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kelynkelyn

Contracting to build with our money

kelyn
16 years ago

We met with our builder today. The contract was ready to sign, but after seeing his interim finance charges, origination fees, we determined that we could save $30,000 if we give the builder the money as we went along. We recently sold our house (closing is end of June) and will have the opportunity to use our proceeds to pay cash for the new home. We are retired and have additional cash in the bank to get the build going. We recognize there would be a loss of interest earned if the entire proceeds were not deposited (an offset to savings). The builder called this a straight to close arrangement with a fixed price build. There is a risk as the incentive to get the house finished would be diminished. The builder is a custom home builder with an excellent reputation. We have talked to several of his clients who built in the same neighborhood. The current contract calls for $20,000 down with the remainder due at closing. We've asked the builder to develop two additional versions: a contract where we give him the cash he needs on a monthly basis as we go along and a contract where we give him $100,000 to buy the land and to get the build going. The current price of the house under the normal contract is $400K.

Any experience with this out there?

thanks

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