Refinancing loan ideas

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Topic Author
eternalcow
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Joined: Wed Aug 09, 2017 4:29 pm

Refinancing loan ideas

Post by eternalcow » Tue Aug 13, 2019 3:50 pm

Hello, so about two years ago, my spouse and I purchased a quarter acre lot for the purpose of building a new home. Unfortunately, we weren't able to sell our current home at the time and decided to sell the lot. We listed it for what we paid for it (66,900) and have had it for sale ever since. The loan used to secure the lot was a construction loan that was to be used to build the new house. Its an interest only loan at 3.75%. We have made payments to principal.

Late last year, we approached the lender wanting to know if we could use some of the money on the construction loan to finish our basement. They allowed us to do it and our balance is now roughly $104k.

We are now at a point where they will only extend the loan for another 90 days. I have gotten quotes to refinance our current mortgage ($224k) and to add a 2nd mortgage for the basement cost of $44k.

My issue is the lot where we still owe about $59k. We are changing real estate agents and are listing it for 64,900 with 4% total commission. We have done for sale by owner and nothing happened. The street that the lot sits on was recently built out to include 30 new lots, however my lot is in a developed part of the street. Ideally, we just sell the lot, but its been on the market for 2 years so we aren't holding our breath.

Does anyone have any ideas on what we can do to maintain a loan on the lot? Do banks do 100% financing on land? We don't have the money to pay off the lot in a lump sum without raiding retirement accounts. The plan would be to cash flow 1500-2000 per month to pay it and the 2nd mortgage. Thanks.

megabad
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Joined: Fri Jun 01, 2018 4:00 pm

Re: Refinancing loan ideas

Post by megabad » Tue Aug 13, 2019 3:57 pm

eternalcow wrote:
Tue Aug 13, 2019 3:50 pm
Does anyone have any ideas on what we can do to maintain a loan on the lot? Do banks do 100% financing on land? We don't have the money to pay off the lot in a lump sum without raiding retirement accounts. The plan would be to cash flow 1500-2000 per month to pay it and the 2nd mortgage. Thanks.
I am confused. Are you going to build on the lot or not? If not, why would you want to maintain the loan on the lot? Wouldn't you just sell it? Am I misunderstanding something?

Topic Author
eternalcow
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Re: Refinancing loan ideas

Post by eternalcow » Tue Aug 13, 2019 4:05 pm

Sorry for the confusion. We aren't building on the lot, we want to sell it and have had it on the market for 2 years without any bites. We need the loan on the lot until we are able to sell it.

megabad
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Re: Refinancing loan ideas

Post by megabad » Tue Aug 13, 2019 4:14 pm

eternalcow wrote:
Tue Aug 13, 2019 4:05 pm
Sorry for the confusion. We aren't building on the lot, we want to sell it and have had it on the market for 2 years without any bites. We need the loan on the lot until we are able to sell it.
Ok well the good news is that it looks like you have 90 days to sell so I would just make sure it sells. Since I don't know of any banks that allow for construction loans without the intent to construct, otherwise, I think we get into scarier suggestions for emergency liquidity like 401k loans, Roth withdrawals, 3% down mortgages, etc. All of these can be useful temporary tools but these shouldn't be necessary for you. Just sell the land. Paying another loan origination plus taxes etc to hold on to land you don't want to avoid a small loss probably isn't worth the trouble in my opinion.

BobTexas
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Re: Refinancing loan ideas

Post by BobTexas » Tue Aug 13, 2019 5:09 pm

You most likely have it priced too high. Are the new lots being sold as lots or is a builder selling them with houses? How are they priced compared to yours? You need to price it aggressively

Also, you say that you are selling it at a 4% commission. Is that typical? If you raise it to 6% are more agents going to want to show your lot?

Topic Author
eternalcow
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Re: Refinancing loan ideas

Post by eternalcow » Wed Aug 14, 2019 8:45 am

The lots down the street are listed for 70k and above. We have ours listed at 64900. Those lots down the street are flat lots which is what I have as well. They are all listed by the builder so they would pick out a lot and then pick out a floor plan to build. I did approach the builders agent to see if they would be interested in it, but they were not interested.

I'll have to think about raising the commission. Since commissions are split between the buyer and seller's agent they are each getting 2%. Since its just an empty quarter acre lot, they don't have to do a lot of work to show it. In my mind, I am paying for their network because the for sale by owner route didn't work for us. Maybe that's the wrong way to think about it?

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unclescrooge
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Re: Refinancing loan ideas

Post by unclescrooge » Wed Aug 14, 2019 9:06 am

Have you approached the neighbors l on either side of the would like to buy it from you?

Have you shopped around to see if you can refinance the construction loan somewhere else?

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unclescrooge
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Re: Refinancing loan ideas

Post by unclescrooge » Wed Aug 14, 2019 9:10 am

eternalcow wrote:
Wed Aug 14, 2019 8:45 am
The lots down the street are listed for 70k and above. We have ours listed at 64900. Those lots down the street are flat lots which is what I have as well. They are all listed by the builder so they would pick out a lot and then pick out a floor plan to build. I did approach the builders agent to see if they would be interested in it, but they were not interested.

I'll have to think about raising the commission. Since commissions are split between the buyer and seller's agent they are each getting 2%. Since its just an empty quarter acre lot, they don't have to do a lot of work to show it. In my mind, I am paying for their network because the for sale by owner route didn't work for us. Maybe that's the wrong way to think about it?
If you drop your price to $50k the builder would probably be interested.

I would raise the commission to 10% if I wanted to move it quickly.

2% is only $1300. Definitely not worth it for any agent with a large network.

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