Game Of Loans

‘systematic greed at the expense of financial integrity and stability’


When the current economic crisis began in 2008, at least one hundred of the biggest Banks in the US had construction and lending departments. As the economic crisis evolved, all of these Banks shut down their vacant lot and construction lending divisions. As of today, not much has changed. With the current government rules so harsh on regular lending, coupled with fears of making bad loans, Banks haveĀ been hesitant to venture back into the game of making land loans.

If you want to buy a vacant lot and build your own home right now your timing could not be better. Although it is difficult to find vacant land and construction financing, it is not impossible. Lending rates today are as low as 3.75% for vacant lots and 3.00% for construction lending. When looking to buy land, you need to investigate the lot thoroughly prior to getting funding. The investigation must include questions such as; how much acreage is included in the lot? Are their multiple APN numbers (assessor parcel numbers) with this lot? What is the zoning of this lot? (residential zoning will be accessible, but agricultural will be difficult for lending) Does the property ‘percolate’ for septic systems or does the lot have direct access to the local sewer system? Is water provided by a local water company or will you have to drill a well? Is water available by well? Are utilities able to be hooked up, or will you have to pay the local company to bring power to the site? Is the lot burdened by easements? If so, how will those easements affect your build? What city ordinances will be applied to the lot? What are the exact boundaries of the lot?

What about the soils and topography of the site? Are you dealing with a ‘cut’ site where the lot is graded and ‘cut’ right out of the hill, or do you have ‘fill’ in which dirt is compacted to accommodate your building site. How much slope does the lot have, because more ‘slope’ will usually mean more retaining walls and or caissons. Caissons and retaining walls can be very expensive and add up to 20% to the build. Usually, this cost will not come back when an appraisal is completed, as it is regarded as a sunk cost to build a house on a hillside. All these questions, amongst others, need to be answered before moving forward with the loan and purchase of the lot.

Since the Great Recession of 2008, vacant lots have been reduced to approximately 35% to 45% of value depending where the lots are located. With loan rates and land prices so low, this is an excellent time to buy vacant land and build on it.

I have been a realtor and real estate land specialist in Los Angeles for the past 15 years creating opportunities for land-owners and Buyers brokering vacant land throughout the Greater Los Angeles area. I can be contacted at sales (at) westsideland (dot) com and information can be obtained from