monday- thus pushing back the closing date shouldn’t hurt anything since it took so long for the paperwork.  Like I said, he’s awesome!  He also sent us all the paperwork so that Mike and I can review it and ask questions. 

Obviously we’ve been looking at the closing costs pretty hard to make sure that we have enough money and that we aren’t getting screwed or something.  So it looks ok with one exception.  The lawyer fees are in the sellers’ lawyers name.  We want to make sure that that fee is going to OUR lawyer- since he’s the one doing the work for us and NOT the seller’s lawyer.  We’ll see if it is the cost for our lawyer or not.  I’d rather have our lawyer get that money anyways- obviously.  We’ll see how it goes if it’s really for the seller’s lawyer.  I’ll protest it without a problem, we’ll just see if he budges.

Anyways, that’s where we are on the land currently.

Some things to think about before you begin your quest to buy land and build:

1. Step one: make sure you have enough money for a deposit and down payment.  We do now, but originally we were going to try to borrow.  Sadly the party we were going to borrow the down payment from ended up being a dead end.  This is a story for another day.
2. Step Two: Decide if you will be going through a bank or if the seller offers financing.  If you go through a bank decide if you are going to go with straight construction loan, which most banks have a time limit to when the construction needs to be completed, or if you will be doing a land loan.  The bank we are still looking at is one year for a construction loan. 
3. Step Three: Know that these processes take time.  Land loans and construction loans take about 2 months to process right now.  This may change as the economy gets better, but know that this does take time.  If you go through a bank, make sure that you put your closing date a couple months out due to bank processes.  If you go with a seller financing loan- know that this also, apparently, takes two months… which under normal circumstances, it really shouldn’t. 
4. Step Four: And I will continue to repeat this throughout my posts: ALWAYS ask the question you may have- no matter how ridiculous it may seem.  You want to make sure that you are protecting yourself as well! 
1. Example: Question: Should I get a Perc Test done before officially saying “Yes I will buy this land”. Answer: absolutely!  You want to make sure that it’s not going to cost a fortune to put a septic system on your land!
2. Question: Should I ask about any special circumstances this land may have i.e. Wetlands protection?  Answer: absolutely! You also want to make sure that the land is buildable or (like us) if the land requires any special driveway stuff in order to get INTO your land.  Our land actually has a small designated wetland area in the front, so we will have to build our driveway with a special covert to make sure we don’t disturb the wetland too much.  It’s fine, we just need to go through a little bit more crap before we start building.

There are so many things to consider when buying and building land.  This is what we are going through now.  I can only hope that this helps some of you out there as you begin your projects in building. 

I’ll let you all know how the closing goes! J

Happy building!

Land Financing and Banks...

When you find the right piece of land, you just know!  Mike and I have been searching for that perfect piece of land for quite some time.  In August of this year, we found a piece we really liked.  It was in a pretty good location- so we decided to talk to a wonderful real estate agent to see if she could show it to us.  She did- along with the sellers real estate agent. 

The piece was 12 acres, and quite a bit of it was wet- it seemed like wetlands run off.  Walking around the area, it was easy to figure out where we would want to put our home… right where the highest spot was, and where it was dry- about 200 feet off the road.  The area there was probably 2.5-3 acres of dry land.  In reality, we probably could’ve only used that much to build on as the rest of the land was pretty wet. 

So we decided to look into it.  We put a deposit on the land and began our search for funds.  We had already been preapproved for a construction loan through this one bank, so we thought it would be a relatively stream-lined process.  WRONG!  We went back to this same bank and asked the representative about starting the loan process.  I asked from the Get-Go what we needed, A-Z for each step so I could make sure we had it all ready.

In the end, this guy kept giving us half information.  We needed ABC and D for the loan application.  He never mentioned EF and G.  Each bank is different, I know this, but this was ridiculous.  I had him repeat to me three times over the phone what he would need from us when we went to go sign up for a mortgage application.  He told us: latest pay checks (for Mike it was amounts put into the bank for the year since he is a contractor), bank and savings statements, driver’s licenses, and if available the house plans.  Well, we made sure we had everything- even the house design.  We had Mike’s brother in law print out a couple of copies so we had one as well.  We went to sign the paperwork and we were missing the contractors’ contract (which had estimates of the job at hand), a building permit (really? How can we get that when we don’t even own the land!!), plus a few other things.  I even made sure we had the plot plans so if he asked for them I had them.  Then when we were discussing costs and closing and time frames, he kept holding information back from us.  Mike and I had to pry information out of him. 

NOTE TO ALL: ALWAYS ask questions… and question you can think of!  It doesn’t matter, it’s always good to know what you’re getting yourself into!  If you feel that questions are being skirted around or if you are only getting part of the information… just walk away.  It’s better to be safe than put your neck out there.

In the end, after we had signed everything- the bank’s rep told us he would hold it for 48 hours before putting it through.  He also told us that it would take 2 months to even decide whether the bank would give us the money to build!  Apparently it needed to go through the board for approval and we had to have that contract from the contractor.  I called him the next day and asked him to shred everything- that we would be building in the spring instead since 2 months would bring us into October before we could even begin building.  Not a good time for New England building by the way!  Both Mike and I really had a bad vibe about him and this particular banks way of doing things.

We learned a lot through this process though.  Always ask the questions and pry if needed! 

We tried other routes to obtain money for this land.  The land was nice, big, in a nice neighborhood, in a relatively good place, and it was cheap!  We didn’t want to pass up the opportunity!  We tried filling out personal loan applications- and were told at first that we didn’t have enough credit history.  Ok, I understand.  Both of us have had car and student loans… but not like 10 of them.  One place also said that I had not been in my current job for long enough (I had just started with MMI not two weeks prior) and I was also told me debt to income ratio was too large…

My debt: well I paid off my Car Loan about a month before I submitted the application- I still have a $90/month student loan and I pay $500 in rent.  I make $590 plus a lot more a month- so I’m really still dumbfounded that they thought my debt to income ratio was too large!  For Mike, he has no car loans anymore and the only loan he has is his student, which he doesn’t have to pay till 2013!  His minimum payment a month once that hits is $100/month.  He helps pay for rent too.  Again… dumbfounded!

So we scratched our heads and went back to OUR bank and had Mike’s Dad co-sign with us.  Two days later I called to see the status and they told me that we didn’t have enough credit history.  That was the last straw.  I asked how we didn’t with three people, one being a business owner with good credit history (and a lot of it).  The guy told me, well you have a lot of credit history… just not the right TYPE.

What the hell does that mean?!  Banks now have “TYPES” of credit histories?!

Needless to say, we pulled out of the piece of land we found.  I liked it, but it wasn’t Perfect.  We got our deposit back since we couldn’t get anywhere with the banks.

Soon after we found that it was impossible to get a loan from a bank (what a joke considering we have little to no debt and extremely good credit!) my Dad calls me and tells me that a guy he works with has a piece of land for sale… 8 acres for the same amount that we were going to buy this other piece for.  Bonus- he was willing to do seller financing!

We couldn’t help it- we had to take a look!  We walked the property and it’s even better than the last piece.  More usable land, with a couple quirks that we will need to work out, but nonetheless, nothing we can’t handle.  It must’ve been fate- that’s all I can say.

So, we talked with the seller- also someone that Mike’s family knows and has worked for before.  He was pretty pushy (in my opinion) and got us to sign a piece of paper with a good faith deposit (which was sizably larger than normal- and still makes me shake a little), and had a 30 day bracket on there so if we changed our mind for any reason, we would get our money back.    

So, we signed it, I gave him the deposit, and we are still in wait for having the closing finalized.  It’s November 24^th right now.  We signed this piece of paper on September 18^th. 

More to come about how seller financing works and a few things I’ve learned to help protect ourselves through this process.

When you find the right time to begin constructing your home...

I never thought that I would be blogging about constructing a home.  There are a lot of things I didn't know before I started this process- and probably a ton more I have to learn before this project is over!

For one, I didn't know that this dream of mine would ever come to reality.  I never thought that Mike would be so interested in building our own home.  It was his idea after all, and in every step- he's having me make decisions, something I rarely enjoy doing.  I've grown a lot since this process began.

Let's start from the beginning.  When do you know that it's the right time to begin looking into building your own home?

Take a step back for a second.  Look at the economy.  Right now- it seems like the PERFECT time to build a home- if your better half or parts of your family is in the business.  I won't lie, I think it's a really good time to buy foreclosures right now too.  We actually started looking at foreclosures at the beginning of 2010.  It's time we find something of our own.  We've been living in an in-law apartment for the past 3 years together.  It's just too small for us now.  

A Lot of people think that Mike and I are nuts.  Building a house? Hah! Why do that when you can get a foreclosure for $50,000?  Well, let me tell you.  After a long long time of debating and discussing out the pros and cons to buying and building, I've found that the best way to go for us is building.  For one, we aren't buying a  potential ruin.  Yes you can walk through a house and take a look and turn on and off the faucets and stuff, but what are you really getting yourself into?  Especially in the foreclosures!  People are getting kicked out of their homes, and in most cases, are taking anything of value- including that wonderful copper piping that gets you a pretty penny in the market now.  So, why buy something that you could potentially sink tens of thousands of dollars into, when I can build for the same price?

The best part is, Mike is a contractor... as is his dad.  He also has friends and family that build.  It just makes sense.  we can  build this house and buy the land for less than $120,000 (and that's with the fancy upgrades!) What we really needed to figure out is exactly how big do we need our house?  I certainly don't want something the size of a mansion (can you imagine the amount of time it would take to clean?!) but I do want something decent sized.  We found out happy medium.  A Ranch with a walk out basement, one that would be living space for us.  Mike has already created the designs with a few of my ideas and wants put into it.  I really do want cathedral ceilings in the Kitchen/Dining room area, and he put them in for me.

So, we found our time... we found a piece of property, which we are still in the process of purchasing- which I will post about later- and we have the drive to make this happen.

There's SO much that you will need to consider before deciding to build, and there's a lot of things you need to keep in mind when you go to purchase that perfect piece of property.

In my coming posts, I will uncover what Mike and I have gone through already- and we haven't even started the building process yet!

To all those buying a home- congratulations!  It's an amazing feat right now just to purchase a home. To those who are building- you amaze me!  I hope to learn from all of you that are building!