No. It is not customary. You need to be talking with an architect who is experienced with a tear down infill. Not a builder. The right architect will k ow the right builder.

We've been through one custom build, and it was very stressful (though the results were great). I'm trying to avoid going through that again. The architect employed by this builder would, I assume as that's where most of this builder's properties come from, be experienced with tear down infills.

There are essentially two types of financing when getting a newly built home:

1) end loan type - which is what you are talking about when the builder builds on a lot you deeded to him/her - or has the lot in inventory. This is typical for production type builders and not custom builders. You have zero protection if you purchase the lot with your funds and then deed it to the builder for the construction portion and then finance the entire lot and home purchase at the end when the builder has a c/o. If the builder runs into financial problems and can't complete your build - you lose your lot. I have seen builders that are not production builders use this method, but Sophie is right - you lose your leverage for changes/corrections etc when the builder owns your lot and has his own construction loan.

2) the second type is a construction-perm type loan where you maintain ownership of your lot and the construction draws are issued in stages. You have protection here if the builder is not able to complete the building process (goes out of business). You can bring in another builder to finish it. This is the way most custom homes and semi-custom homes are built IME. At the end of construction, the loan rolls over into a permanent mortgage (standard type). There are some that just have the construction feature and do not roll into a permanent mortgage at the end, but then you end up with two closings and not one.

Naturally there is more detail to each type of financing, but the summary above is the basic summary of the two types of builder financing. BTW - use a bank or CU or other third party lender

Thank you both for the input, that bottom line, that this is not usual. To provide more information, on our side, it would be a cash purchase, both of the scrape house and the newly-constructed house. So we don't need financing - but somehow that builder would? Now that I think about how we built our vacation home, we funded the build (also cash) by payments to the builder as the building process went along (we had owned the land for years). So if we went with this builder, that's how it should go, not him buying the land.

We have been talking to a different builder, about a spec house designed by a well-known local architect (that honestly, I don't think we could afford to hire) that he is in the process of building. We will talk to that builder, as well, on Monday about this potential scrape, though I don't know his timing or availability re a different house for us.

I know this is a change of topic, but how does ownership of building plans work? If we wanted to build the same house plan on a different lot, would we need to obtain the consent of the architect? Or the property owner of the original house built using those plans? We are talking about small flat city lots with very similar setbacks, so it's not a matter of designing a house to suit or fit the land, and we really like his design style.

Two comments to your post:

1) who owns the plans? This is a legal question. I found an article that addresses the egal issues that you would want to discuss with the architect: I made an assumption that you are in the US. It may be totally different in another country,.

http://corporate.findlaw.com/intellectual-property/llp-owner-vs-architect-who-owns-the-design.html

2) You can also fund this next build in draws. Make sure you have an independent appraiser and inspector to check the builders work before you pay a draw. Have a great construction contract. I wouldn't deed my lot to the builder if I were in your shoes. Consult with a good real estate attorney - not the builders attorney.

Edit: This article says exactly what Sophie and cpartist state - but it comes from a legal POV.

The architect always maintains ownership of the copyrights. If you like the plans, then hire him. But realize that even small flat lots are occupied by different families with different needs. What suits someone else is likely to not be perfect for you.

And I would not work with that builder period. Scoundrel with cash flow issues is my first instinct.

I know this is a change of topic, but how does ownership of building plans work? If we wanted to build the same house plan on a different lot, would we need to obtain the consent of the architect?

The architect owns the copyright. You cannot use the architect's design without his written permission and probably a fee to him.

It's no different than if you bought a drawing from me. You'd own the original drawing but you'd have absolutely NO rights to reproduce the drawing in any way shape or form. Only I the artist has that right.

Anything else in either case would be copyright infringement.

Architectural drawings and specifications are typically "instruments of service". This simply means that when you commission an architect, you are commissioning his/her experience and talent, for a particular project. Unless your owner-architect agreement says something to the contrary, architects retain the copyrights to all their materials, which may not be otherwise used without prior approval by the architect.

Thank you all, again for the info. Looks like we will be proceeding on building a house, which will be lovely and I hope not so stressful or painful. I've already talked to the builder whose work we really like, of houses designed by a specific architect, whose work we really like. The builder has already proposed a meeting with the architect and him. The meeting would likely go along the lines of "we like these two houses a lot, and would like to end up with something very similar." But we will talk to others, though maybe not the builder I first asked about unless he allows us to fund the construction and we are able to confirm the quality of his work.

But we will talk to others, though maybe not the builder I first asked about unless he allows us to fund the construction and we are able to confirm the quality of his work.

Frankly I wouldn't bother with that builder because 1. he sounds somewhat sleazy, and 2. if he's not sleazy it sounds like he's more of a production builder. Again when building custom, you don't want a production builder who only knows his way to do things. Take it from me, it's hard enough.

^Listen to cpartist above, it is excellent advice. A production builder has a hard time building custom.

Just a point of clarification...

There is nothing inherently wrong with a builder buying the land and building a home for you on the land and you paying him when he is done.

There is no protection afforded you in owning the lot that can't be replicated in a situation where the builder owns the lot. There are several protections afforded both you and the builder in situations that they own the land that are difficult to replicate when you own the land.

It is a type of contract that is preferred by tract builders and developers, which gives it a bad reputation. But those builders prefer that type of arrangement because both parties are far more protected when things go bad.

There is a custom builder in my area who buys the lots, he works with an architect and does all the custom building things, just when things go south with customer financing, recovery is a lot easier. The customer made a 10% deposit which they can quibble over, but he can sell the house.

It is a sign that you need to pay special attention to the contract, but until you read the contract and discuss possible changes we are just guessing.

I agree with your analysis bry911 as far as it goes, but the OP has a slightly different situation.

The OP owns the lot F&C already and is contracting for a custom build with a yet to be selected builder. The OP risks his funds paid for the lot (and the lot too) if he deeds the lot to the builder and the builder is unable to finish. Normally in this type of situation, there would be a construction perm loan on the buyers lot which would afford a little protection. But the OP is funding the building themselves.

The OP risks his funds paid for the lot (and the lot too) if he deeds the lot to the builder and the builder is unable to finish

The OP says, "One builder, who does a lot of spec houses, it looks like, said that his company would buy the lot, not us, and we would have the usual construction contract for a house that his company would build."

Even if that were not the case it wouldn't necessarily be a problem. While not a common arrangement it isn't uncommon either, you just use an addendum to modify the quitclaim during breach or at the termination of the contract. Commonly the builder will accept a contingent quitclaim such that the deed only transfers if the buyer refuses to make final payment.

It really isn't that unusual and I can't see any situation that an attorney would let you get into the situation you are suggesting.

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ETA: I did an addendum for a quitclaim on some property. I have a farm in an area that requires 10 acres to build (they are attempting to keep the area horse farms). We wanted to give the foreman an acre to build a house close to the farm. So we sold him one acre and quitclaim nine more, attaching an addendum that the quitclaim would reverse in two years unless he paid us a fortune.

Thanks for the additional comments. If we end up being interested in that builder, I'll definitely consult with a real estate attorney (I'm a corporate attorney myself), though I would much prefer for us to retain ownership of the lot; if the builder defaults, I wouldn't want to not own the lot (though the quitclaim continency would help). The company is a production builder, but small-time, only a handful of houses a year. We'll have to see - I would have much preferred to buy a pre-existing house, but this opportunity came up after months of looking. I really want this to be as pain-free for me as possible. I'll be posting more questions!

I really want this to be as pain-free for me as possible.

Then don't build. LOL.

I don't know if the quit claim contingency would help or not. I'm not an attorney. I'm a Realtor. Over the years I have seen a few builders go out of business, file bankruptcy and the customers getting their homes built at the time lose their lots and their money. The customers that didn't lose their lots were the people that had not deeded over the lot and had a construction perm loan in place. I recognize that this is not a common experience (builder going out of business), but it isn't rare either. Your situation could be much different - I don't know. It is a good idea to work with a good real estate attorney though.

Over the years I have seen a few builders go out of business, file bankruptcy and the customers getting their homes built at the time lose their lots and their money. The customers that didn't lose their lots were the people that had not deeded over the lot and had a construction perm loan in place.

This can be addressed in the contract to some extent, it might not often be addressed but it could be. Probably not air-tight or anything but certainly some protection.

However, the very last thing you want is to be stuck with a partially built house after your contractor went bankrupt. What you are making a case as the problem is what I was advocating as the advantage. I had a builder go bankrupt shortly after completing my house and it still cost me about $50,000 extra. If your builder goes bankrupt you want the ability to walk away.