Financing in Chicago>Question Details

Eric Marcus, Real Estate Pro in Chicago, IL

Anyone have a creative financing idea for a lot purchase and plans for new construction?

Asked by Eric Marcus, Chicago, IL Thu Feb 12, 2009

My client wants to buy a lot and build on it but now his bank is requiring a 20% down payment on the cost of construction plus the lot cost (up from 15% 2 weeks ago). I am wondering if anyone knows a creative way to do this with the seller financing all or part of the lot. Assume a $220,000 purchase price for the lot and $380,000 for construction cost and my client can put up $90,000 just not $120,000. Any help is greatly appreciated!

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I am an expert in real estate finance and can tell you I don't know of any seller carrybacks allowable with less than a 20% equity position (more and more becoming 25%-35%) in the property. So his deal is actually less restrictive than most I know.

Also, there are many clients in this predicament whereas the underwriting guidelines have changed since first becoming approved for a particular mortgage program... some changes occurred even after the purchase agreement is executed and earnest money given. Since most mid-sized banks offering lot loans generally do not care from where the down payment funds come, your client could raise capital from wherever. If that is not viable, it's back to the 500 phone calls to find that one bank that will do it. I have a resource that MAY finance this type of deal if your client has incredibly strong compensating factors. But, I can tell you the costs are exorbitant...7-8 points and 17% interest. IF the valuation numbers for IRR cash flow analysis still work even with this higher expense, so be it. It's a possible solution. We would have to see the entire deal upfront so feel free to visit my website (web reference) for contact info and call me. If it is a primary home or something similar, I could not help unfortunately. Be glad to share any insight I have anyhow. Good luck sir.
1 vote Thank Flag Link Thu Feb 12, 2009
Hey Eric,

I don't have any exact answers for you, but have you considered subdividing the lot. Maybe the seller could sell your client the remainder of the lot at a different time or gift it or something along those lines.

I'd also suggest calling Dan Larkin over at Wintrust Mortgage. They are often able to pull rabbits out of hats that no one else can find for some reason. He can be reached at or 312-952-8068 (C) or 847-277-1781 (off). Good luck.

Christopher Thomas
Broker Associate, Sudler Sotheby's International Realty
773-418-0640 (cell)
1 vote Thank Flag Link Thu Feb 12, 2009
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