ᐅ Process for Purchase, Demolition, and New Construction + Is This Timeline Feasible?

NewHouseAppear schrieb:

What discourages me is the long process of transferring the land registry to our name and dealing with the demolition companies. They say October is still some time away, but if we can only start once the land registry is actually transferred, the timeline could still be tight.

There is the legal transfer = registration of ownership in the land registry, and there is the economic transfer. The economic transfer usually happens upon payment of the purchase price. From that point on, you could and should take care of the house/land yourselves = ancillary costs etc. would be your responsibility. From then on, you could also proceed with demolition (permit required? If so, you would need to coordinate with the previous owner).

NewHouseAppear schrieb:

Our total budget is 750 k€ and we are putting in about 230 plus demolition as equity, the rest will be financed. Because there was such a long gap between buying the old house and starting the new build, the Dr. Klein advisor suggested the easiest way would be to pay for the old house and demolition in cash, have that recorded as “already paid equity from the total amount” with the bank, and finance the rest through the bank to get back to our original plan.

Find a proper advisor, not a salesman. That is nonsense. You cannot “register” equity with the bank. No matter what, the bank sees that your equity = the land is already owned by you, regardless of when or how it was acquired. The rest of the equity (the “already spent money”) can also be easily documented. Simply put, you go to the bank in summer with a paid-off plot of land and say you need 520 k€ (about $570,000) for the house construction.

Thank you! That was just Dr. Klein for now. The conversation with Baufi24 was still quite general, and we will probably schedule at least two more appointments with our house banks (VR Bank and Consorsbank).

Demolition is exempt from requiring a building permit/planning permission; we have already confirmed this ourselves with the building authority.

Many thanks again to everyone who replied so quickly, and have a great Sunday!

At the end of the day, none of this really matters much so far.

You need a plan of what you want to build in a non-final but concrete form. For example, a two-story single-family house, basement, specific dimensions, features, etc. Based on this, the bank calculates the value for their internal assessment. Whether one more window is added or a wall is moved by one meter (3 feet) isn’t particularly important.

The next point is how the land is valued. There are different approaches for this, which can vary from bank to bank and serve as the basis for their internal calculations.

Simple example:
The bank determines the house in the desired form to be worth $500,000, the land after demolition at $150,000, so your project has a total value of $650,000.

After that, the calculation is made for how much loan you will need. In your case, $520,000 for the house, and the land has already been paid for. This means the $520,000 will be registered as a mortgage.

The next step concerns the loan-to-value ratio and the interest rate you will receive (term and other factors naturally influence this): The security for the bank would be the difference of $650,000 - $520,000, so they could consider this $130,000 as equity or already paid security.

The fact that you paid significantly more out of your own pocket unfortunately does not count as security for the bank because the money has simply been lost, just like the house that stood there before. In this case, these are unfortunately just costs incurred but no usable collateral.

Thanks for the explanations! Unfortunately, I’m not very experienced with this topic. 🙂 You never stop learning!

We already have a rough plan regarding the number of floors, basement, and dimensions. We are now waiting for the next draft from the architect and will then address the financing in the summer.