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O-B Finance in Texas


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Roswell's Forum Posts: 7

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By Roswell in San Antonio, TX on 12/1/2002


Anyone know of any lenders in Texas that are "O-B friendly"? Talking to some of the big players (Bank One, Wells Fargo, B of A, etc.), they require a builder or GC. Maybe I shouldn't be going to the majors, so if someone could point me in the right direction, I'd appreciate it. We have plans, know the real costs, have a firm handle on the process, found a lot, and subs are calling everyday ready to start. Just trying to find funding.

Thanks,

Roswell


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By Tony in Brandenburg, KY on 12/17/2002


BuildMax.com can help you with your financing as an owner-builder in Texas.
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By David in Dallas, TX on 1/27/2004


My wife and I are beginning the process of owner-building. We live in Texas and understand that in Texas, you cannot be the GC of your own house. People do, however, act as GC for you even though they may not ever see the construction site. This seems to me to be less than advantageous because of the liabilities for that person, especially if the bank wants more verification of their involvement. How can we owner-build in Texas? I do need a construction loan? I would like to use a reputable lender

Regards,

David Hawkins


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By Scott in TX on 1/29/2004


David,

I too am at about the same stage as you are in Texas. What I've found so far:

1) Some people say it is illegal to build your own house in Texas (word from a Bank of America lender who used to be a GC).

2) Some say Texas (as well as other states) has no laws against being your own contractor without a license.

3) Financing companies who offer construction loans to owner-builders: ownerbuilderfinance.com (looks really good - offers a single loan process and allows you to lock a rate anytime - I like that), Buildmax.com, and Loantobuild.com.

4) There are some companies who will charge a fee to help you get the financing and help you with the whole process: Ownerbuildernetwork.com (met with them and pricing was $2.95/sq. ft., thought they have a good network of subs, lacked a good package for guideance, I thought) Ushub.com (meeting with them next week).

I am in the Austin area and plan to build this year. I just have to figure out my best options. I really don't think it's illegal to build your own home in Texas. That's just a common misconception. It sounds like as long as you get the right permits, financing, and have the desire, it can be done. I'm also looking at the preassembled panel home offerings from Rhinobldg.com. Hope this helps a little. Maybe we can share more info.

Scott


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By David in San Antonio, TX on 1/29/2004


I too am planning to owner-build in Texas (San Antonio). Right now I am just planning, but I want to break ground late this summer if possible. I have heard of many others around here owner-building without any problems. The financing does not appear to be a problem, as long as you show the lender that you are prepared.
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By Scott in TX on 2/2/2004


I've just learned some new, revealing information. A lender in Minnesota does a lot of owner builder loans in Texas for such companies as TX Help U Build and Owner Builder Network. He informed me that Texas does require a GC to sign a form that is part of the loan. The funny thing is that there is no license required to be the signing GC, just a third party who will sign this document that says that all subcontractors and parties involved will be paid. So in my case, I could have my Dad sign this form acting as the GC because he has built his own house before. There evidently will be no one to check the GC other than when you sign at the title company for the loan.
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By David in San Antonio, TX on 2/4/2004


I talked with CornerStone Mortgage (cornerstonemortgage.com) yesterday, and they provide owner-builders one-time close construction/permanent loans in Texas. I have not gone too far into this process yet, but they stated that they do not require a GC to sign-on as an advisor. In case anyone out there cares, they are also an Endorsed Local Provider (ELP) of the Dave Ramsey Show.
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By Michael in Arlington, TX on 2/11/2004


I work for a company that does owner-builder lending in Texas. We also have an owner-builder program that provides subs, suppliers and consulting. We are in Dallas (DFW), San Antonio, Austin and Houston. Give me a call 817-602-4712
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By Michael in Arlington, TX on 2/11/2004


I work with The Owner-Builder Network and the Minnesota lender you were referring to is First Federal Mortgage. We use them a lot. They are pretty good. Call Pete Flom at 651-766-7077. Tell him that Michael Kiefer in Dallas referrred you. If you need any info from me, call 817-602-4712.
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By Suzanne in Spring, TX on 4/10/2004


I built my own home in Houston, Tx. I used BuildMax. They charge a fee for their service. They kind of act as the GC of the project. They do go over your plans and your budgets. They work through First Federal Mortgage. I built my house in about 6 months. When I finished building, I refinanced through a different company locally and I signed the papers saying I was the GC for my house. Steve at BuildMax was really helpful. Their number is 888-422-5613. Go to their website: buildmax.com to see more info. In Texas it is hard to get a loan to build your own house, but you can build your own house. I live around a lot of people who have built their own houses.
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By Rodney in Houston, TX on 4/11/2004


Hi Suzane,

 I am owner-building in the Houston area, I work in Spring though. What was the final cost per sq. ft. and what are some of the features or products you used? If there are any subs you would recommend, let me know at swindlerodney@hotmail.com. Thanks, have a great week.


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By David in Dallas, TX on 4/11/2004


Scott,

Thanks for replying to my message on the owner-builder website. Since I posted that message, I've learned more about building in Texas. I am now registered with the TRCC in Texas, a must for builders, remodelers, and the like. I did this because I am a remodeler by trade. In fact, it can be difficult to be your own builder in Texas. However, that is only true if you are borrowing money from a lending institution. That particular requirement states that you must have a Builder of Record, other than yourself, when you borrow money to build a house. We are still going to build our own house, however, we are going to use cash to do so. When the house is finished, we will pull a home equity loan and replace the money we moved from our accounts.

Regards,

David


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By Susan on 6/6/2004


I'm also a Suzanne from Spring! Did you consider Owner-Builder Network? I'm not sure about their finance charges. I'm getting worried that I'm being shafted.
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By Arthur in San Antonio, TX on 6/9/2004


David,

I am also working through my plans with a designer and hope to build in the fall in the San Antonio area. Are you using a local lender for your interim loan? Let me know when you get a chance. Also, I would like to call and discuss your experiences and I will be happy to share anything that I pick up along the way. Thanks and talk to you soon.


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By Cindy in South Houston, TX on 6/15/2004


Hello Scott,

I'm here in Houston and trying to find the best why to get financing. If you can, please e-mail the lender you may have used. It seems to be a little hard in Texas to build your own home.

Thank you,

Cynthia


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By Rodney in Houston, TX on 7/22/2004


Hi Susan from Spring. I am using the Owner-Builder Network also. I wanted to know how things are going. I am building in the South Houston area (288 south and beltway).
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By Julia in TX on 7/31/2004


My husband and I are also considering using Ownerbuildernetwork.com. I do sometimes feel overwhelmed with all the information I am reading on the internet. You seem to hear some sort of negative comments on each owner-builder company. We are also planning to build in the South Houston area near beltway and 288. Can anyone please let me know the success stories they are having? Also, Owner-Builder Network wants to charge a $2.95/sq. ft. fee. For me that would be about $7,000 for a 2,500 sq. ft. house. Is that normal for companies like that to charge a fee?
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By Bill in Irving, TX on 8/9/2004


David,

I was wondering if you ever did business with Cornerstone as you mentioned in your posting. I am looking for a lender now. It seems like many require a GC to sign on, but regularly give loans with a wink knowing the owner is actually the builder. Please PM with a reply. Thank You.


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By Arthur in San Antonio, TX on 8/9/2004


Hello Julia,

I have inquired about the O-B Network as well, and also received the same price here in San Antonio. I did talk to a few of the referrals that were listed and the consensus was this:

1. It was a way for an individual to receive the construction loan. (Might check the interest rate here, the quote I got was about .5% higher.)

2. They did help with subcontractors and connections.

3. They also do some hand-holding if you are unsure of the next steps and what is to be required from a builder, per se.

4. If you have never built before or participated in construction, it may be worth it. I believe that every individual will benefit differently based on their experiences and requirements. I would recommend calling the referral list of people who have used them directly and have them explain their experience. I hope this helps.

Thanks,

ac 


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By Arthur in San Antonio, TX on 8/9/2004


Susan,

I am looking at building in San Antonio, TX and was wondering how your experience with O-BN was going and if you felt that you benefited. If you would like, you can send me email directly to arcamach@cisco.com. Thanks and hope to talk to you soon. -ac


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By Leon in Austin, TX on 8/16/2004


See my post at: http://www.ownerbuilderbook.com/forum/thread.cfm?ThreadID=900 for my meeting with UBuildIt in Austin.
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By Linda in San Antonio, TX on 9/4/2004


I am trying to owner-build in Texas and I am encountering problems with acquiring a construction loan (I do not want to use IndyMac). All the banks require you to assign a builder of record so they can attach a mechanic's lien to the contract. Some mortgage officers have even advised they use a "dummy Builder of Record" just to process the loan. Whoever you assign would need to have some construction experience.

Several companies have cropped up to assist owner-builders in qualifying  for construction loans by providing construction experience for a fee. They have programs where you can pay them several thousand dollars to be a consultant on your project and act as the "Builder of Record" without being the builder. Examples of this would be: UBuildIt, The Owner-Builder Network, and Build Your American Dream Home, to name a few. Anyone out their in Texas using a lender on their project have any suggestions on how to get around the Builder of Record requirement? Or, just in general, your own personal experience working around Texas construction laws that do not favor the owner-builder.
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By Kathleen in TX on 9/7/2004


We are borrowing through the Federal Land Bank. They have the Builder of Record requirement, but will gladly use a family member for that position. In our case, my dad will serve as the Builder of Record. Do you have a close friend or family member you trust to serve in this capacity?

Kathleen


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By Linda in San Antonio, TX on 9/8/2004


We are exploring the option of using a friend with some building experience. But my understanding is the Builder of Record is still responsible for providing the warranty for a 10-year period. Have you encountered this problem? How are you working around the Worker's Compensation requirement that most banks require?
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By Kathleen in TX on 9/8/2004


When you build your house on your land, the new Texas builder registration regulations do not apply. Therefore, you don't have to have the 10-year warranty. The new regulations are for the builder's protection - limiting how much the owner can sue the builder for and limiting the period of time in which a claim can be made.
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By Jessica in Midlothian, TX on 1/27/2005


I need help and advice. Just got pre-qualified at 100% for $160K. We only want to borrow $130K to build (not including the lot). The appraised value will be around $200K (including the lot). When the broker was calculating the estimated taxes and insurance, they based it on the appraised value of the home, and that of couse raised the monthly mortgage payments. Do I have to insure the amount that covers the full appraised value of the home? Or can I just insure the cost that it took me to build the home? Same goes with the taxes, what they are estimating, we cannot afford.

On a different matter; we still owe on our lot. With the sale of our existing home we wanted to pay the lot off. The broker says not to do that now. "Put the money in to an account, so that it looks like more equity, and we will also have it for start-up costs. When the first draw comes in, pay the account back and then pay the lot off." I don't want to pay any more payments to the lot than I have to. And they kept saying that we will be refinancing the lot anyway. I don't want to have to pay another closing cost for the lot.

I hope someone can make sense of all of this?  I don't want to pay two closing costs on the lot, nor do I want to pay taxes and insurance on money that I will not be putting into the house. We've been had by a broker before and are really reluctant. We are affraid that there are going to be mess-ups that cost greatly, as in the past.

Thanks,

Jessica


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By Domingo S in Laredo, TX on 2/14/2005


Hello everyone! Wow, this is one heck of a forum. I am very impressed with everyone's contributions.  Anyway, my wife and I plan on breaking ground within 10 to 12 months. However, we would like to hear of any suggestions for construction loans. We live in Laredo, Texas and own our home. Our plan is to demo the existing dwelling and construct our new "dream home" on the same lot. I read on some of the earlier posts that, in Texas, construction loans are hard to come by. Does anyone recommend a particular lender that will "ignore" the GC requirement? I'm hearing too many horror stories about construction loans in Texas. Help!
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By Deanna on 4/7/2005


You should only insure what it will cost you to replace. Do not factor in the cost of your lot or permanent factors such as your driveway. (Which would still be there if your house burned to the ground.) We used Tim Tobey State Farm there in Midlothian for our homeowner's insurance and they had great rates! Have you started building yet?


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By Jessica in Midlothian, TX on 4/7/2005


Hey Deanna,

We are almost done with the design (finalized Friday). Still need the foundation engineered though, have gotten several  bids. We used Tim Tobey, he is such a great guy. I talked to Tammy and she said that we should insure the appraised value of the home, during construction and after. That is not what I want to do, I only want to insure that amount that we are financing or even 15% over that. Hopefully we will break ground in one to two months. Are you done building?

Let me know,

Jessica


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By Deanna on 4/12/2005


Yes! We are finally finished. Try Rodney Bell Insurance in Waxahachie (he brokers Germania Insurance) for your builders risk. He has great rates on it. Mine was $608 for a 12-month policy for $272,000 coverage! 972-938-9676 Their rates are really reasonable because they want to convert it to a normal homeowners policy after construction, but with State Farm and their discounts on auto, they had the better homeowners rate. Good Luck. Let me know if you need any help.


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By Lee in Cedar Hill, TX on 7/5/2005


Has anyone had any luck at getting a loan in Texas (Dallas area)? Trying to get started, but no luck as of yet. Thanks for any help.

Lee


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By Jessica in Midlothian, TX on 7/5/2005


I have a couple of people you should look into.

Mid America in Duncanville, 972-780-5887 (office). Jim Mentzell is a school board member here in Midlothian, and the title company I use talks highly of him. Gary Vinyard is their branch manager. Talk to him, Gary's kids and my kids go to school together and play baseball together. Good guy also.

Fireball Mortgage/Financial in Midlothian, 972-723-9554. Roxy owns the company and they all are very friendly. I was referred to them by a friend that also is owner-building. 

I have been pre-approved with Fireball, and as soon as we are ready to get things going and close, I will know more about them. We may end up using Mid America.

Both of the companies offer construction loans. Feel free to e-mail if you need more info.

Jessica


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By Bill in Irving, TX on 7/5/2005


I finished my house in Pilot Point at the end of May. It took 8 months. I financed with Scott Henley and Burl Huffman of First National Bank Southwest on Preston Rd. in Frisco.
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By Kary in Keller, TX on 7/20/2005


Can you give me the particulars of the lender you used? I'm interested in orgination fee, rate, and draw schedule.

Kary


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By Pete in TX on 11/17/2005


I have read several post in this forum on owner-building in Texas. Can you build a owner-builder house in Texas? I have also looked at lending and have a FICO of 648 hope that is not too low. I have about 8,000 equity in the property that i want to build on. Thanks for any input into my question.
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By Joe on 11/20/2005


Yes, you can owner-build in Texas. I'm looking into it also. Check out ownerbuildernetwork.com.  They will help you owner-build for $2.95/sq. ft. which is pretty reasonable, I think.  They have offices scattered around TX.
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By Dennis in Rowlett, TX on 11/23/2005


Have you found a construction lender yet?

Dennis


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By Joe on 11/23/2005


No, we're not building yet.  I can't find a good piece of land for a good price.  But, I have done a little homework and know that Hibernia will work with you as an O-B.  You do have to have a Builder of Record and Hibernia recognizes the O-B Network as a Builder of Record.  So, for a little under $3 per sq. ft., they will be your Builder of Record.  I checked with a local (Beaumont) be-your-own-builder program and they want 8% of home appraisal value to be the Builder of Record.  So, if I built a 2,000 sq. ft. house, the O-B Network fee would be around $6,000 (for heated area).  The other would base their fee on the appraised value of the house, minus the land.  I hate to sound like a commercial, but there you go.


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By Pete in TX on 11/23/2005


I had someone contact me about BuildMax. I went to their website but I don't know about them. I have not researched any local banks because I was told that you had to have a contractor; that was why I have not contacted them.

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By Joe on 11/24/2005


I don't know much about BuildMax other than what I've read in these forums.  Some people seem to like them and some have issues with them.  Anyway, from what I've seen, you don't have to have a General Contractor to build a house in Texas.  If you want to do it on your own and need to go through a bank or lender, you will have to have a "Builder of Record" because the lender won't give someone a construction loan who has no experience in building.  My aunt works for Hibernia and she said they do construction loans and mortgages all of the time for people who use the Owner-Builder Network (ownerbuildernetwork.com).  There are several O-B networks in the Houston area, not just the one I gave the link to.  I'm not sure where you are located.

To make a long post short, you may be able to go through a local bank or credit union in your area.  They will most likely want you to use a general contractor but ask them if they recognize an O-B network as the Builder of Record.  If they do, you're all set.  Hope this helps.

Joe


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By Joe on 11/24/2005


I can give you guys my aunt's phone number if you're interested in talking to her.  She is a VP of mortgage lending with a Hibernia branch in The Woodlands, a few miles north of Houston.
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By Peter in Houston, TX on 3/30/2006


Hi Julia,

My name is Peter and I live in Houston, TX. I saw you were trying to O-B your house somewhere around 288. My wife and I are trying to do the same, sometime next year. We just bought our land around Rosharon.

Please, let me know how your project went if you have completed it, or simply just update me. I need some help.

Thanks

Peter


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By Melissa in Houston, TX on 5/30/2006


Hi everyone,

We are at the beginning stage of our project.  We have plans, we located the lots that we want to build on.  The next step is to get three to five general contractors to bid on our plans.  We wanted to go ahead and secure a loan for the lots so that we don't loose them.  We spoke with a loan officer at IndyMac bank and we were told in the state of Texas, to get a loan on a construction project with IndyMac, you have to have a General Contractor.  They are not a bank that is in Texas.  The Texas gov't has put this stipulation in place according to the loan officer we spoke to.  He did tell us that there is a way around it if we work with a Texas bank, which IndyMac is not.  The banks know that they are the only ones you can work with and don't necessarily offer the best terms.  My question is, do you know if this is true and if so, what banks in Texas do construction loans and are reasonable?  The other thing that I was told is that banks will do lot loans, but typically they want all the specs and estimate for the entire project which we don't have yet and probably won't have for 6-9 months.  I don't want to loose the lots.  Is there a way around this?  HELP.

Thanks,

Melissa


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By Jeff in San Antonio, TX on 5/31/2006


Melissa,

You do not need all the specs to buy the lots with a lot loan.  The bank will have its own set of rules for the lot loan.  We bought our lots in San Antonio last year without specs or plans.  We went through Frost Bank.  They had the best deals at the time.  But check around, most will want 10%-20% down.  Hope this helps.

Jeff 


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By Brian in Manvel, TX on 6/19/2006


If you are getting a loan you must have a GC. If you are building with cash, you will not. The form only requires a signature. Your brother or anyone can be the GC on your loan papers. They will need to register with the state (~$350) just so it can't be questioned later. I built my own and had a good friend be my "GC," he never even spoke to the bank, just signed a paper at closing with the title company.

PM me for more info. Will be happy to share.


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By peter in houston, TX on 8/8/2006


Brian,

I am a local builder in the Humble area and would like to build my own home in Willis.  I have had the banks tell me similar stuff regarding financing my own house and being the GC. I don't really need the help of a GC. Most of the projects I do for myself are duplexes and I keep them for rental, pay cash for them, and then refinance. I can't do that on a house for myself without disturbing my other business. I am skeptical that a bank would let just anybody "be the builder," especially if the last name is the same. Could you provide me with the name of the loan officer who got this loan through for you?

Thanks.


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By Rachel in Magnolia, TX on 9/6/2006


I know this post is several months old, but if your aunt still works for Hibernia in The Woodlands, could you pass on her information to me?

Thanks.


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By Charlie in Magnolia, TX on 11/12/2006


We finally found a mortgage company that does owner-builder financing exclusively.  They showed us how to solve the stupid "Builder of Record" requirement in Texas, got us a construction rate below 7%, and helped us get started.   Dan was our loan officer, and he is at builderspriority.com or 936-321-2701. Now, I need some help locating a good framing crew, concrete company, and plumber that will do GOOD work in the Galveston, Texas area.  I will be happy to share my results as we build our dream home.
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By Duane in DFW, TX on 11/19/2006


Has anyone used an LLC as a way to satisfy the Builder of Record requirement of their lender?  IOW, can an LLC (owned by the owner-builder), as a separate and distinct legal entity, be the Builder of Record?  Is this Builder of Record deal a state law, or simply an accepted practice among lenders? 

According to the TRCC, one doesn't have to be a registered builder to build their own home (if they occupy it for one year or more), so where does all this Builder of Record stuff come from?

Thanks!

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By Charlie in Magnolia, TX on 11/26/2006


The Bank made us list the partners in the LLC and the addresses of completed construction projects by the LLC. Needless to say more, we wasted $300 forming the LLC plus the time we spent dealing with the Texas Secretary of State's office, forming the LLC. We found Dan at builderspriority.com who helped us solve the stupid "Builder of Record" problem in the state of Texas. Rate was 6.9% for the construction loan, one-time close saved closing cost, up to 50 bank draws if you need that many, no money down because they lend based on 95% of appraised value. We were really pleased.
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By Ignacio in Houston, TX on 12/4/2006


I may be able to pay for the tear-down and rebuilding of my house with cash. My house has lots of problems and is appraised at $100 with the lot value at about $210,000. After a tear-down and rebuild I would like to refinance it. Might there be any issues with the bank if I am the owner-builder after the house is built and passes inspection, etc.?
 
IV

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By Paul in Round Rock, TX on 1/9/2007


What I was wondering is: does anyone know what the liability, if any, is for a "builder of record"? From the "Local Forums >> Texas >> Is Texas  "owner-builder friendly" forum I saw the following post:

In reference to your question, if you are building a home to be used as your primary residence for more than one year, you are exempt from home and builder registration with the commission.  According to the Property Code, Section 401.005(a), a home is exempted if it is “built by the individual who owns the home, alone or with the assistance of the individual’s employees or independent contractors; and used by the individual as the individual’s primary residence for at least one year after the completion or substantial completion of construction of the home.”  However, if someone builds their own home and sells it within one year, they are required to register as a builder/remodeler and register the home at the time it is sold.

This was posted by "Tom in Austin", so thank you Tom for the research and post and I hope you don't mind me borrowing it. So basically, it seems like anyone wanting to be an owner builder is caught in a catch-22. The state of Texas doesn't require you to have a Builder of Record if it is your primary residence; however, any lender in Texas will require a builder of record from what I gather. We won't be self financing, so we will need a lender. I have a family friend whose father builds homes in the DFW area and I thought about asking him to be the Builder of Record when we go to obtain the financing. Before I ask him this, I wanted to know if he would be liable for anything at all or if all liability would fall on us only since we are the owner-builder and GC. Would this be deceiving the lender (note 1) since he would only be going on record and not doing any actual work? He is an actual home builder, he just wouldn’t be building our house. I just don't even have a clue as to where to find these answers. I contacted a real estate lawyer, but he didn't seem to have any idea about it.

I know of the Owner-Builder Network and don't want to start a firestorm and another debate between the "good" versus "bad" of the Owner-Builder Network plan. Personally, I feel since it is made up of franchises that you will probably get variances in service and satisfaction between one area and another. I know theoretically you shouldn't, but I feel you will. I'm not saying that the fee is bad or anything (10 - 12K based on the size we are planning), I just feel that if we can put that money into our pocket or upgrades and not be violating any lender contracts or putting a liability burden on someone; we are willing to do it ourselves. Again, I know there is a benefit of using the Owner-Builder Network to answer those questions immediately that pop up, but I just hope I can find an answer to the liability question, if any, for a Builder of Record.

Any help would be greatly appreciated.

Paul

Building in Burnet County near Smithwick

House size: 3,500-4,000 sq. ft. (still being finalized).

Plan to start building end of this year, start of next.


Note 1: From the same forum mentioned earlier, Deanna made the very valid point below which is why I asked this question.

Could you have Joe Blow fill out a Builder of Record form and be falsely liable? Sure, but I was not comfortable lying to the bank that was going to loan me the $$$,$$$ to build my dream home.


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By Michael Penn in Dripping Springs, TX on 1/16/2007


I'm getting the sense (through the fog, darkly), that the Builder of Record liability looks very different depending on where you're standing. 

Got this sense from the last bank lender I talked to. She insisted that she's gotta have a "builder of Record" who's not me.  First, she said they had to be a real builder, not like my mother or other relative. They don't have to really be general-contracting for me, they just have to sort of pretend to, and sign the docs and accept the liability. 

But then she said she would also accept an owner-builder consulting company such as Owner-Builder Network or Texas HelpUBuild.

I asked - "But won't they have a contract with me in which they deny all responsibility and liability?" She answered - "Yes, they will, but really our contract, which you and they would sign, would make them liable (as well as you)." So there'd be conflicting contracts, and whoever had the better lawyer might win out. She seemed to be confident their lawyer could handle it.  Probably doesn't come up, except once in a blue moon.

Which makes me wonder, does anyone (here in Texas, particularly), know of a case where there was some sort of failure to complete on an owner-build in Texas, where the lender pursued remedy with a third party to the transaction, such as a "Straw-Builder" or an owner-builder consultant company?

Michael


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By Mary in Corpus Christi, TX on 2/20/2007


I'm on the hunt.  I have put off signing with the Owner-Builder Network for the before-mentioned reasons.  I want to know the measure of liability before I sign anything.  The OBnet here says he would be liable to complete the job and that tells me he would charge the owner for completion or assume the property, sell and then make a profit and the owner would be the loser.  The hounds are calling, I'm back on the hunt.

Later.


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By Michael Penn in Dripping Springs, TX on 2/20/2007


Mary, you might be unnecessarily worried about "failure to complete." and hypothetical consequences.

If you really have any reason to worry that you might run into a problem completing your personal build job, then by all means you should wait until you're more confident that you can get it done.

If you are confident that you can get it done, which I hope you are, then you don't have to worry particularly about that hypothetical case. It's not going to happen for you.

I was only raising the question to explore the strange, ambiguous business arrangement that seems to be the predominant arrangement for owner-builders in Texas.

By the way, if your build really did fall into a serious "failure to complete" crunch, the bank might be the really hostile party in the transaction. Best not go there.

Anyway, I continue to believe that the best deal for me is to do a two-party transaction with a bank or other lender.  Then the lender will only have me to worry about in getting the house built.  I just have to find one who's willing to consider it, and then convince them I'm a safe "lendee."

Even a conventional (non owner-builder) financing arrangement, where the buyer contracts with a general contractor, and the bank does a construction loan to the buyer, is more complicated and I believe more fraught with risk.  Thousands of builders go bankrupt every year, and leave banks (and buyers too) holding the bag.


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By Duane in DFW, TX on 2/22/2007


I'm kinda going through the same deliberations myself with the funding.  I deal with a great local bank, who I "think" I'll be able to work something out with when it comes time to build.  That said, I'm also going to be talking to the Fort Worth OBN folks.  I've seen a few of their signs on houses down here. 

But, and this is really the point of the post, it seems what we need in TX is a true O-B Network, or club/organization/etc. set up in a suitable manner. Texas O-Bs could "network," and provide Builder of Record documentation for each other (or even have the "club" set up as a registered builder), and have pics of houses they've built as proof to the banks. 

Perhaps there would have to be some sort of buy-in to limit it to people who are serious on O-B'ing, and helping each other.  The buy-in could be used to pay for some sort of blanket liability protection for the club. 

There's lots of legal liability mumbo-jumbo to consider and hash out, and maybe I'm making it more complicated than it needs to be.

But, couldn't a group of Texas O-Bs just form a club, work together, form group-buy purchases on items we all need (even just discounts with local suppliers),  trade sublists, advice, experience etc.?

Any thoughts?

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By Mary in Corpus Christi, TX on 2/23/2007


Something like that just might work.  The word co-op is creeping into my head.  TX O-B CO-OP.  I'll keep thinking on that idea.   In any group there will be money and man-hours involved to keep it alive.


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By Mary in Corpus Christi, TX on 2/23/2007


Thanks Mike,

I'm really trying to justify the cost of using the O-B Network contractor.  Sure it's only $7,000 but that would pay for upgrades in roofing, appliances, or septic the city requires.   I have met with him twice and the line I get is, "we give you everything you need to complete the build."  He has a seminar tonight.  I like that he and his wife work together and that he is close to my build.  If my budget were not so tight I would stop my hunt, hire him, and begin to get my hands dirty.   We are putting a lot of our savings into this build and we would like to have the final mortage paid off in 10 years or less.  Most banks will lend us more than I want to finance and I do not want to be living a nightmare to pay off a dreamhouse. 


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By Dale in Richland, AZ on 2/23/2007


A couple of other things, the co-op could offer its members a tool-lending service, group workman's comp and a better avenue to financing.

How many people have "made do" because the right tool was expensive and the thought of how to get rid of it after construction stops the purchase?

As a co-op, I would think that there would be some group power for getting some of those sticky O-B related issues marginalized and make individual finance processes easier.

Now you need a few energetic and resourceful people willing to make a commitment to get things set-up, legal, and running.

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By Michael Penn in Dripping Springs, TX on 2/23/2007


Hi Mary,

Once you have the books, DVDs, and all the additional support and resources such as you can find here on this forum, what more can an owner-builder consultant company provide you?

They supposedly have a list of contractors that you can call and get a bid from.  Supposedly they have previous experience with this list of subs, and vouch for them.  But you have to do the deal, and ultimately the contractual relationship is between you and the sub - if there were any problems I wouldn't count on much help from the consultant company. 

Getting good subs, and working productively with them, is certainly a challenging part of being an owner-builder.  But it's ultimately your challenge, and to have a good experience on an owner-build, you're the one who has to make it work (not the consultant company).

In Texas, another good reason to use a consultant company is to secure the construction loan - there are clearly more lenders who will talk to you if you're using a consultant company.  Every consultant company that's worth considering has one or two lenders that they work with consistently.  But it doesn't sound like you need help with that part of the deal.

Still, in the overall scheme of things, $7,000 in your case to get a measure more security in the deal, it may be worth that.

The question to ask yourself, and to ask the consultant company, is what exactly will they do for you that you cannot do on your own with the reasonable effort that you have to put in regardless, and is that worth the cost?


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By Michael Penn in Dripping Springs, TX on 2/23/2007


The idea of an Owner-Builder co-op sounds really appealing to me.

Seems like some aspects of it could be national, but the most crucial ones would be more local.  Tool lending, for instance, sounds like it would be practical only locally (if at all).

But the thing that appeals most to me about a co-op is the networking aspect. It would be wonderful to go to a meeting once a month or so where there were a bunch of like-minded folks working on planning or executing their owner-build project, where you could share war stories, figuratively hold each other hands, and just generally network and support each other.  Again, the part that's most attractive to me seems local.

Of course, national forums such as this we're on here, do provide a valuable part of that networking function, just not the "in-person" part.

In particular, I'd be really interested in a co-op here in Texas that could develop a database of expert info about the peculiar owner-building lending challenge here, as well as many other things, like subs, suppliers, etc. etc.

I really enjoy Mark Smith's Owner-Builder Workshop DVDs, and besides all the info, a big part of what I like is the vicarious experience of being in the room with the other owner-builders learning how to do their projects.


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By Paul in Round Rock, TX on 2/26/2007


Some great ideas for a co-op!

I am guessing to register as a Builder of Record, that it involves paperwork with the state since the co-op would basically be listed as a home builder because the co-op wouldn't be building any primary residences at least as far as the state is concerned. Hopefully, once the co-op did that and had a home portfolio, the banks would be more "friendly" if you will. Once again, some great ideas for a co-op and I think the type of people interested and involved in being an OB would probably lend well to a co-op mentality.

I am attending a seminar for UBuildIt on Wednesday night here in Austin. We signed up to get “information” from them and the OBN at the last trade show here in Austin. My main goal in going to the seminar is to find out exactly what is the "liability", if any, that they (UBuildIt) assume in as plain language as I can get. This way, I can talk to my friend in Dallas and see if would be a "consultant" for us and use him as the Builder of Record to save us “x” thousand dollars. I know we will complete the building, but it is the planner in me that wants to build a worst-case scenario for him being a Builder of Record and make sure he would not be liable for anything if the worst happened.

I agree, in essence, that the “consultant fee” for OBN ($7K in Mary’s case) is not a huge sum when one considers the total cost of the project and it might well be a very good ROI for our or your money. But as Mary stated, it is $7K that you can't spend on something else like kitchen upgrades, tile, etc. We don't mind spending "x" amount on a Builder of Record like UBuildIt or OBN, but if we can save money smartly somewhere we will try. We understand why the banks want a Builder of Record, since they don't want to lend money out to have a house built and it doesn't get completed or that there are liens against the property, but it does seem to be a catch-22, in Texas at least, for the OB. The state of Texas doesn't require a Builder of Record if it is your primary residence, but it seems most banks do. All in all, as Michael said "what exactly will they do for you that you cannot do on your own with the reasonable effort that you have to put in regardless, and is that worth the cost?" and from what I can tell, they (UBuildIt or OBN) fulfill the bank's requirement of a Builder of Record. I believe you can probably get as good of quotes from contacting your own subs and suppliers versus using their subs and suppliers if you do some "leg work." Even if we go with UBuildIt or OBN, I will also seek out subs not on their list to try to get the best prices for our house. We know to expect to spend a very good bit of time being our own GC, but think it is a worthwhile investment.

BTW, to emphasize Michael's point about thousands of builders going bankrupt every year, just the other week there was a news story on one of the local stations "we will try to help you by embarrassing the company on TV" segments about a home buyer who was stuck in a bad situation. The GC wasn't returning their calls, the subs had placed liens on the partially completed houses because they weren't being paid and the bank was getting hostile with them. The GC basic excuse was that the builder went bankrupt and there wasn't anything he could do, etc., etc. Basically, even with a regular loan with a "real" Builder of Record, there are numerous hazards where the buyer can get stuck between subs, GC, builder, the bank, etc.


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By Paul in Round Rock, TX on 3/6/2007


So, I went to an UBuildIt seminar and it was very informative. I found the basic answer to the liability question and that is that if I ask my friend to be the Builder of Record, then he would have some liability. For that matter, any Builder of Record holds the same liability. For example, if there are foundation issues with the house ten years down the road, the Builder of Record would be liable if an agreement of some sort couldn't be reached. Basically, the liability is the same that any normal home builder would have.

They also had a mortgage lender there to answer questions so I asked about the "catch-22" of the TRCC not requiring a Builder of Record, but that the banks do. It is confusing (at least to me), but basically it seems Texas is one of only two states that have lending laws that are setup this way. From what I was told, if an individual walks into a bank and asks for a construction loan, the bank cannot give them one because it would be considered "cash out." It seems like in Texas that a home loan is actually an "equity loan" and you can't have equity on something that isn't built yet (your house). So in order to get a loan, you have to have the home built already, but you can't build because you can't get a construction loan as an individual without the home equity - a catch-22 again. The person there told me that if I had a company that was incorporated that the bank could probably give me the same loan since I was incorporated and registered with the state of Texas and the TRCC. It seems weird that the same person who walks in as an individual can't get a construction loan, but if that person has a company that is incorporated they can work with them (at least according to him). Now he did mention that this company does most likely need to be something involved with the housing industry - home remodeling, plumbing (his actual example), etc. So, I don't know if by definition a co-op can incorporate, but it seems that would be a requirement to have "weight" when trying to be the Builder of Record for the members.

 


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By Mary in Corpus Christi, TX on 3/7/2007


Well, that is just about what I've heard.  So now, at least for me, it is an issue of renegotiating cost.  One fellow in the construction industry here has mentioned looking at the cost of his insurance, plus fees on consulting & inspecting.  So, it just might be easier to have a flat fee.  I'm going to investigate what liability insurance cost.

On the co-op idea, people setting it up would have to be licensed and then others can be added (for a fee) to the license while they build and then be removed or continue to pay a fee.

Good day.


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By George in Wharton, TX on 3/23/2007


My wife and I do not even have a house design yet but I started looking into financing b/c of problems I saw with others on this site getting OB financing.  No use in doing this if we're not going to get a loan, right? 

I spoke with Susan Joyce (979-543-6441 at Community State Bank, it is local).  They specialize in this kind of lending.  I told her about problems others are having across our state and if they lend out of county.  She said they do as long as they have one of their inspectors in the area.  I do not know if they can lend in Austin, Plano, East Texas or not but it might be worth a phone call to check it out if you're stuck on this issue.  Maybe they could agree on a new approved inspector in your area.  Even better, start looking for a similar type bank in your area.  If they are in Wharton County, there surely are others.  I have no idea who Susan Joyce is other than a nice voice on the phone, so as always, do your homework. But the info that I got seemed to be consistent with the advice given in The Owner-Builder Book, which if you have not read, stop everything and read it closely.

BTW, they require a "straw-builder" and it is o.k. if he or she has no building experience.  Also, the loan officer was very impressed about how much I knew about the issues of funding and building - she thought I had done a ton of homework or had done this before because usually they have to explain everything to their customers.  The only thing I did was read the book.  Um, I know it's early, but I'm feeling pretty good right now.


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By Michael Penn in Dripping Springs, TX on 3/25/2007


Many of us who come to the Texas Local Forum are either looking for financing, and facing the usual challenges as well as the special Texas-specific challenges.

Or, we've already got it done, and could contribute helpful recommendations for others.

Either way, I'm hoping it will be helpful to consolidate these posts in one place.

If you've already done your financing, or if you have some good leads on owner-builder friendly lenders, please consider contributing here.  The more detail, the better.  If you have websites or phone numbers for lenders, please include them. 


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By Sandi in Round Rock, TX on 4/25/2007


O.K. Texans, I got a question, so put on your thinking caps and grab a beverage of your choice.

I am in the planning phase and talking to contractors to see which way I wanna go.  Here's the million-dollar question.

How can I come up with creative financing to build my little house near Lake Austin?  

I am tired of paying the banks extra money in fees, etc. I bought the land on an unsecured loan just so I would only pay the interest to the bank.

I want to build my house in phases, but still be able to pay for it like a mortgage, and then get a loan (owner-occupied) from the bank.

Someone please tell me what is wrong with this processs - so I will not fail.


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By Michael Penn in Dripping Springs, TX on 4/29/2007


Sandi in Round Rock,

I'm not at all sure that I understand what you're asking.

But, it sounds like you'd like to build your house in phases over a longer period of time (how long?), and then take out some form of mortgage once you're finished building.

First, you could go the conventional route, maybe with some tweaks - apply for and get a construction loan, maybe with a longer term.  Of course the longer the term, the more interest you pay.  However, in order to get a construction loan, you must have a formal qualification for a mortgage (a takeout letter?).  One easy way to do that is a "one-time close" where both the construction loan and the permanent loan are all closed on at once. 

Another consideration is that all "owner-builder" construction loans in Texas seem to require a "Builder of Record" or "Straw-Builder" (called on the paperwork the "Builder").  Depending on the lender's choice, the "builder" may have to actually be doing major work on your project, or maybe they're in the construction business but they're your builder in name only, or maybe they're a building-consultant company set up for this purpose and are charging a substantial fee, or maybe they're just any human who's not you.

Is there something about your situation that makes you want to avoid this conventional route?

The other thing you could do is build the house with money from whatever sources you can muster: personal loans, credit card loans, withdrawals from your retirement or other accounts, and of course, cash on hand.  But consider your interest costs carefully. 

But even assuming that's doable, here's a couple things to consider:  Once you're finished and you seek a mortgage on your free-and-clear house, it will be considered a home equity loan rather than an original mortgage.  So the interest rate may not be quite as good.   Also, if you did borrow a significant part of the construction costs, your income/debt ratio may prevent you from qualifying for a loan at all.  So if you do some version of the "credit card finance", just know that it might become a longer-term commitment.

I actually considered doing something like this myself (briefly), but it seemed to add several layers of additional uncertainty and risk in a project that has plenty already.

There's certainly several other angles I haven't thought of.  One good thing you could do is call up some lenders, and talk it through with them.  You may need to go through more than a few to settle into a clearer picture for your situation.  There's lots of variables in a borrower's situation (advantages and disadvantages), and what you want to do is match up your situation with the best available loan or other strategy.  There's a give and take in finding that, and some art.

 

 


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By Sandi in Round Rock, TX on 5/2/2007


Thanks for the reply.

No, I have no problem getting a loan (no special situation that would preclude a loan). It is just the fact that I hate banks. They make all the money from us.  It's bad enough the interest we pay on a loan, but then they tack on all the fees... freebies for them. The rich get richer and we working-class pay for it. 

But, like you said,  if I do a non-traditional finance - like credit carding it, when I go for a loan, the debt-to-income ratio will look bad. Or, they get a higher interest rate on post construction -see we can't win, the bank is gonna get us.

But, I'm still trying to figure out a way around it.  Anyone have a rich aunt or uncle who will finance me at a reasonable rate?  hahaha

 

 


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By Jeanne in Conroe, TX on 5/10/2007


I have read numerous posts about the Texas mechanic's lien, Builder of Record, "straw-builders", TRCC issues and other owner-builder concerns. I am confused. I recently secured owner-builder financing, and I think I now understand the issues around someone signing the mechanic's lien as the Builder of Record. I hope it is not illegal to quote directly from  my closing documents, because I am copying a few of the sentences directly from my document.

For consideration, contractor agrees to furnish the necessary materials and labor and to complete the construction on the property in a good, workmanlike manner according to the plans and specifications.

Contractor's Obligations:

1. Until the construction is completed and delivered to Owner, Contractor will insure the construction and all related materials against loss or damage by fire and the perils included in extended and builder's all risk coverage in an amount equal to the consideration. The policy will be payable to parties to this contract according to their respective interest. If Contractor does not provide this insurance, Contractor will bear any loss to the construction and materials.

2. Contractor will neither make nor charge for any alterations in the construction described in the plans and Specifications unless Contractor and Owner agree otherwise in writing. Any alterations made without a written agreement will be considered performed under the original contract at no additional charge.

3. Contractor will pay all costs of construction, including labor, materials, and subcontractors, and will furnish Owner receipts for and releases from these costs. Contractor shall also pay, out of the Consideration amount, such closing costs as agreed to by Contractor and Owner incurred in connection with the closing of the construction loan from a third-party lender to Owner.

4. If any other lien claims are filed, Contractor will pay for their removal or else provide a statutory bond.

As you can see, if something happens to the homeowner, the Builder of Record is liable for the project. The bank explained it to me as follows: If the owner can't finish the house because of injury or illness, or if the owner loses their job the bank goes after the Builder of Record. In my opinion, it's like asking my dad to co-sign for a $306,000 auto.

I think this explains why the Builder of Record is a big deal.

Hope this helps.

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By Ray in LaPorte, TX on 5/10/2007


Jeanne,

Great information. 

It's now clear to me that whoever signs the bank documents as the 'Builder of Record' is really the person on the hook for the loan; he is actually assuring the bank that the project will be completed for the fixed price of the contract. If the project is over budget, the 'Builder of Record' is responsible unless the owner signs a change order.  If no change order is signed, the builder is responsible for any changes to the original plans! When the "straw-builder" signs the mechanics lien, he is actually signing on as the builder! 

It's more than co-signing for a huge loan, it's being totally responsible for the entire project : any liens, general liability insurance, workmen's compensation, the potentially for having to post bonds, responsible for the deductibles on any builders risk claims - and equally important, the house has to be built per the plans and specs! In Texas, the Builder of Record is required to warrant the home for 10 years. The Builder of Record can be fined $50,000 if he fails to register the house with the TRCC. If I decide to walk away from the project the person who signed on as the 'builder of record' will have to pony up with the money to finish the project and register the house with the TRCC. 

I can see why people are reluctant to sign on as the builder of record - that person is securing the loan for the bank!  No wonder that they don't care who the 'Builder of Record' is, they only want to know if that person has the assets that the bank can go after if a problem arises. I don't think I could talk anyone into taking on this responsibility!

Ray

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By Ray in LaPorte, TX on 5/10/2007


George, 

I called Susan Joyce per your post and found out that you were right, she has a nice voice. She informed me that she is a loan processor not a loan officer.  She transferred my call to her boss who gave me a different picture of the construction loan process at their bank.  First the "straw-builder" must have building experience and she said the "straw-builder" actually carries the full liability and responsibility for the construction of the home, responsible for carrying general liability insurance on the project (not just builders risk insurance), financially responsibile for clearing any and ALL LIENS placed on the project by ANYONE, including any supplier, sub-contractor, sub-contractors' employee, general liability insurance covering errors and omissions, workman's compensation, etc., etc.  She told me some real thought needs to go into having a loved one or friend take on this liability because the bank ultimately holds the straw-builder responsible for completing the house on time , within  budget, etc.  If the house can't be completed within the budget given to the bank, the straw-builder is the one who the bank will force into court to come up with the funds to complete the project.  The straw-builder agrees to build the home according to the plans and specifications for a fixed contract price.  If you go over the contract price, the straw-builder must pay the overage if the owner doesn't handle it with the bank.  The bank will accept anyone as the straw-builder if they have good credit and assets to cover the cost of the project.  Hope this helps!  

Ray

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By Michael Penn in Dripping Springs, TX on 5/15/2007


I also agree that generally anyone should be reluctant and very careful to sign on as a Builder of Record (actually called a "Builder").  Potentially, there's considerable liability attached.  And an owner-builder in Texas should be circumspect about asking a friend or acquaintance to shoulder that potential liability.

However, I'm sure that this is something that varies dramatically depending on the lender, and of course depending on the relationship of the owner and the Builder of Record.

In my case, my mother was my Builder of Record.  She of course has no building experience.  The ONLY requirement that this bank expected of the Builder of Record was that they be human, and appear at closing to sign docs.  The lender was explicitly looking at me alone as the party responsible for completion of the house-build.  I'm quite sure that in this particular situation, none of the boilerplate you can find about 10-year warranty and $50,000 fine for not registering with the TRCC applies.

But from what I gleaned, talked to some other lenders who supposedly were open to a certain flavor of owner-builder lending, they would indeed be considering the Builder of Record as a liable party (and therefore had requirements to qualify the Builder of Record - building industry experience, and maybe financial).

Of course the bottom line requirement that you should expect of yourself, before you enter into an owner-build project, is that there's no more likelihood of your not finishing successfully, than there is of lightning striking you down.  Otherwise, you better get more ready before you begin.

 


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By Kelli in Rockwall, TX on 5/16/2007


Michael,

My husband and I have been following the drama of this owner-builder construction loan financing thread for awhile now.  I've tried to contact many of the suggested names and websites that have been posted here as friendly to our owner-builder situation.  BUT, would you mind sharing with us (or me) the name of your lender that let your mom sign as the builder?  I'm in Rockwall, Texas but I'll call anyone in Texas to get some guidance. 

Thank you.

 


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By Ray in LaPorte, TX on 5/23/2007


Did you find a lender? Keep us posted if you find one like Michael found. 

Thanks,

Ray

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By Brian in Manvel, TX on 5/26/2007


Ray,

I owner-built last year in Manvel and used MidCountry Bank in MN. They are the preferred lender for PolySteel ICF, but anyone could use them for O-B. Nothing down - used land equity, no payments during construction, minimal inspections, one-close loan, so only paid closing costs once. Highly recommend them. Ask for Connie Martin.

We emailed scans of all our receipts/invoices and got checks mailed out to us to pay for subs or funds wired to our checking acct. for reimbursements. I would highly recommend reimbursements, because they only need a receipt from the vendor showing paid by cash/credit/check or canceled check for labor. I was able to cut my labor budgets significantly by paying subs by check immediately at completion. They usually wait two weeks to 30 days for builders to pay their invoices.

A buddy of mine who is a TRCC registered contractor signed the docs. However, nothing was ever verified. Only a photo ID to prove he was there in person  - no TRCC number, no insurance cert. If someone you know is willing to take on that risk, you could get them to be your builder on paper but they will probably need a different last name than yours so as not to raise any suspicions.

MidCountry never even spoke to my "builder." I did all the coordinating on the building and payments. He only signed again at closing saying everyone was paid and he was done.

It was a pretty easy process considering that it was a bank. Almost too easy in some cases. PM me if you would like more info. You will have to buy a builders risk policy; they are easily obtained from your homeowners ins. company. Mine was about $1,100 for the year and you have to pay it in full. That was the only bump in the road I ran into.

Brian


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By George in Wharton, TX on 6/3/2007


Thanks Brian.  I've never heard of that bank and I'm not too far from you. 
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By Sandi in Round Rock, TX on 6/4/2007


Hey Brian,

How much did MidCountry Bank charge you? Any additional fees?
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By Brian in Manvel, TX on 6/5/2007


Sandi,

We paid (out of loan, not pocket) application fee, loan fee, appraisal, survey, title ins., escrow fees, title fees, one-time close (modification fee) courier fees, attorney fees. The usual gotchas. It was about 2% of the loan amount, but it saved us paying it all over again if we got permanent financing elsewhere later. MCB was also the preferred lender for PolySteel, so I got a little kickback.

By doing the one-time-close loan, it was all set from day one, no re-qualifying etc. We just re-signed papers to modify to a true mortgage. It was then sold 15 days later to another bank in Ohio at no fee to us. It was a pretty fair deal. Construction interest was paid out of loan, so we had no payments due while building. The faster you build the better. Construction interest is a bit higher than a 30-year mortgage and if you borrow more than $417,000, I think that's the limit (Fannie Mae or Freddie Mac limits) you will pay even more since it is "non-conforming" and they can't package it to sell as easily.


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By Alex in Houston, TX on 4/2/2008


I have reviewed the owner-builder construction loan financing thread, and I've tried to contact most of the suggested names and websites that have been posted here as friendly to owner-builders (all the way back to 2002 postings). I have discovered that the rules and the number of banks offering O-B loans must have changed dramatically since January, 2008. Some of the big guys are either out of business or will not do O-B loans. IndyMac, Wells Fargo, Chase, Compass, Bank of America, Capital One, Bismark... who can I  call  in Texas to get some guidance? 

Alex


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By George in Wharton, TX on 4/3/2008


Alex,


I spoke this week to Jeff Shealey (713-435-5398) with Capital One. I got his name from a friend who is president of our local small town Capital One bank. He claims to be the only big bank that will loan to O-Bs these days. He seems to have a lot of experience dealing with guys like us. I was pleased with him and will give him a shot come finance time. If you don't mind, keep us up to date on your experience.

 


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By Jason in Burleson, TX on 4/3/2008


Depending on the location of your property, you may qualify to use a bank affiliated with the Farm Credit Bank of Texas.


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By Gene in Dallas, TX on 4/3/2008


We can do Owner Builder loans in Texas.

Guidelines:

No construction experience required

Max. loan amount $417,000

Must presently own a home in TX at time of closing

Max 50% Debt to income ratio

Minimum 640 credit score

Will lend up to 80% of the Future Appraised Value of the property

No prepayment penalty

Fixed-rate, One Time Close construction loan that converts into permanent loan when home is complete. Interest only during build

Please call Gene @ Texas Construction Loan Banc

1-866-918-5805 or e-mail gene@texasconstructionloanbanc.com


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By Sheila in LaPorte, TX on 4/8/2008


I called and spoke with Edith at Construction Lending Corp, she was really helpful and very nice. My question though is that she stated that our loan would have to have a "Registered Builder" on it, someone who was actually registered with the state of Texas and not just some random person. She said that the person could fill out a short form application and mail in $350 to get registered.

Does anyone know if this is accurate? I presume it is since it's what she told me and she certainly did seem to know what she was talking about.

Also, she quoted me a flat fee of $6,000, not a huge issue, but I'm wondering if all of these OB lenders require some sort of fee like that, to help you secure the loan? Am I going to be facing these fees no matter what, or will a bank like Mid Country not charge a fee?

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By Michael Penn in Dripping Springs, TX on 4/8/2008


Yes, I've always heard that it's very easy to register with the TRCC as a builder in Texas, and that the fee (annual?) is about $350 or $400.  Of course it's entirely possible that might have changed in the last year, as many things have.

Regarding the $6,000 "flat fee," that might be kinda high, or might not, depending on how that fits into the overall total closing costs.  One point, that is one percent of the principal loan amount, is common as a fee to the lender, besides all the other closing costs.

Another question - is this a loan for construction only, or is it a "one-time close" of both a construction loan and also a final mortgage that it's set to easily roll into?  If it's not, you've got another set of qualifying criteria to satisfy, as well as another set of closing costs.

Best advice I can give is to talk to multiple lenders, examine how they're different, and decide who's best.


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By Brian in Manvel, TX on 4/8/2008


The fee to register as a builder in Texas is $500 per year.

If you complete your house in the 12-month period, you would not need to pay it again unless you wanted to be a builder.

Most banks will not accept you as the builder even with the TRCC number. You would need someone under a different last name.

All banks operate to make a profit. They all assess their fees differently. Some as app. fees, origination fees, upfront fees or higher interest rates.

As mentioned above, check with multiple lenders. O-B lending is getting more restrictive. I am a builder and consultant on O-B projects and the last one we ran through, the underwriter required 20% down. The one before that was 10% and the one before that was zero down. And all were with the same bank.

Good luck on your projects.


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By Alex in Houston, TX on 4/8/2008


Sheila, 

In searching the long thread on O-B loans, I found Builders Priority Mortgage who only does O-B loans.  I talked with Brian who quoted me the following details:  construction loan of 5.5% with 1.5 pts. origination fee, 95% loan to value based on the appraised value, the loan will include the closing cost, well, septic, fence, land payoff, etc. -- but you must have good credit.  You are not required to submit invoices like Mid Country, and the draws (up to 15) are sent directly to me, not the Builder of Record.  They will even give me a draw at construction loan closing to get started... maybe we can start an O-B mortgage co-op company that would even beat this deal. I will keep you posted after I meet with Brian. 

Alex

Oh yes, Brian's cell # 936-321-2701

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By Sheila in LaPorte, TX on 4/8/2008


Thanks much for all the replies. Regarding the lady (Edith) that I spoke with, the quote was for a one-time construction to permanent loan.

Can someone enlighten me on "points"? It's not something I've ever dealt with and I would really like to know about it, should I encounter it while trying to find financing.

I did also talk to Jeff Shealy at Capital One, he is going to send me some information, definitely a very nice guy. And I talked to a local bank today also that thinks they will be able to help me, they will also provide registered builders to sign off on the loan, which is extra great. I have to call them tomorrow and I'll let you guys know how it goes.

Thanks!

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By Bob in katy, TX on 4/21/2008


To: Sheila and Alex,

I followed up with Brian at BPM (281-687-0928), so far he does offer the best deal for owner-builder loans in Texas.  I will keep you posted if I find a better deal.

Thanks,

Bob

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By Alex in Houston, TX on 4/23/2008


Sheila,

I contacted Capital One and a construction lending company called "Bismark Mortgage Corp." and neither offer construction loan financing. I will find someone who will help...

Alex

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By Bob in West Chester, OH on 4/24/2008


You could try Buildmax.com  - I went to their site and they claim "construction loan financing."

- Bob
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By Alex in Houston, TX on 4/24/2008


Thanks Bob!  Already tried them.  They offer their program in EVERY state except Texas, go figure.  I'm still looking...

Alex

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By DCG in Lago Vista, TX on 5/2/2008


In regard to finanacing, I'm told

1) Single close financing is getting hard to find.

2) Builder financing is largely at prime + 1% - I've had one builder indicate that he could get me prime + .5%.  I haven't done more investigating than that.  Lenders willing to cover 85-90% of actual cost.  How hard it is to draw from these loans can vary quite a bit, so I'm actually considering a local lender over a "best deal" on the Internet.  The final mortgage terms will probably dictate who I choose to go with.

Note, we're not true owner-builders, we're likely to seek assistance of an experienced home builder, GC, or a service like the Owner-Builder Network (perhaps one of the competitors).   I've received a quote of 10% over actual cost, I see all receipts and can hire/fire subs - from one custom builder in my area... That seems pretty competitive to me, but we're still working on it.

 


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By Alex in Houston, TX on 5/4/2008


dcg, 

I talked with Owner Builder Network in Houston and was also very unimpressed.  I think each of their offices are standalone franchise operations, therefore Dallas and Austin may actually be fine, check them out.  We were very impressed with Owner-Built Custom Homes in Houston but I don't know if they cover Austin. I don't want to use ANY of the consulting  firms because of the money, but Owner-Built Custom Homes does have a Builder of Record Program that is less expensive than their normal program but I'm trying to save money by going TOTALY ALONE if at all possible.

Back to our financing thread:  Wells Fargo said no way, likewise with Chase, but a local Houston bank looks promising: it's Central Bank of Houston:  centralbankhouston.com, they will do owner-builder loans.  It looks like two-time close only. I will post results of my next meeting. 

Alex

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By Michael Penn in Dripping Springs, TX on 5/4/2008


I had got my one-time close construction loan/mortgage loan financing from Capital One (out of Houston) about this time last year, and it's been a very satisfactory deal.

However, I did check with my loan officer with Capital One last week and he confirmed that they weren't doing new owner-builder loans--actually he said they were getting out of construction loans entirely (not just for owner-builders).

He did mention that he knew of one Texas bank that was currently doing owner-builder loans, Citizens Bank in Waco.  I don't know any more than that, but I'd be checking it out yesterday if I were still in the hunt.


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By DCG in Lago Vista, TX on 5/5/2008


I have nothing against OBN--in fact, it's one of the things that brought me to this forum.  Their website "forum" seems to have gone private and doesn't look like it's kept up very well....

I'm going to pursue an audience with them, see what they have to say.  I'm not sure I can really owner-build with the amount of free time that I have available to me.  In regard to the OBN, I do mention:

1) The various offices may be franchises.  References on the office out of one area probably don't apply to the references out of another area.  You also need to check how long that particular business has been in the hands of the current owner -- you want references for current ownership.  I know that the office in Austin changed hands.  I know because when I contacted them, my email got routed to the guy that "sold" the business - he was offering to GC for me... he did put me in contact with the OBN office though.

2) Per what I read on the internet, OBN (and the other businesses like it) have reference customers.  Non-reference customers aren't going to be listed.

3) In my area they check out with TRCC and BBB.  Reputation seems to be good.

4) They can help with owner financing, their name goes down as the Builder of Record.  They may not want to give you information on financing, or advice -- because that's part of what you pay for in using their service.

5) They charge per sq. ft.  I'm reading different things about AC sq. ft. and non-AC sq. ft., but that's how they charge.

6) How helpful are they -- I've read very helpful to "didn't use a single one of their contractors."

Financing:

PM me directly, I may have a contact that can help you (at least in Texas). You may have a hard time if you're not a licensed builder.  I'm hearing that two-time close is common,  rates tied to prime + .5-1%, and LTV of up to 85-90%.

My contact works for CTM funding, I'll send you her email directly.  I haven't used her for a construction loan yet, but will pursue with her.  Also, I'm considering local banks (which are usually more expensive) -- unless you've got significant cash reserves, the draw schedule can be an issue so you want a local bank.


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By Alex in Houston, TX on 5/5/2008


dcg,

I talked with someone at CTM but got the impression the points were very high, maybe I missed something. Please PM me the email address of your friend at CTM and I will try again.

Thanks again,

Alex

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By Alex in Houston, TX on 5/5/2008


Michael, 

First, congratulations on winning outstanding moderator for last year! What did you buy with the $10 million dollar award (ha)? I called your loan officer and he gave me the feedback about Capital One and the contact info at Citizens. They gave me the same story, i.e. they are currently holding off on new O-B loans until further notice. Bismark Mortgage also said they are on hold for O-B loans until the mortgage picture improves. I'm not discouraged, I have great credit and I'm determined to find a bank that will give me a construction loan. I will keep you posted. 

Alex

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By Jennifer in Austin, TX on 5/16/2008


I just finished building my home and used Owner-Builder Loan Services based in Michigan.  They are a direct lender, not a middle man like so many others and they did not require me to hire a project manager or contractor. I was free to call my own shots.  This company was very helpful. If you want to reach them, their website is ownerbuilderloan.com. Good luck! Jenny
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By Doug in Austin, TX on 5/16/2008


Jennifer,

How would you rate your overall experience?  Was it easy to make the draws?  Where there any hidden costs? 

Thanks!

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By Jennifer in Austin, TX on 5/16/2008


Hi, I saw your question and thought I'd share with you an OB lender I used for my home. Go to www.ownerbuilderloan.com They were easy to work with and did not require me to have a project manager or contractor.

Good luck!

Jenn


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By Jennifer in Austin, TX on 5/16/2008


Hi Doug, Owner Builder Loan Services gave us unlimited draws with no draw fees. We made over 75 draws. I'm getting ready to go through them again on our second home so I guess I would give them an excellent rating. They explained all the fees very thoroughly before I signed up. Let me know if I can help you out more.


Jenny

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By Alex in Houston, TX on 5/16/2008


Jenny,
 
The draw schedule looked great, but wow what fees!  I'm trying to determine if their fees are actually even legal. Look at my case, credit score of 675 yields a loan max of $417,000 which is OK but it's with a rate of  5.75 + 4.0= 9.75% AND A WHOPPING 4 points (2 ORIGINATION + 2 PROCESSING!)  That's a lot... $16,680 for a SIX-MONTH LOAN if you go for a 12-month loan, which is standard, it's another $8,340 or $25,020!  HEAVEN FORBID THAT YOU TAKE 18 MONTHS, THE COST WOULD GO TO $33,360  Let's add in the other fees and the title policy and we are closing in on $28,000 FOR A 12-MONTH LOAN AND $38,000 FOR AN 18-MONTH LOAN.
 
It's not over... now on top of these closing costs I would have an incredible interest payment: let's assume we pay interest at 9.75% on ~$400,000 for one year, the interest payment will be ~$20,000! Closing cost for one year $28,000 closing + ~ $20,000 interest, that's  $48,000  for a one-year loan secured by 35%  equity... (65%  LTV)

Closing cost and interest payments for the 12-month $400,000 loan is $28,000 + ~$20,000 int. or ~$48,000! For 18 months the cost would be ~$33,360 + ~$30,000 int or $63,360.

THIS IS NUTS!  Compare this to one point origination 0.5 points processing and 5.0% interest for 12 months, for someone with a good job and a score of 675-700... that would be $10,000 int plus $6,000 - $7,000 closing or $17,000 vs $48,000!!  I'm still determined to beat the $17,000 so I will pass on the $48,00-$63,000 loan! I'm sorry but they are just not on this planet.
 
Alex

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By Ray in LaPorte, TX on 5/18/2008


Alex,

I read your post and thought you had misread or misunderstood the ownerbuilderloan.com site. I decided to follow their process to calculate a loan closing cost for my own case. Assume the project is $615,000 then I would be able to get a loan of $400,000 (65% of appraised value). O.K., a 12-month construction loan would be two pts. origination, four pts. processing, all other fees including the title policy ~  $6,000, and the 10.25% interest all adds up to only ~ $60,000... 

Now if you look at their site for brokers, the fees are the same except they recommend that the broker add another two-pt. origination fee, in my case another $8,000! If I do the loan without the broker I will spend about $60,000, or $68,000 if I use a broker. They also say that the broker can go as high as he wants as long as it doesn't exceed the maximum allowed by state law! If the broker wants, he can add additional closing cost and fees when he helps the client with the final mortgage. 

Would someone please tell me this is a joke? I'm like you Alex, I will be upset if I have to pay more than $20,000 for everything: All closing costs, inspections, fees, down payments, reserves, and all interest payments for a 12-month $400,000 loan, and I expect that $20,000 to include all costs for the final loan at a good rate!
 
Ray

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By Bob in katy, TX on 5/18/2008


Ray,

I don't think the rates you have listed are legal for a lending institution in the state of Texas to charge!  I will forward the rate sheet to:
Don Clemmer, Chief of Criminal Prosecution,
Office of the Attorney General State of Texas,
P O Box 12548,
Austin, TX 78711-2548
Email: CJID@oag.state.tx.us,
Phone: (512) 475-4220
to get his opinion. Looking at an origination and processing fee of 10 points or more for a broker-handled job of 18 months along with an interest rate of prime interest + 4 percent or 5 percent is like borrowing money from a pawn shop or the mafia. I'm speechless at the shame of this offering.

Can someone from Michigan check this company out?
 
Bob

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By Jeff in San Antonio, TX on 5/19/2008


Go Spurs Go!

You guys might want to try Vision Mortgage 210-348-0077 (armandobarbosa.com, Armando Barbosa is the contact).  They will not lend to owner-builders but, will lend to builders.  You have to get your TRCC license and then they will lend to you.  I do not remember the exact terms but they were not bad.  Becoming a builder is one of the hoops you have to jump through to be able to build your own home.  I just wish I could get my current home sold so that I could get started on building.


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By judy in burleson, TX on 10/3/2008


I am in the process of gathering bids to build my own home. Well, I built my own home in 2000 but now it is different in Texas. The banks are requiring a licensed builder to sign off on the interim loan paperwork.

Do all banks require this and do you know if I can register with the trcc and that be sufficient. Do you know any banks that do not require this?

Thanks!
Judy

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By Mike in Bonham, TX on 10/4/2008


Judy,

Believe it or not, its a Texas Constitutional thing called homestead.  If this is to be your primary homestead, then yes, it is required in order to satisfy the homestead and lien laws, regardless of who the bank is.

You can become a registered builder, but that won't solve your problem.  The owner of a property cannot be the GC on their own job is bank financing is involved.  As they say, Texas is a whole other country!

Where are you going to build and what technologies are you looking to use?

I'm trying to put together a seminar in the Houston/Galveston area on storm resistant and super energy-efficient housing.

- Mike

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By Michael Penn in Dripping Springs, TX on 10/4/2008


Judy and Mike,

I believe it's correct that Texas Homestead Law/Title Policy Practice in Texas does necessitate that an owner and a builder cannot be the same person, if there is external financing required. 

However, this permanent Texas Homestead Law/Title Policy Practice does NOT necessitate that the builder be registered with the TRCC.  Certainly the TRCC has it's requirements of professional builders. 

 And certainly most banks won't do owner-builder loans, and of those who will, most will require that the Builder of Record be licensed (with TRCC).  But many people have owner-built their homes in Texas, with only a "Straw Builder" or "Builder of Record" only, who was indeed a different person from the owner-builder, but was not a professional builder, or a owner-builder consultant, and not registered with TRCC.

In my case personally Capital One did the financing, and accepted my mother as Builder of record, and her only involvement was to sign papers at the one-time close, and at the conversion to permanent mortgage.  She's definitely not a professional builder.

Cap One isn't doing that now, and I assume it will be difficult to find a lender who'll work that way now, but I strongly suspect there's still some out there.  But understand you'll have to look hard, and most people (bankers, builders, consultants) will tell you can't do it, and they'll believe they're right.


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By Mike in Bonham, TX on 10/4/2008


Michael,

The issue is not that it can't be done in Texas with the homestead laws.  The issue is with the underwriters for the lending institutions.  They CAN lend money to a home owner to build their own home w/o a builder of record.  The issue is that if the owner defaults, the bank then cannot foreclose on the property.  I'm not an attorney, but I've beat my head on that wall many times.  There's nothing illegal about it.  Its just that in order to protect their assets, the banks won't do it.  This is because the courts strictly enforce and uphold a homeowners homestead rights, even if the homeowner agrees to waive them.  The banks require (by policy, not law) to use a third party.  Also by policy, more and more banks are requiring that the BOR be a registered builder.

Right now, things are getting so bad/tight, that some banks are requiring a performance bond by the builder in order for the homeowner to get the financing, even though the builder is not the one applying for the credit.  This adds about 10-20% to the cost of the home.



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By Bob in Ennis, TX on 11/12/2008


I'm still in the research phase of my home. I own my land free & clear. I have read some of the Texas laws about building. I'm not a lawyer so some things got a little fuzzy.  I did find a section that talked about building your own house. From what I understand, If the house you build as a owner/builder will be your primary residence, you do not need a registered builder to sign off on anything. If you sell your house within 10 years, you must disclose the house was owner built. From what I see is it has to do with the warranty period. I found this information in Texas HB730.

Now banks/lenders are a different story. They may have their own internal rules stating that you need to have a GC or project manager to get a loan. I don't believe that all lenders require this though. I'm going to do some more research.

I'll look into some of the lenders mentioned further up in this forum.

I'll let you know what I find out.

 


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By Bill in Irving, TX on 11/13/2008


Incorporate; that's how I did it.
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By DCG in Lago Vista, TX on 11/13/2008


That's a bit vague.  How does incorporating help?

Surely owner-builders can build and as I ready them today -- are not necessarily subject to TRCC inspection.

Getting a "straw man" as a builder would work - but that registered builder is open for at least of 10 years of liability on home issues. This becomes a problem if the house is resold.  I'm not sure how the guys like OBN are dealing with the liability if they're the builder of record...

Financing is an entirely different discussion.. :-)

 


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By Chris in Arlington, TX on 11/13/2008


The only thing preventing "owner-builders" from building their own home are regulations and policies within the financing world.  Most banks will not loan money to anyone building their own home, registered builder or not.  It has to do with the Homestead Laws, I am sure there are countless threads here about those.  Basically, the bank has to have someone (i.e. builder) in the middle between them and the owner or person who will "homestead" the property. 

There is nothing within TRCC preventing you from building your home, its all about how and where to get financing.  If you are paying cash out of pocket, then you can build your own home.

As far as the 10 year warranty goes, OBN is just like 99% of all the other custom builders in the state.  They sell a 3rd party warranty such as 2-10, Bonded Builders, Structsure, etc... As long as OBN or the builder meets a certain inspection schedule and can provide copies of those inspections, the third party company will warranty the home for the required 10 years.  By the way, these companies will also sell warranties to an individual who is building their own home.  Just contact them before you start to get their requirements and pricing.

Feel free to email me with any other questions.  I have built two homes for myself, both using OBN in the DFW area.

Good Luck! 


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By Bill in Irving, TX on 11/13/2008


The corporate entity acts as GC.  No third party straw man, and no paying a consulting fee.  It satisfies everyone.
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By Kay in Garland, TX on 11/13/2008


So the bank was OK with the project being built by a corporation like an LLC?  Were they aware that the LLC members were also the persons who were moving into the completed home?  Was the final mortgage then taken out in the owner-builder's name?  Which bank did you work with?
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By Mike in Bonham, TX on 11/13/2008


An LLC won't cut it.  It's a glorified sole proprietorship.  If the owner's role in the corporation is masked, then the bank won't know any better.  And if that is done deliberately, then it is considered loan fraud. 

If the bank issued the loan knowing the roles of all involved, then that's their decision to make.  I would not try to hide any relationships just to save a few bucks.

And I say that as the owner of  NTxHUB.  We've been doing this for years.

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By Bill in Irving, TX on 11/13/2008


Yes the bank knew it was a corporate entity of which I was one of the principles. I worked with First National Bank Southwest in Frisco. The bank's legal dept. made the suggestion. It ended up a jumbo loan, and the final mortgage was to me and my wife.

I imagine with credit being as tight as it is now, it will be more difficult to get such a loan. However, don't give up; I did it and you can too!

Good luck!

Bill


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By Kay in Garland, TX on 11/13/2008


We have not talked to anyone about finance yet.  We are still in the very early planning stage, but we have purchased our lot. 

I am glad to hear that at least one bank in the North Dallas area was willing to work with an O-B.  I will certainly ask the bank(s) if our company, 3DPlanView, LLC, is something that could help us get the loan processed.  

We may, or may not contract with a company like OBN or U-build-it.  We have contacted them, but have not really discussed the project yet.  I can see how they could come in handy. 

The home is going to be a "project house" for 3DPlanView LLC.  It will become part of our website. We do 3D images of floor plans for folks building their dream homes.  Now it is our turn. 


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By Dave in Boerne, TX on 11/14/2008


I have used just such an arrangement. My situation was that to 'sub-out' the trades to complete the project the bank required that I have a GC. My arrangement was that after all the necessary permits, insurance, appraisal and bids were final, and an 'amount to finance' was determined, the Bank facilitated the construction loan. A contract was drawn up between myself and the GC and approved by the bank. I handled all of the cash disbursement for materials and labor, based on receipts and invoices obtained from the GC. No funds above the budgeted amounts were to be spent unless approved through me first (we ultimately had to reallocate  some funds due to cost over runs).
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By Jeff in Paris, TX on 2/4/2009


In the very early stages of planning, doing as much research as I can.  The one thing that is making me nervous about owner-building, is finance.  From talking with a few people it sounds like for Texas, according to the Homestead Laws, you have to OWN a home in order to get financing for owner-builder construction.  I am nervous about this because of our situation, we DO own a home right now... but we're selling it.  The plan is to sell, live in my now-vacant grandparents house to save some money while building the new house.  I asked a guy at CTPloans.com, he said this:

"Odd as it may sound, yes it will DQ you from this program. Texas has very odd homestead laws and the owner-builder program has this crazy requirement."

Is this right?


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By Michael Penn in Dripping Springs, TX on 2/4/2009


No, that's not right.  Except of course I can imagine that "their program" might have that requirement--maybe they're set up to do financing on "second homes."

But it is true the part about Texas having unusual homestead laws, which along with title company practice in Texas does make things a little more challenging in Texas.  Mainly that if you're financing the construction, you will need to have a "Straw Builder" or "Builder of Record," not yourself.  Then the lender may have certain requirements about the Builder of Record, but that will vary depending on the lender.  Definitely pays to talk to several lenders: local banker/national banker, mortgage broker/direct mortgage lender, and lender attached to owner-builder consultant company.  They'll all have different constructions of what's required, what's legal, etc.


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By Jeff in Paris, TX on 2/4/2009


Thanks so much for the reply!

I did ask him if that was a blanket requirement of all lenders in Texas and he did say this:

I think anyone left doing O-B in Texas may require it, but I can’t speak for everyone. We had another program until a few months ago that had the exact opposite requirement for Texas – you could not own (without jumping through a bunch of hoops), so you never know what is out there. We have two programs left that will do O-B in Texas and both require it.

I did however talk to a local banker today (we're in a very, very small town), and I thought I'd ask her just out of curiosity, certainly thinking that she'd scoff at the idea.  She said, "Yeah, we do owner builder construction loans.  Technically, you have to have a general contractor, but... there's ways around that."  I said I had read online about someone having a family member signing on as the GC and she said, "Yeah, we've done some like that."

So I was very excited to hear that.  This conversation was before the email I received from the guy above, so I didn't have a chance to ask her if they required that.  Basically looks like it boils down to the individual lender. 

Thanks again!


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By George in Wharton, TX on 2/5/2009


My experience has been about the same.  However, with TRCC rules I think the "builder of record" may have to be registered, not mother-in-law.  Look TRCC up online and call them, they will answer questions about what they require.  I know Michael did it that way but I think their rules have changed.  If you have to get a builder of record who is TRCC registered then that poses a cascade of other issues.  The builder will be required to warrant for 10 years regardless if he is just a consultant or not.  I sold my house also with the same plan as yours.  Our title company will not issue title insurance unless there is a builder of record to sign the Texas Lien Waiver Contract.  Just my two cents.
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By Jeff in Paris, TX on 2/5/2009


Messing around on the TRCC's webpage, here's some info I found on owner-builder in the FAQ section:

I was told I can save money if I build my own house and just pay someone to consult with me about getting permits, finding subcontractors and checking on their work. Is this true?
Before you do this, you really need to know what you’re getting into. Keep in mind, it may cost much more than simply your initial time and effort.

If you sell the home without living in it for a year, the law requires you to provide the state’s set of minimum warranties to subsequent homeowners, just as if you were a builder for a living. That’s right: The state’s required minimum warranties are your responsibility if you don’t live in the home for at least a year.

The required set of minimum warranties includes:
• a one-year workmanship and materials warranty;
• a two-year mechanical and delivery system warranty;
• a ten-year structural warranty; and
• a ten-year warranty of habitability.

If you live in your home for more than a year, you are not required to provide any warranties to subsequent homeowners, but you will be competing in a market where other homes carry at least the state’s minimum-required warranties. You will also have to disclose to future potential buyers that the home does not carry the state-required minimum warranties.

FAQ - Builder/Remodeler Registration and Renewal

Are residential builders and remodelers required to register with the commission?
Yes, registration with the commission is required to operate legally as a residential builder or remodeler in Texas. A person must be at least 18 years of age and a citizen of the United States or a lawfully admitted alien at the time of registration in order to register. Additionally, the applicant must satisfy the commission that the applicant is honest, trustworthy and has integrity.

Who is exempt from registration?
An individual who builds his/her own home (alone or with the assistance of the individual's employees or independent contractors) and uses that home as his/her primary residence for at least one year after the completion or substantial completion of construction of the home;

 

Are any residential construction projects exempt from home registration?
A home built by an individual (either alone or with the help of the individual's employees or independent contractors) and used as the primary residence for at least one year after completion or substantial completion of construction is exempt from registration. Home improvement projects that do not change the square footage of the home's living space or an interior renovation that does not exceed $10,000 during a 12-month period are also exempt. Please note that the $10,000 threshold only applies to interior renovations, not material improvement projects.



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By DCG in Lago Vista, TX on 2/5/2009


I'll call attention to the fine print:
You're only going to be held to a 10-year warranty if you live in the home for under a year.  Most O-Bs are going to get at least a year in their home, if not, they should really be a registered builder anyway..

From trcc.state.tx.us/policy/faqs:
If you live in your home for more than a year, you are not required to provide any warranties to subsequent homeowners, but you will be competing in a market where other homes carry at least the state’s minimum-required warranties. You will also have to disclose to future potential buyers that the home does not carry the state-required minimum warranties.



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By Jeff in Paris, TX on 2/6/2009


I went to my local banker and he was under the impression there was a new "law" out requiring you to have a licensed builder/contractor when changing any living area square feet or doing a renovation in excess of $10,000.  He said it came down from his mortgagee department.  He said in the past they did "paper builders," just had a relative or so sign as the builder of record.  He also called the title company and they said, "Yeah, we don't do that anymore."

However, I called TRCC directly and spoke to a "registration specialist".  And here is what she said, "No, that is not right.  If you are an individual, building a home for yourself to be used as  your primary residence greater than one year, you do NOT have to register with the TRCC or register your house with the TRCC.  That thing they are referring to, the living area change and $10,000, only applies if you are building it for someone else.  So if you want to contract out building a house for your friend or family member, you do have to register.  Although, your lender or city in which you build might have this stipulation."

Basically for proof, she referred me to the FAQ section I posted above.  So there, that should settle it... from the TRCC's standpoint, you don't have to have a "licensed builder" or register your home with the state.

Also, just for information's sake... the "new law" he was referring to, all it was doing is reducing the $20,000 in construction/renovation to $10,000 for the requirements to register.  That went into effect 9/1/07.


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By Beverly in Austin, TX on 2/7/2009


Banks in Texas seem to insist that owners have a "registered builder" on board before they will approve a construction loan.  But, does anybody know whether banks would be okay with the owner  also being the "registered builder?"    Becoming a registered builder in Texas is a matter of filling in a one-page form with your name and contact info and a statement that you have never been convicted of a felony or a crime of moral turpitude and then paying the $500 registration fee.  I'm happy to do that IF my bank will then accept me as both the owner and the builder of record.  

I know that as the registered builder, I would be responsible for the state-mandated "warranties" (ranging from 1 to 10 years depending on the particular alleged defect) but I intend to live in the house till I die anyway. I certainly wouldn't ever bring any warranty complaints against myself!  LOL.  If I were die while any of the statutory warranty periods were still in effect, I suppose whoever wound up with my house could perhaps bring a complaint against my estate. But, that would mean they were bringing suit against the same estate that they inherited the house from... i.e., effectively suing themselves and any co-heirs.  

So, anybody ever go to a bank asking for a construction loan for a house they were O-B-ing but with a builder registration certificate in hand? How did the bank react?


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By James R. (Bucky) in Beaumont, TX on 2/8/2009


If you want to build houses legally in Texas for other people then register with the TRCC, but the homestead law in Texas will not allow you give up your first position right directly to the bank or any other lender. Some responsible person other than yourself must transfer that to the bank so that they (the Bank) have the first position. All others take a second or inferior position to the bank. That is the reality in our great State of Texas. To sum it up, if you must borrow to build in Texas, you must have someone other than yourself involved.  ABBA jrc


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By Beverly in Austin, TX on 2/8/2009


Bucky, I do appreciate your response but I'm not at all sure I understand it.  Can you explain further? 

First, I thought homestead law only applied to the one residence that I designated as my homestead... which, until this new house is built and ready for me to actually move into it, will continue to be the home I already own and am living in.  So, why would homestead law apply at all?

Second, even if the bank is concerned that I will designate my new house as my homestead when it is completed (which I do plan to do), wouldn't the fact that the bank lent the money to purchase and build the home mean that their lien is a "purchase money lien" and therefore an exception to the homestead exemption anyway?  In other words, as I understand it, homesteads CAN be foreclosed on to satisfy a purchase money liens... so it seems to me that the bank would still be protected. 

Also, wouldn't the banks lien be a pre-existing lien at the time I declared the property my homestead?  Surely one cannot just effectively make pre-existing liens go away by the simple act of declaring a property to be one's homestead?

I'm not saying you're not right.  But I just looked up and read the entire Texas Homestead Law in the Texas Property Code and read an article by Gerry Bayer (prof. of law) regarding homestead law.  Based on that reading, that I don't understand WHY a bank would be any less protected by me being my own registered builder than they would be if some other person were the registered builder. 

It sounds like you probably have first hand experience with this issue so I'm sure there must be some quirk here that I'm overlooking.  Can you clarify?

Thanks much

 


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By James R. (Bucky) in Beaumont, TX on 2/8/2009


I am sure I am telling you correctly, but you should visit with the lender you are planning to use and then first hand you will see what I am trying to explain.   Before the TRCC many people that have a friend or relative stand in as if they were the contractor when in reality the owner-builder was the contractor. The bank was satisfied as for as the first lien position was concerned. The first position is extremely important to banks and lenders. In Texas you as an individual cannot give a valid first lien on a homestead directly and that is what I was trying to say. It takes a third party.  I hope that helps. It seems to me that the banks jumped on the TRCC requirements to limit their liability.   ABBA jrc  (The photo is of me roofing our cabin that once stood in Caplen... now no more.)
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By Jeff in Paris, TX on 2/9/2009


I don't have much to contribute, but just to add to what James said, that's exactly what my lender told me when I visited with him about it this last week. They still have to have a "mechanics lien" on it; you can't go into contract with yourself. So there was to be a "paper builder" as they call it.


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By DCG in Lago Vista, TX on 2/10/2009


So what gets me in all this - you need a TRCC builder to get a loan.

If you're the TRCC lender of record, you're liable for a 10-year structural warranty on the residence.
How does OBN/UBI handle this condition?  They can arrange a release of liability with the owner-builder -- but successive owners clearly have someone to sue.

Many small builders get around this long term liability via an insurance policy on the structure, but I hear it's $4K-$5K for homes in the $250K-$400K range.

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By Doug in Austin, TX on 2/11/2009


For that kind of money, you can get your slab and frame engineered and inspected by the engineer (You should get the slab done at a minimum anyway).  That places the liability on them (I believe).  But, if a new owner sues the builder of record, I think they would then have to sue the engineer to get reimbursed. 

At least that is what I understand about it.

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By Jeff in Paris, TX on 2/11/2009


Here's my understanding, but I may be wrong....

According to the TRCC, if you are building your home for yourself and live in it a year, you do NOT have to have a TRCC builder of record.  All of that depends on your lender, city/county requirements.  If your lender requires a TRCC registered builder of record, then all the details I guess you'd have to ask them.

But if your lender just requires A builder of record, doesn't have to be registered, then you do NOT have to have the house registered or guaranteed under warranty (IF you live in it at least a year... if less than a year, then you have to give a warranty.) 

So, if my wife and I built a home... and my lender only requires a builder of record, I'll get my father-in-law to sign as the BOR.  We build the house ourselves, live in it at least a year, and we do not have to warranty the house.  Only thing is, if we sell it before 10 years, we have to disclose that it has does not have the state minimum warranty.

I may be wrong in my understanding of it all, but I'm basing it on this (directly from the TRCC's website):

I’m building my own house. Do I have to warrant it?

If you sell the home without living in it for a year, the law requires you to provide the state’s set of minimum warranties to all subsequent homeowners. That’s right: The state’s required minimum warranties are your responsibility if you don’t live in the home for at least a year. Depending upon your circumstances, you may or may not have to register as a builder.

If you live in the home for more than a year, you don’t have to provide the minimum warranties. However, you must disclose in your contract for sale that the home does not come with the state-required minimum warranties


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By DCG in Lago Vista, TX on 2/11/2009


Who isn't having their slab engineered?

Jeff - I'm not sure you can have a builder of record and have that builder NOT be registered with the TRCC.  If lenders are forcing you to have a builder of record, they're also forcing someone into a position of liability...

I'm curious about OBN/UBI - because they're in this position quite a bit.  They're the builder of record on quite a few O-B homes...

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By Jeff in Paris, TX on 2/11/2009


DCG-

Well, from what I've heard that they always used to do is just have a "paper builder" or just a name to put on the papers as the "builder of record," just like someone on here had their mother down as the BOR, but they had no building experience at all and certainly was not registered as a builder w/the TRCC.  True, they are going to be held liable if the project isn't completed or while the project is going on.  But it's dependent on the lender to require that BOR to be registered or not.  The TRCC does not require them to be registered, in fact, the TRCC doesn't even require you to have a BOR... it's just the bank.

The banker I'm wanting to work with always did the "paper builder" method for owner-builders, and he thought that there is a new law with the TRCC requiring them to be registered, but that is not the case.  Its up to the lender and the local building code requirements.

I talk as if I am positive about all of this, but I'm not... I've barely got my toes wet in owner-building but this is just the information that I have gathered thus far. 

Jeff


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By Jeff in Paris, TX on 2/23/2009


Man this is tough!  My preferred hometown lender is asking around to his higher-ups about doing owner-build financing in light of today's "new laws."  He told me I should contact the title company to see if they would even do it, because if they don't... then we might as well forget about it since it won't matter what lender we use.

So I called the title company, spoke to the person there and she told me the same thing most lenders have, "The new law says you have to have a licensed builder... etc."  I told her about the exception to the law and she said she'd call her attorney and call back.  She called back and said her attorney said they still require a licensed builder.

So...what do I do now?  I guess I have two options left?

1)  Hire an owner-building consultant group (not really excited about this option since I've come to determine I won't really benefit that much... if anyone has any high recommendations, I'm all ears...).

2)  Convince an existing builder w/a TRCC number to "consult" on my project for a little cash to sign the papers?

How would I go about doing that and how much should I offer for them to take up that much liability, would they be crazy to accept that much liability for $1,500-$2,000?  I knew that this would be tough, but I'm hitting a wall in every direction I turn.

*By the way, if anyone is still looking for O-B Financing but has a builder w/a TRCC number, Brian at Builder's Priority Mortgage is still doing O-B loans, here are his requirements:

Approval of builder of record (in Texas a builder needs to be licensed at the state level to sign the builder contract, you can still be the general contractor and manage money and subs, but builder of record will be “on the line” with the lender.

Under 40% debt-to-income (under some circumstances up to 45% and the formulas are not intuitive).

10% of loan in liquid/semi-liquid assets (can be down to 5% but needs override approval).

$0 at close (in most cases) but you need 10% of loan amt for the project to be successful (5% may work, but not ideal).

700 middle mortgage credit score (one lender goes down to 640 but other requirements are involved).

Appraisal – loan up to 90% of appraised house-land value (one lender goes up to 85%).

Cost – loan up to 100% of cost of land/construction/closing-costs combined (one lender goes to 85% of the total “cost to acquire”).

Rates – 5.5% to 8.5% (most folks are in the 5.5% to 7% range).

 


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By Jason in Burleson, TX on 2/23/2009


Jeff, is your lot outside of the city limits?  If so, have you checked with any of the Texas Farm Credit System-affiliated banks?  When we were looking for financing they seemed much more flexible in their requirements.

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By Jeff in Paris, TX on 2/23/2009


No, unfortunately it's probably within a rock's throw of the city limit.  It's a new addition just added, so it's zoned for residential w/electricity, sewer, and water hook ups.

I talked w/another local banker and she said she's done some before just having a local builder act as a consultant.  Anyone here ever hired a GC as a site supervisor or consultant to sign the papers... how much did you offer them?  Thanks!


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By DCG in Lago Vista, TX on 2/25/2009


My wife works for a title company -- I don't see why they would care who the registered/non-registered builder is. They have very little to do with underwriting.

The TRCC requirements have obviously put owner-builders in a difficult position, which is going to push more and more business to builders -- perhaps an intended or unintended consequence of the legislation.

I just spoke with another owner-builder friend of mine.  He's cash financed, but I asked him how he's handling liability.  Basically, he's contracted with a registered builder/GC that will handle all of the construction up to the "dry-in" point.  In terms of structural warranty, this is the most important part of the project.  In exchange for getting this work, he's willing to sign up for the "builder of record" and be on the hook for structural warranty...   Other O-Bs seeking financing might consider this type of arrangement if you're having financing problems.


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By Alex in Houston, TX on 2/25/2009


dcg,

Have you talked with OBCH?  They offer programs with great construction loan rates that include registration for the ten-year warranty.  They may cover your area, obchinc.com.

Good luck. 

Alex

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By George in Wharton, TX on 2/26/2009


Jeff,

Brian in Manvel (member on this site) has agreed to supervise my project for a fee. He is a registered builder.


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By DCG in Lago Vista, TX on 2/26/2009


Alex,

I'm set.  I've worked with a GC/TRCC registered builder.  In exchange, I give up a lot of control.

OBCH looks like OBN/UBI.  I wouldn't try them without a lot of references.  They say the do financing too -- so watch out for fees.  Registered builders in my area are paying .5-1% over prime, last time I checked.

Per their website:
"OBCH serves as your Custom Home Building Consultant during all phases of the home building process, while the owner serves as the general contractor and builder. "

Course, this doesn't mean that they're not the builder of record.

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By ROBERT in VICTORIA, TX on 4/24/2009


Does anyone have a lead on a lending institution willing to provide financing at a reasonable fee?

Local banks are breaking me over on fees and more before the actual percentage on loan begins.  Help.

Robert

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By Grant in Woodlands, TX on 4/28/2009


Robert, try Builders Priority Mortgage in Magnolia, Texas.  We worked with Brian. I think the rate was 5.5% and 1.5 points.  Sorry, I can't locate the phone number.

Good luck!

Grant

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By Lori in Universal City, TX on 5/14/2009


We are working with two mortgage brokers here in San Antonio.  They both were offering rates around 5%.  PM me for the names!

Lori


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By Jamie in Cedar Park, TX on 5/15/2009


We are working with a local bank here in Austin called Prosperity Bank, offering rates in the 5s.
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By Marty in Helotes, TX on 5/15/2009


Hi Lori,

Can you give me the names of the banks giving the loans to you for building?   Did you have to have a builder of record?

Thanks,

Martha in San Antonio


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By Angela in Fort Worth, TX on 7/19/2009


I know this is an old thread, but just thought I'd add what I was told last week. The local bank that I'm working with for our raw land loan was talking to me about construction loans. They have a one-time close, which also rolls over the raw land loan also with pretty good rates (6.75% I believe). I mentioned that I am going to be my own contractor, and that was a no-go with them. They said they need a registered builder for me to get a loan. Then I mentioned that my future father-in-law owns a construction company and is getting licensed as a builder ($500 and  a one-page form). Then they said that he needed experience as a homebuilder and I said that he built his own home and works with others that build homes. They said that might work but they would have to investigate to make sure he is qualified/experienced.

So when I formally present my plans to the bank I will just say it is under my father-in-law's company. They are making O-Bs jump through hoops now. Maybe O-Bs can get someone to register as a builder for the loan and hopefully the bank will just take the registration without investigating too much.

Just the little bit that I have been told. :)

Angela


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By Roger in Sinton, TX on 9/9/2009


My wife and I are battling the financing war and are getting tired after about four months of NO from banks.  I have a couple of banks who will only finance 80% of actual construction costs, but we do not have the money to do that.  We need 100% financing or close to it.  Can anyone help?


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By DCG in Lago Vista, TX on 9/9/2009


I don't think you'll find 100% construction cost financing outside of being a registered builder with a bank relationship and extensive track record. 

You may have some luck if you can show equity into the project - i.e., if you own the land.

No one is taking risks with true 100% financing these days, it's a huge risk for a lender - especially with an owner-builder where one mistake can mean big over-budget and instant negative equity.

Do you have some form of equity in the property?  e.g. - own the land, already have a foundation up, etc.?

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By Roger in Sinton, TX on 9/9/2009


We have purchased our land, and have about $6,000 in equity; plus we have already paid out of pocket another $5,000.  That is the extent of our equity.  I plan on doing a lot of work myself and that would make up the rest of the equity needed to get an 80% loan to value mortgage.
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By Michael Penn in Dripping Springs, TX on 9/9/2009


Roger,

If you have a lender that really will do your deal and provide financing of 80% of your build at a fair interest rate, that doesn't sound too bad in this environment.

You mentioned that you planned to contribute a lot of sweat equity. That's good, but your lender probably doesn't give you much if any credit for that possibility. But if not, maybe that's not so bad, because you can still save the money, and not have to spend it, and therefore not need the loan for that part of it.

Of course there's lots to consider there. Can you really do that much of the labor? And can you do it in a timely way, so that your build doesn't drag on too long with extended interest costs? And even if you can do the work, can you afford that much distraction from the your supervisory responsibility as your own general contractor? Not saying you can't do it--just beware all you're getting into.

But if you do decide to proceed on that basis, but still look a little short on the financing, be sure to consider all your resources. Do you have a lot of credit card credit lines that you could use during the construction (that you would then pay off when you convert to permanent mortgage)? Can you establish enough credit with lumberyards, Home Depot, Lowe's, etc. to work out enough bridge financing to get you over the top?

I used credit cards and Home Depot and Lowe's credit extensively during my build, as a convenience with managing my draws, and also to delay incurring the interest on my construction loan. Of course this worked because I did have plenty of cc credit, built up from using it in my business previously, and was able to manage it at average interest rate less than my construction loan rate.


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By DCG in Lago Vista, TX on 9/9/2009


Roger, I don't know of any banks that will go for that type of situation, unless you can document the $11K in equity and it represents 10-20% of your overall construction costs.

Your other option is a hard-money loan, but most of those lenders are going to want to see some sort of positive equity position also.  They also charge significant points up front, significant interest, and have a short balloon term.

When I started my project, I was warned not to get too far out in front of the project in terms of cash position as some lenders would not count all of the up-front cash towards equity.  In particular, I had built a pole barn, installed a water well, and done some initial grading.  I was out about $35K in cash.  What lenders want is a 20% down deposit in terms of cash, and a draw schedule.

Are you a registered builder?  Even if you have 20% down - most banks won't let you build your own house unless you're registered with the TRCC as a homebuilder. 

Note: the above poster has some very good points.  You'd need to find a lender that would do interim-to-perm financing they may only give you credit for actual "cost" of construction... that is, many many lenders would not count your sweat equity.  I ran into this problem with several large lenders when doing perm financing on my home.  Most of them wanted to give me the LESSER of appraised value or actual "acquisition cost" of the home and land itself - they were not going to count the other improvements ($35K) that we put into the property.  We had to shop around for a lender that would loan on appraised value.

Each time you refinance, it costs a lot of money... OBN's will typically finance twice.

One option would be to work with a GC or registered builder to be the straw man on your project.  The only problem with this is that the registered builder is going to have to comply with all TRCC codes and provide a 20-year structural warranty on a home that he's really NOT building... Many GCs/ builders will object to this.

Also remember that labor is cheap in TX.  I found that things like framing, drywall, and painting were not good places for me to spend any of my time - the margin on the labor and the cost per dollar was simply too low.  I did a lot of wiring, a lot of finish work, and a lot of odds and ends. Our appraisal turned out great - after we got a lender to accept it and a specialty appraiser to justify our home in a rural area that was hard to provide comps... Lots of hoops in the best of circumstances.

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By Baron in Houston, TX on 10/15/2009


How are you today, dcg? I was just reading your post. I'm 14 months away from the building process. Any tips to offer? I'm lost and needing a little help and anything you or anyone else can offer as far as where I need to start or what I need to do.
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By Aquaman in Houston, TX on 10/16/2009


dcg,

The TRCC is no more, and no one need register with them as of September.  If you are in the county, builders are still required to have third-party inspectors and I recommend that to all persons building a new home... not just "homebuilders".


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By Baron in Houston, TX on 10/16/2009


I have already purchased my property. Do I need to start looking for a contractor?
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By Jeff in Paris, TX on 11/2/2009


So I wonder if this will have any effect on financial institutions?  Now there is no TRCC for a builder to be "registered"?
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By Roger in Sinton, TX on 12/31/2009


I found a possible finance option at ownerbuilderfinance.com.  They offer a package similar to what I am familiar with from UBuildIt or Owner Builder Network, except the builder of record would be Equity Homes.  Has anyone had any experience with these people?
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By DCG in Lago Vista, TX on 1/1/2010


Roger, Where are you building?

Did for feedback - or references on these guys, make them give you a project list of ALL projects in the last 9 months or so.  Not just reference projects.

Their BBB seal is real, so that's good, but it doesn't really mean anything.

They're owned and incorporated out of MI, kinda odd for a Texas construction company.

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By Roger in Sinton, TX on 1/4/2010


We are building in Sinton, TX which is near Corpus Christi.

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By Grant in Woodlands, TX on 1/4/2010


Roger, we contacted these guys when we got our construction loan in Texas. They quoted fees that were very high, and they required lots of info before they would give me the number of points and total closing cost (it was something like three points)... Let everyone know what your final estimated closing costs are when they finally break the news to you... let's hope they now have lower costs... Best, Grant

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By Baron in Houston, TX on 1/12/2010


Has anyone used UBuildIt? If so, let me know how the process with UBuildIt went.  
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By Brian in Houston, TX on 3/29/2011


Anyone know of current O-B financing out there?

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By Doug in Fort Worth, TX on 3/30/2011


Hey Guys,

I highly recommend you look at a "One-Time Closing" from Colonial Mortgage cnmcs.com/tx/hul. They also have construction loans. I have dealt with them in the past, and they are great.

The one-time closing is a loan where the construction and the permanent mortgage loan is together in one closing, saving you time and lotsa money. However, I am not sure if you will be able to get a loan without a "Builder of Record", which I have also been involved with.

Doug


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By Brian in Houston, TX on 3/31/2011


They only have 80% construction loans, do you know of anyone else for TX?

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By Arne in Houston, TX on 4/1/2011


BBVA Compass bank does construction loans wrapped up with a one-time close.


Construction loans are never done at 100% for a multitude of reasons.

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By Roger in Sinton, TX on 4/3/2011


My wife and I fought with this for a year. Finally, we found a local contractor whom we paid a fee to be our builder of record. Then we had the problem of only 80% financing. We then talked to a bank that would do 100% financing if we got a mortgage company to provide a commitment letter. The mortgage broker charged us 1% fee up front to do this, but it was credited back when we did the final mortgage. It worked well for us. Good luck to you.
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By Leon on 12/15/2012


Does anyone know of any banks offering a construction loan for an owner-builder in Montgomery County or Houston area? I really don't want to go through an owner-builder network. I feel like I should just pay a builder to build my home if I am going to do something like that.

Thanks,

Leon
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By Leon on 12/15/2012


One more question. Does anyone know of any lender out there in Montgomery County or Houston, TX area that offers construction loans, but does not have qualifications for the builder of record? I am having trouble finding a construction loan that will allow me to be the owner-builder. The only thing I can think of is just getting one of my friends to sign on as the builder of record, but I am finding a lot of banks have requirements on who can be the builder of record. Any help would be deeply appreciated.


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By Grant in Woodlands, TX on 1/3/2013


Why not check out builderofrecord.com? They have a fee, but I guarantee I saved plenty...

Good shopping,

Grant

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By sabrina in los fresnos, TX on 5/19/2016


 It's 2016 and it looks like the last post was made in 2013 and I am now wondering if more lenders are starting to lend money to owner-builders? And what companies should we look at? We want to build in South Texas and I really want to owner-build. We don't have any UBuildIt or similar companies in our area to help us out (which stinks). 
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By James in Beaumont, TX on 5/20/2016


If you seek regular financing from regular channels, Bank of America, Wells Fargo, Chase, etc. or your local credit union, you will have to have a Contractor of Record (Builder of Record). Someone other than yourself. Like it or not, TEXAS is a true homestead state and you are not allowed to place a lien on your own property by yourself. (Like protecting you from yourself). You can give a lien to another person or entity and they transfer that lien to the lender. If this is not done, you do not have to pay them back. That is the essence of the homestead law.

Shop around but be prepared to supply the Contractor or Builder of Record who will either assist you with your building or actually do some work. Now if you have saved more than enough to build without a loan, get started; but if you run out of money, your projects stops. Once you have a completed home that you can and do move into you can apply for a home equity loan or a total refinance. Obtaining 80% of appraised value can qualify for home equity or up to 100% for a VA or USDA loan or 96.5% or 97% for a FHA loan or 95% for a conventional loan. But you must start with a Contractor or Builder of Record.

P.S.: That completed home I mentioned must be complete: no unfurnished areas; otherwise, the appraiser will call that out to the lender. You can get by some of the time with no floor covering but not much else.

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By Tigger on 6/30/2016


Do you'll have something like this in the Dallas-Fort Worth area ?
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