Looking for some help/info/tips on a situation we currently find ourselves in...

We had a custom home built in 2015 while we were shacking up with my parents for a year(1/10 do not recommend!). We didn't have a home to sell so we used our land/cash for 10% down to get the construction loan closed. Now after job changes, life changes, and the addition of kids we now find ourselves cramped in our house.

There is a much larger house in our neighborhood that is currently being built by another local custom home builder. Its got pretty much everything we need/want (for now). The builder was initially intending to build the house for his family but after some life changes of their own he decided to put the partially built house up for sale. It has sat dormant for awhile but is dried in, has HVAC, electric, septic, and running water, but still needs trim, tile work, paint, fixtures, appliances, and some finishings to get it fully finished.

Based on current market value and a sort of recent appraisal (we re-financed w/appraisal during COVID), we should have plenty of equity in our current house to manage a decent down payment plus closing and extras. However we've never had to sell a house to buy a new one much less an unfinished house.

My main intrigue is purchasing an "unfinished" house. Are there any specifics a mortgage lender will need regarding the loan for this house? Any gotchas or additional things that i need to worry about trying to close this deal? I have a feeling that purchasing a new house like this provides some flexibility for closing the sell of our current house.. but i welcome any help/tips/anecdotal info from anyone who has done the same. Thanks!

Make sure there are no mechanic or other liens on the property.

Like said above make sure you get a release of lien or paid invoices for all work that has been done. To purchase a home like that it will not be a traditional mortgage. Most likely you will have to do a modified construction loan where your first draw will be to pay off what is currently there then subsequent draws to pay contractors for finish work. Many banks will not allow you to self contract unless you have experience in the area so that is something else to look out for.

Probably better to buy it out of foreclosure in six months or so.

I missed that part. How do we know it's going to foreclosure?

What stage of completion is it? 20%? 50%? 80%? There are options but it's much more complicated than buying a move in ready home.

Can you all not sign a PSA that makes the builder responsible for completing the home like you want it? Essentially, this final leg of the house is completed as a custom home. We sell homes in the construction stage all the time but they are not closed on until they are complete and ready for occupancy; that's our performance metric, completion.

If builder is not willing to finish the home, then probably best to walk away. And, if it has just been sitting there incomplete for months, that would be of concern to me.

jja79 said:

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What stage of completion is it? 20%? 50%? 80%? There are options but it's much more complicated than buying a move in ready home.

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I would say home is at 80-85%. It needs tile, trim, some paint, and some fixtures. Cleanup then appliances and all that.

However, some additional info after meeting with the builder today… he is only going to sell the home after it's finished and will be "move in ready". He actually had some trades there working on it today. He is just kinda slow playing it until it garners more interest I guess.

My take on it now is I assume this will then become a more standard mortgage loan and not a construction loan to finish it.

I did dig through county clerks records and could find no mechanics or materialman liens on the home.

We are planning to meet with a realtor next week to discuss the sale of our current home. Hope the current market isn't too bleak for us.

The builder finishing it is much better option. Now you are looking at a traditional transaction

TopFlightReject said:

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jja79 said:

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What stage of completion is it? 20%? 50%? 80%? There are options but it's much more complicated than buying a move in ready home.

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I would say home is at 80-85%. It needs tile, trim, some paint, and some fixtures. Cleanup then appliances and all that.

However, some additional info after meeting with the builder today… he is only going to sell the home after it's finished and will be "move in ready". He actually had some trades there working on it today. He is just kinda slow playing it until it garners more interest I guess.

My take on it now is I assume this will then become a more standard mortgage loan and not a construction loan to finish it.

I did dig through county clerks records and could find no mechanics or materialman liens on the home.

We are planning to meet with a realtor next week to discuss the sale of our current home. Hope the current market isn't too bleak for us.

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Makes me feel better about the builder knowing that he would approach it like that which is the way to do it. However, if you all wanting to buy it is a sure thing, then contract it with the option to have some say in the selections. If the builder puts in blue counters and green cabinets and pink tile (not that they should do these things) that would obviously be a deal breaker