Builder Delay On Custom Home Build With Construction Loan Maturing

Transition1

LoanSafe Member
Apr 12, 2020
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Hello everyone.
I’m new to the forum with a worrisome situation and am looking for advice.
My wife and I have been building a custom home with a lesser known builder in town(New Mexico).
We have had trouble with the contractor who seems to be slow rolling the build. Perhaps because our payment situation allowed him to obtain more loans to build other properties or for a possibly more nefarious reason.
We have a 9 month contract and construction loan with a bank for which we have already had to ask a 60 day extension. We are transitioning to permanent financing with another lender. We are qualified and locked.
Our construction loan matures in 8 days.
We have been pressing our builder to complete the build but we are running into more of the same behavior...he hasn’t ordered plumbing supplies, he keeps making mistakes and forgets what has been agreed to. All of it has cost valuable time. He represented that it would be a 6-7 month build as we were one of his first clients after his building some nice spec homes. We agreed to a 9 month contract just to provide buffer, but he has well exceeded that(11 months).
We are getting close to finishing, but it still looks like he will not complete in time and I will have to ask for another extension.
We are fully paid up on all interest charges on the construction loan and have a lot of money invested of our own.
My worry is about what to do if the construction loan company denies the extension to finish up. We might need max 30 days, but the builder and his partner made a case for us to use their lender because they were already established with them(Melbourne Bank in New Mexico) and my suspicious side is worried that the builder may be delaying to exceed the maturity date to allow a foreclosure by the bank. They seem to be a little worrisome in their behavior as the project has gone along. Many other things were misstated and the relationship between builder and bank seems a little too cozy.
Does anyone have legal experience in such a matter?
We have no problem making any of our payments, and as I said, we are already qualified and locked with our permanent mortgage company, but don’t have enough to just pay off the entire construction loan and fire them if needed nor can the permanent mortgage company be able to pick up the loan with the house not complete.
I’m looking for advice in how to handle a “no extension” decision, just in case they disapprove or a last minute increase in builder stated cost exceeds our debt to income limit because our appraisal came in quite a bit higher than contract cost.
They have built a nice house until now, but it’s starting to feel like a set up.
Any experience, in this type of situation or particularly legal expertise especially in protections would be very much appreciated!
Thank you!
Transition1
 
C

Chasegame two

Guest
Hello everyone.
I’m new to the forum with a worrisome situation and am looking for advice.
My wife and I have been building a custom home with a lesser known builder in town(New Mexico).
We have had trouble with the contractor who seems to be slow rolling the build. Perhaps because our payment situation allowed him to obtain more loans to build other properties or for a possibly more nefarious reason.
We have a 9 month contract and construction loan with a bank for which we have already had to ask a 60 day extension. We are transitioning to permanent financing with another lender. We are qualified and locked.
Our construction loan matures in 8 days.
We have been pressing our builder to complete the build but we are running into more of the same behavior...he hasn’t ordered plumbing supplies, he keeps making mistakes and forgets what has been agreed to. All of it has cost valuable time. He represented that it would be a 6-7 month build as we were one of his first clients after his building some nice spec homes. We agreed to a 9 month contract just to provide buffer, but he has well exceeded that(11 months).
We are getting close to finishing, but it still looks like he will not complete in time and I will have to ask for another extension.
We are fully paid up on all interest charges on the construction loan and have a lot of money invested of our own.
My worry is about what to do if the construction loan company denies the extension to finish up. We might need max 30 days, but the builder and his partner made a case for us to use their lender because they were already established with them(Melbourne Bank in New Mexico) and my suspicious side is worried that the builder may be delaying to exceed the maturity date to allow a foreclosure by the bank. They seem to be a little worrisome in their behavior as the project has gone along. Many other things were misstated and the relationship between builder and bank seems a little too cozy.
Does anyone have legal experience in such a matter?
We have no problem making any of our payments, and as I said, we are already qualified and locked with our permanent mortgage company, but don’t have enough to just pay off the entire construction loan and fire them if needed nor can the permanent mortgage company be able to pick up the loan with the house not complete.
I’m looking for advice in how to handle a “no extension” decision, just in case they disapprove or a last minute increase in builder stated cost exceeds our debt to income limit because our appraisal came in quite a bit higher than contract cost.
They have built a nice house until now, but it’s starting to feel like a set up.
Any experience, in this type of situation or particularly legal expertise especially in protections would be very much appreciated!
Thank you!
Transition1
I'm a contractor/builder/investor since 1981. Call the bank manager directly and be firm about your situation, suspicion and your displeasure with the builder that is/has promoted his bank. Ask for a resolution within 48 hrs or 'you're going legal'.

Regardless if they respond or not, my advice would be to also, immediately, get a referral to the most feared, big city law firm you can find that has construction law type experience,. (Your inexpensive local hometown sole proprietor lawyer or family lawyer person will not be effective}. Your consultation with the law firm won't cost you anything. What you need from them is a simple letter addressed to both this bank manager and to the builder. It must be to both. It should identify the circumstances and threaten (hate to use that term but oh well for them) appropriate actions including local media notification (they will freak out more to this than even legal stuff) about your situation. It should include an expected timeline for your desired outcome (90 day extension, construction completion date etc). Cost of this to you will probably be less than $500. Ask the law firm to send it certified mail to both of them.

Trust me, your initial call to the bank will result in them calling the builder. Then, your banker and builder getting a certified letter from Big, Mean & Nasty Law will send them the signal that you're not fooling around.

If you decide that you don't like operating this way, or, you feel this is too aggressive then be prepared for both the builder and banker to view you as 'weak' and your situation to continue as is.

Best of luck. Let us know how this works out!
 
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