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Construction loan issues

We closed on a construction loan a month ago. We provided a down payment and land. The bank during closing required an appraisal of the land with projected house info in order to agree on the amount of money we were asking for. Deed search was completed when we bought the land and from the bank. We just started digging for the foundation when someone showed up stating half of the property we are building on is in fact theirs. They stated a survey they completed cuts down the middle of what we thought was our property. The appraisal report includes pictures of the land including the section in question. The bank never requested a survey and I didn't realize I should get one( hindsight 20/20 ). The bank has already released 30% of the total loan amount to the contractor. We have a survey scheduled. After looking back over closing paperwork it states in the contract before any draw payments are made we will provide a survey of the land. We didn't and they still released money. If survey shows we are in fact currently half building on someone's property is the bank at fault? Can we recoup money lost due to their failure to request survey before releasing 1st draw payment? by pertee8193 from Pompano Beach, Florida. Feb 24th 2021 Reply

Bert Carpenter (BertCarpenter)
#1 ranked lender in Arizona - 2,423 contributions

Maybe. You may have protection from the Title Insurance Policy, if an owner's policy was purchased at the time the land closed escrow. You may want to seek legal guidance to get a court order to force the contractor to not spend any of the proceeds he received while you get the matter cleared up. It is likely that there is some provision in the document for the loan that absolves (or attempts to absolve) the lender. If it were me, First thing tomorrow, I'd be hunting down a good real estate Attorney. I wish you well and hope it all works out. ~ Bert Carpenter, The LoansA2z Team of NEXA Mortgage ~ NMLS 40586 ~ Licensed in AZ, CA, GA, IL, OR & WA... In fact, NEXA is licensed in all states except MA and NY and we are pending approval in VA, so give us a call. ~ 480-889-9000.

Feb 24th 2021
Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 4,703 contributions

Yikes... Sorry to hear of this mess. Your first course of action should be to see if your bought title insurance when getting the construction loan AND from when you actually originally bought the property. Both of these should have included at least a basic plat drawing. Ultimately, sounds like you probably need to immediately reach out to a good Real Estate Attorney. Good luck.

Mar 4th 2021
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