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Douglas Petersen's Advice

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  • 3 Contributions
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Douglas Petersen wrote:

What are potential risks to lending the equity from my land to another investor?

Answer
Your risk is that you could lose your land.From your description it appears that the construction is on another parcel of land, not yours where you would subordinate to the construction loan. In this case it appears that the investor's lender does not have enough equity for the construction loan and seeks cash or equity in something they are willing to use as additional collateral or for an abundance of caution. Then comes the question of the construction loan. Is it residential, commercial, land development or a combination thereof. The ultimate liquidity of the construction project would be a key factor in my decision if I were in your situation. What legal document does the investor propose to use to collateralize your property for his loan? Do you get a junior lien on his construction project as consideration for using your equity in addition to any fee? And if so, are you prepared to foreclose and pay off the construction loan should things fail? These are all questions I would be asking and would want resolved prior to such an arrangement. My advice is to get a good real estate attorney since this type of transaction is not generally covered in state approved real estate contracts. I have been in the development business for many years and would not enter into such an arrangement without a solid attorney drawn contract that would protect my equity should something not work as planned. 
May 05 2013
(0)

i am looking for a house, however my realtor wants me to increase the offer to the listing price,

Answer
Depending on the general price range of the homes you are seeking, it may not be a bad decision to increase your offer to asking price. We all understand there is an inventory shortage in many locations and if you want to buy in that location you must pay the market price and in some cases it may be more than asking price. The positive is that with interest rates at historical lows, it may make sense to move forward with a reasonable offer if the property has been priced fairly. Ask your Realtor to do a market analysis to get a good idea of recent sold listings and check Zillow for the trend in your location. This may help you make a decision regarding paying asking price or higher in order to get the property you want. If you are not successful on one or more offers, just be patient. Like a friend of mine once said " Buying a house is like waiting for a bus. If you don't get the one you planned for, just wait and another one will come along shortly." 
May 05 2013
(1)

why is my zestimate much higher than my appraisal, average home price in zip code and village?

Answer
I have had a similar experience in the past where there is conflicting estimates of property value. I tend to seek zestimates to help with city and neighborhood trends and not necessarily as a true value based upon an appraisal of the property. I have also noticed that neighborhoods where there is a lot of activity of similar models, it seems that estimates may be easier to determine using Zillow. I believe the Zillow information is extremely helpful and informative, but it is only one tool in the toolbox when it comes to a local market analysis of the home.
September 19 2011
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