Home Buying in 85204>Question Details

Jack Brown, Home Buyer in Phoenix, AZ

If i purchase a residential lot to build a house and the seller is providing owner will carry option how will this change my construction loan.

Asked by Jack Brown, Phoenix, AZ Mon Sep 17, 2012

Help the community by answering this question:


Hi Jack,
Normally when a construction loan funds money will be dispersed for the payoff of any existing leins (seller carryback) plus some money for the first stage of construction. So the seller carryback in and of itself won't affect your construction loan. Construction loans are pretty difficult to get in the current very conservative lending environment. I suggest you contact some lenders before you buy the lot to be comfortable you'll be able to do what you want once you own it. A carryback is a loan that you'll have to pay back and that means some form of payment. Since it is uncommon to be able to get any income from vacant land (like from renting it out as you could improved real estate) its more important to do your due diligence to be sure you don't get stuck with an alligator.
Call me and I'd be happy to discuss what you need to look for and what questions to ask a lender.
Good luck!
Charlie 602-577-1111
0 votes Thank Flag Link Mon Sep 17, 2012
definitely need legal advice and attny should write up addendum for every possible scenario.
0 votes Thank Flag Link Mon Sep 17, 2012
I strongly suggest you talk with a real estate attorney to be sure all your bases are covered.

Best of luck,
Ann Griffin
Coldwell Banker Trails and Paths
0 votes Thank Flag Link Mon Sep 17, 2012
Hello Jack:

Your construction loan lender will want to be in first position at the time they lend you the money. So, they will require that the proceeds of the construction loan include enough funds to pay off the seller-carried financing (assuming the seller has recorded a lien, which they would be crazy not to have done so), and will require to do so as part of the funding/recording of their lien.

I am sorry, but there is no "eventually" or "maybe" to this situation. No construction lender is going to go into second position for even a second once they have lent you the money.


Bill Parker
NMLS #223607
0 votes Thank Flag Link Mon Sep 17, 2012
You will need to have unencumbered "Clear Title" to the lot. The construction loan, will need to be converted eventually, unless you plan to pay Cash for the house at completion, to a loan (mortgage to the lender) once construction is completed. The land and the house will be attaced to each other via the loan (mortgage), title and lien.
0 votes Thank Flag Link Mon Sep 17, 2012
If you seller is carrying the loan that means there will be a lien against the property. Your bank will want to know the terms and payments (if any) just as if it were any other loan and you may be able to pay off the seller with the construction loan.

I certainly don't think that it would be a deal killer. Good luck on your dream home!
Ray Teerlink
0 votes Thank Flag Link Mon Sep 17, 2012
I am currently working on a similar situation for a client of mine. The lender that is helping my client with her loan is Korene. She is excellent and will do a good job for you:

Korene L. Clopine-Seaman
Senior Mortgage Originator / Team Leader / Mortgage Lender
NMLS# 218520
AZ License # LO-0916745
CA License # DOC-218520

Direct Phone: 623-340-0934
0 votes Thank Flag Link Mon Sep 17, 2012
This is something you would need to speak with your lender about.

Brenda Sanford
Sun Canyon Realty

0 votes Thank Flag Link Mon Sep 17, 2012
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2014 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer