# Bare Land Loans



## tygrus (Mar 13, 2012)

For any RE experts. I have bought bare farmland before and the bank has financed me based on what crop I could likely grow, but how does it work for something like a city lot that you want to build on. Say I own a $100k lot and want to put a $300k home on it. Can the lot alone with nothing on it be used as security? A credit line wouldn't be enough money to complete the house. Even home builders don't take enough funds from the buyer to complete the entire structure. How is the rest financed?


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## nobleea (Oct 11, 2013)

tygrus said:


> For any RE experts. I have bought bare farmland before and the bank has financed me based on what crop I could likely grow, but how does it work for something like a city lot that you want to build on. Say I own a $100k lot and want to put a $300k home on it. Can the lot alone with nothing on it be used as security? A credit line wouldn't be enough money to complete the house. Even home builders don't take enough funds from the buyer to complete the entire structure. How is the rest financed?


If you own the 100K lot outright, you can probably get a mortgage on it for 50% of the value, assuming the FMV of the lot if 100K.
Or you can get a construction mortgage for the completed assembly of house+lot which would be up to 80% of the value of completed house+lot.


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## birdman (Feb 12, 2013)

Well, when I was in the business you could and expect you still can but may have to shop around a bit. It may be dependent on the home being built on a firm price contract by a reputable builder and funds would be advanced on a "cost to complete" basis, in other words the undrawn portion of the loan would always have to be sufficient for you to complete the project. We suggest you carry a good reserve for cost overuns. There could be extra costs involved for progress inspections and perhaps bank fees. Using your numbers, the lot would be the 25% down payment on the finished product. You net worth, experience, banking relationship, etc would also come into play.


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## steve41 (Apr 18, 2009)

My property (7000 ft lot) is assessed at 3 Mil. Of that, 35K is house, remainder is lot value. Vancouver realestate wackiness.


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## Mukhang pera (Feb 26, 2016)

My experience with big Canadian banks is they will ask for an appraisal of the lot, then an appraisal projecting the value of the lot with the proposed improvements on said lot. 

So, for example, if the lot appraises at $100,000 and the finished house and lot at $600,000, the bank might agree to, say, a mortgage of $500,000, to be drawn in tranches as the work progresses. You would get something like an advance of $100,000 once foundations are complete, another $100,000 at lockup, a further $100,000 on completion of interior finishing and the balance on full completion, including landscaping and issuance of an occupancy permit.


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## steve41 (Apr 18, 2009)

In some cases, the bare lot is worth more than lot with house. Rich Chinese buyers are averse to living in a house that has already been lived in.... they will tear down the house and rebuild. Unless they are parking their money, in which case they will leave it vacant.


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## tygrus (Mar 13, 2012)

steve41 said:


> My property (7000 ft lot) is assessed at 3 Mil. Of that, 35K is house, remainder is lot value. Vancouver realestate wackiness.


Thats the same value as my 1200 acres of sask farmland. Too bad it wasnt located somewhere in the GVA.

Steve, you aren't going to sell at those valuations?


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## steve41 (Apr 18, 2009)

What would I do with the $? Sit on a cruise ship making small talk with a senile retiree, or driving a new JAG? At my age.... I don't think so. I am happy where I am in the middle of paradise. My kids will need the money, anyway.


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## Mukhang pera (Feb 26, 2016)

Steve, I am guessing your 7,000 square foot lot assessed at 3 mil is not on Hornby Is., as per your profile. But that would be closer to the middle of paradise than Vancouver. Vancouver is okay as big cities go, but I don't know about "paradise".


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## tygrus (Mar 13, 2012)

steve41 said:


> What would I do with the $? Sit on a cruise ship making small talk with a senile retiree, or driving a new JAG? At my age.... I don't think so. I am happy where I am in the middle of paradise. My kids will need the money, anyway.


Well you could keep your island place and buy a million dollar home in cali and a million dollar yacht to sail between and put the last million in a diversified portfolio for your kids.


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## steve41 (Apr 18, 2009)

You are right. I have a house in West Van and a cabin on Hornby. Luckily, on Hornby you don't need to speak Farsi, Mandarin or Cantonese, so I choose to live here.


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## Mukhang pera (Feb 26, 2016)

That too is among the reasons why I chose to exit Vancouver to live on the islands.


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