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Reply to: saftgeek - I hate to admit it but you are all too correct about far too many attorneys! I was a high school teacher for 20 years before deciding to go to law school and I have been deeply appalled by the how truly unethical and dishonest some lawyers are. In the six years I've been practicing law, I've run into more dishonest, downright sleezy lawyers than I met incompetant teachers in twenty years of teaching school... and people are always knocking teachers for being incompetant! Shyster lawyers make me ashamed of this profession just as incompetant teachers sometimes made me ashamed of the teaching profession. I would urge you or anyone else who has evidence of a lawyer behaving dishonestly or unethically to report them to their state bar association. It might not do any good but then again, it just might. At least in Texas, I think our state bar tries to disbar the unethical lawyers whenever they can find them. It certainly sounds like your ex-boss was exactly that type. I also truly am not trying to paint GCs as dishonest. I believe the vast majority are honest folks who do their best to do a good job when building a home and, if they make mistakes, try their best to fix them. BUT, as in all professions, there are some people building homes that are either lazy, dishonest, or so downright disorganized that the homeowner who ends up hiring one of them needs to be able to go to court and get help. And, unfortunately, the contract promulgated by the Texas Association of Builders is specifically designed to protect these bottom-feeding GCs from facing the music for their bad behaviour. The funny thing is, I KNOW that it was the TAB's lawyers who drafted the d--n contract that protects the bad builders, so when I'm knocking the contract, I'm also slamming some of the members of my own profession! I actually suspect that most builders who use the TAB form contract do so because it is available to them cheaply and they don't know any more about what it really says than the homeowner does. And, so long as there are no major problems with the build - nobody is any the worse off. But, I defy any honest person who has ever READ the TAB contract to argue with a straight face that it is a fair and balanced contract. Among other things, it requires the homeowner to waive the "implied warranty of habitability". Basically an implied warranty of habitablity means that courts have said when two parties enter into a contract for one to build a home for the other, there is an implied understanding between them that the finished home will be inhabitable. The owner doesn't have to make sure to insist that language be put into the contract SAYING that the house must be able to be lived in when comleted...the courts will assume that since the contract was for the building of a home, the finished product must be something one can inhabit or it is simply not a "home." But, just in case someone WANTS just a shell - or something like that - to be built, courts will allow the parties to agree to waive the "implied warranty of habitability". Asking the homeowner to waive the implied warranty of habitablity might be fair if the homeowner wanted to build something totally new and different and the builder said, "you know, I can build that for you but I don't think it'll be something you can live in when I get done, are you SURE that's what you want?" But, I think you would have to agree that, except in those rare instances, a house should be inhabitable, just like a car should be driveable, a suit should be wearable, and a wedding cake should be edible. Would you agree to buy a new car from a manufacturer who insisted that you agree to waive the "implied warranty of driveability"? Would you purchase a suit from a tailor who refused to warrant that it would be wearable? Would you order a wedding cake from a baker who refused to guarantee that it would be edible? Why would you buy a home from someone who refused to warrant that it would be habitable????? Nevertheless, the Texas Association of Builders - with the help of its attorneys no doubt! - realized that implied warranties can be waived and that most homeowners don't ever really read or understand the contract they sign. So they put language into the form contract that waives the warranty of habitablility on every single home built under it. That means the homeowner may think he is contracting for a turn-key home but, even if the house he gets is so defective that he cannot possibly live in it - say the sewage pipe has broken in the wall so that there that raw sewage has contaminated all the insulation - the homeowner cannot argue that the builder breached the contract by building an UNIHABITABLE house. Fair????? The TAB contract also requires that the owner agree upfront to "binding arbitration" in the event of a dispute. This doesn't sound too bad...unless you happen to know a couple of facts about binding arbitration. First, arbitration is MUCH MORE EXPENSIVE than small claims court even though most building disputes are going to be over amounts small enough have brought the claim in small claims court. Second, arbitrators are selected and PAID by the parties to the dispute which means that arbitrators make more money if they are selected for more cases. If an arbitrator wants future work, they have to make sure that the party that is more likely to bring them future business is happy. Care to guess which party is more likely to NEED to hire an arbitrator for a second or third or fourth construction dispute? Some studies have shown that homeowners win less than 5% of claims that go to arbitration but win about half of claims that are tried in a court of law. Even those few homeowners who are nominal winners in arbitration almost never win enough money to actually repair their homes! The TAB contract also requires that the builder receive his final payment, in full, (i.e. NO RETAINAGE) at the time of the final walk-through even though it also specifies that a punch list of items to be corrected/completed/repaired will be made at this same time. In theory the builder is supposed to return and finish the punch list. But, WHY should the unscrupulous builder bother? After all, he has already been paid in full AND the homeowner can't even sue him in small claims court due to the binding arbitration clause I already mentioned? Do you think that is fair? I could go on and on about other clauses that are in the TAB contract but I suspect I've made my point. A builder who insists on using the TAB contract after having some of its many unfair clauses pointed out to him may not actually BE dishonest but, IMHO, neither is he the kind of straight shooter I really want to deal with. Straight shooters are willing to play on a level playing field.

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Reply to: Thanks for your reply Bevangel. I have already downloaded a sample version of the AGC contract (for others - the link is on Gardenweb's the "remdoeling" forum - just search AGC and AIA), and I ordered a copy of the AIA one - I agree about getting a local (CA) licensed contruction attorney to advise and draft - but given how much good thought you had put in to the DD process, I thought it would helpful to see what you and your counsel have come up with . . . . Anyway, thanks again for the DD guidance and good luck to you as well on your project. E-mail if you are ever in the Napa/Bay Area - we just bottled our first vintage last fall!

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Reply to: Napavines, We're using "our own" contract. I actually wound up hiring another attorney who specializes in construction law to draft it and my builder's attorney also approved it before the builder and I signed it. My attorney says he is a bit concerned that posting the contract on the internet could risk putting him (and I guess me as well) in the position of being accused of "practicing law without a license" in some state where we are not licensed. Since various states' laws vary so much, you're much better off getting someone licensed in your state to help you anyway. If you go to someone who specializes in construction law, he/she will probably already have done similar work for other clients in the past and therefore should be able to pull a good contract together for you rather quickly and reasonably inexpensively. My attorney billed me for less than five hours work. The builders in my area mostly use a form contract that was promulgated by the Texas Association of Builders (TAB). It is SO heavily biased towards builders that in my initial telephone conversation with builders, I told them right upfront that unless they were willing to negotiate a fairer, more-balanced contract, there was no point in our wasting time talking or them wasting time bidding my project b/c I simply would not agree to signing that contract. Only two builders (out of about 20 that I made an initial contact with) insisted on using the TAB contract. I thanked them both and hung up without even bothering to ask for any references. Given the current downturn in construction starts, I suspect even that 10% would be more willing to negotiate terms than they were a couple of months ago. Good luck!

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Reply to: “Builder didn’t sign the contract in the next 10 days". He didn’t, so, you have no contract. You need to investigate what the cost of wood has done to builders and what he thought the cost would be to build your home. Everything has changed. Shocking, but true. You want your home built? Then, work with the builder, and acknowledge the added cost he has to pay to get the wood. Not his fault. $30,000.00? I think builder is taking a loss. https://www.charlotteobserver.com/news/nation-world/national/article250841164.html

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Reply to: First, don't get the lots reappraised, they don't ever figure into the equation. Nor would financing the second lot instead of paying cash have helped at all. Banks are notoriously bad at communicating construction loan processes to customers, as a result there are a lot of people who misunderstand the way construction loans work, even some who have had them. Before you build a house you have a lot with an appraised value, once you start building a house, your lot and home get combined into one appraisal. So once you start construction, or submit plans for construction, they stop caring about the separable land value and start looking at the value of the entire constructed house. In the end, it is a simple formula. The loan amount is based on the appraised value of the home, not the cost to construct, and not what you paid for the land or anything else. E.g. You pay $100,000 for a lot. You want to construct a house for $400,000. Now suppose the appraised value of the finished home based on the plans is $380,000. A bank will base the loan percentage on the value of the house and supposing the bank will loan up to 80% of the plan's appraisal they will loan $304,000. If the appraisal comes back at $480,000 on the exact same house the bank will pay $384,000. As for the land appraisal, appraisals break the value up between the land and the house, but largely they don't matter. In the end, how you slice the pie (split between land and constructed house) doesn't change the overall size of the pie (the appraised value of the house). Additionally, many banks will set a hard cap on construction costs. My bank will loan 90% of the plan's appraised value up to 100% of the construction costs. Good luck

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Reply to: First, check with zoning to see if you can even get the 1 acre divided. Then, if she did the loan through a local bank (who still holds the loan), contact that lender to see about having the collateral updated. If a local lender has the loan, this should be super easy. Otherwise, the easiest is likely doing a refinance of the loan with the "new" legal description from the survey. Next, contact a surveyor to determine how much the survey will end up costing you, as that will need done ahead of time.

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Reply to: Contact a local surveying firm to see what is permitted in the current zoning classification and what steps are required in the event the property can be subdivided. You could get a jump start on your project by beginning to get everything necessary for the approval pending payoff of the land.

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Reply to: One thing to keep in mind on the value of the one acre is that it is likely worth more than 5K an acre when divided out from a larger amount of land where it becomes its own separate property. In my area the price per acre varies depending on the size of a property. Around here it can be 50K-100K for 1-2 acres, $20K per acre if in the 10-20 acre range, $12K-15K per acre if 20-50 acres, 8-10K per acre for 50-120 acres and it continues. It is likely similar although different ranges and prices in your area, so you paying 50K for one acre from your mom might be reasonable or it might not. It depends on what a 1 acre lot is sold for in your area. I'd talk to your county or look up the rules on your county website for sub-dividing of lots. In our area there are road rules along with size rules for septic as well as different rules if it is for selling to a non-family member vs. family members. Ours is clearly spelled out and available to read on the county website. If you're in a city then I'd start there, but from what you wrote it sounds like you're not. Talk to the bank also what they might be willing to do or if you will need to come up with a new loan to cover the remaining. In my area a survey is required to show the existing and the new parcels before submitting for approval.

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Reply to: Just to clear up a few things, you don't use your land's equity towards your house, and there is no way to not use it... Not true (or at least not clearing anything up at all). You're required to have equity in the final house (usually at least 20%). This ensures you're going to keep making your payments so you don't get foreclosed on and lose that equity. When buying an existing house, you have to bring that 20% in cash as a down payment to create that equity. When building, if you already have equity in the land, and it's enough to cover the 20% of the final value of the house, then you don't need to bring cash. So you're using your land's equity on the new house. Another possibility is if your land is worth a lot more than the cost to build, you could, in theory, borrow against the land value and use that to pay the builder instead of taking a conventional construction loan. But that's a rare and unusual situation. You can also choose not to use your equity in lieu of a downpayment. Let's say you need $500k to pay your builder, and the final value of the house is enough that the bank is happy to loan you the full $500k. You can choose to bring another 20% in cash and only borrow $400k. You can't avoid having a lien on your land, though. Even if you aren't considering the equity you already have in the property, there's no way to put a lien on just the house and not the land.

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Reply to: They too want cash upfront added to the 130 equity we have Did you read this thread? Ignore what the OP is claiming and listen to what everyone else is saying. The value of the raw land is meaningless once you put a house on it. So if that's what you mean by $130 equity, then that is wrong. How much will the property (with house) appraise for? How much will it cost to build? Those are the two values that matter. Then you find out how much the bank will loan you (80% of appraisal?) and you have to come up with the rest in cash (ie. NOT getting a loan with the property as collateral because the land is already accounted for in the appraisal). Or maybe the appraisal is high enough that it totally covers the cost of building. The key is the appraisal.

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Reply to: I think the biggest disconnect here is the calculation of the home value. County tax collectors may assess some homes at land + building for property taxes, but most banks will loan you 80% of the appraised value of the house. The way I see it, your options are: Go with PeoplesBank if they're willing to use land value + cost of construction as the value of the home Pay the difference to bring the equity to 20% of appraised value Change to another loan product that allows less than 20% down payment Good luck, Chris and Lmarie.

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Reply to: We went through this last year with a number of banks. It's a bummer, but your equity in the land doesn't mean much to them. Pretty much everything hinges on that appraised value, which as you pointed out, can be pretty off base if the appraiser isn't familiar with the area & is using comps that aren't, in fact, comparable. In our case, we held our breath through the whole process until that appraisal came through. The cost of construction can totally wipe out any equity in the land (in the banks mind). And sadly, the appraisal can (and does) come in under the cost of the wood and nails required to build it. Totally depends on the market. And that can vary from week to week in some areas. The only thing we felt we could do to mitigate this risk was to put a line in our contract with the builder that voided it in the case the appraisal was not sufficient to get a loan, and try various banks and look for a one time close loan that did not require an additional appraisal at the end of the build (giving the bank another opportunity to claim they needed more down payment before move in).

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Reply to: Different banks do construction loans differently. I can't shift through your explanation to figure yours out but you might find this piece of information helpful. Many banks use a loan to value based on the appraisal, not the construction costs. This can actually screw you over, for my house the land was 100k, the construction bids came back at 375k, so logically we need to bring 95k into the deal (475k x 20%.) But the house appraised as specced for 625k, now that might sound great but now we have to bring 125k to the deal. In these cases your cash contribution needs to be 20% of the appraised value and the loan will be for more than we need. We will not use it all, but not a problem for us, banker said we could reduce it by leaving things off the plan.

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