Eagle’s Nest Homes                                       Construction-to-permanent financing...

Since 1983, Eagle’s Nest Homes has specialized in do it yourself house construction, also know as owner builder.

The DIY home construction industry was over a 40 billion dollar industry in 2009.

Since 1990, when Eagle’s Nest management recognized that much of our business was associated with do it yourself house construction, we set out to establish and define a step by step program that would direct those owner builders in a manner which would simplify the building process and protect them from the possibility of costly mistakes.

Our do it yourself house construction process involves the use of a credible local builder to consult with and guide the owner builder.

The results have been very gratifying not only for Eagle’s Nest Homes, but for it’s thousands of DIY home construction clients. Their testimonials which speak of tens of thousands in savings and the joy of their accomplishment affirms our belief in our product and services.

Your customer will first become pre-qualified for a mortgage to determine their buying level.

Through the decades, Eagle's Nest has developed relationships with many national and regional lenders willing to offer construction and permanent financing to our buyers.

When your customers work with one of our lenders, Eagle's Nest will not be paid until the house package is delivered to your customer's site.

Your retail price for the package will be in the lender's line item, which means your profits will be collected by Eagle's Nest and returned to you by Eagle's Nest.

Financing will be directly related to the appraisal.

The following is from Craig Johnson, former Senior Construction Loan Specialist for Wells Fargo Bank on the “Builder Assisted” Program. Mr. Johnson has decades of experience in the Construction / Permanent Lending Industry.

It is a pleasure to contribute my thoughts to a project of this sort. As an active participant in the construction-lending marketplace over this past decade, I have seen thousands of construction loan applications cross my desk, and have had many more conversations with families who were considering building a new home. Over the years, I have heard impressive arguments in favor of the concept of owner/builder lending, and have heard equally impressive and compelling arguments against the idea. In the last five years, I have participated in national builder lending in key sales and sales management positions for a number of large construction lenders, and have come to some conclusions in this arena which I have been invited to share in a number of forums.

In this book, I have been asked to share my thoughts about why the “Builder Assisted” program as developed by Eagle’s Nest Homes is an attractive niche for families who may be mulling over the “risk/reward” variables involved in choosing whether to build a home with builder participation, or, to instead hire a general contractor to build as a turnkey proposition.


I have often expressed arguments that limit the desirability of approaching the construction of a new home as an “owner/builder” or as the customer of a turnkey general contractor. Both methods require much more thoughtfulness and care than many customers are willing to invest.


When this very question was raised to the management of Eagle’s Nest Homes in a series of thought provoking meetings, they were addressed as part of an ongoing business plan. Can we combine the advantages of owner built and builder contracted while eliminating the major risks inherent in each? By answering these questions in an organized step-by-step series of solutions, the Eagle’s Nest “Builder’s Assist” program was born. Here is how it works:

The “Builder’s Assist” program combines hiring a general contractor and acting as a self builder so that each component does what it does best…limiting risk on one hand and saving money while maximizing freedom of choice on the other.

These services are contracted on a cost per square foot basis. The Eagle's Nest house package is delivered from its factory, where as much of the home as possible is preassembled and panelized. It is incumbent on the general contractor involved to use his subs or his own employees to accomplish the services spelled out…thereby freeing the customer from the onus and frustration of finding subs to bid this work for him. The contract is binding as to cost, time and scope of service and the price per square foot to build and install represents the first phase of the contract. The second phase of the contract changes the nature of the general contractors work from primary responsibility to collaborative responsibility in concert with the customer.

The owner/customer has the price of the house package from Eagle's Nest and the cost of its completion. He also has an assured flow of sub contractors because of his contract with the general contractor.

For the most part, the builder accepts his role knowing that it comes with two enormous advantages. First, he is not required to put up a dime of his own personal funds or credit. He is erecting the Eagle's Nest house package as bought and delivered to the site by the customer. Further, the material and the scope of his labor are paid through the construction loan arranged by the customer, according to the draw schedule contained therein. Second, he is getting the most valuable asset he can find…a customer, without spending a dime directly or indirectly to find him.

One of the safeguards adopted by the “Builder's Assist” program requires that A RESERVE BE PUT INTO THE LOAN OVER AND ABOVE THE COST PROJECTION TO BUILD AND WITHIN THE CUSTOMERS BORROWING POWER. In other words, this safety valve must be identified and contained in the loan itself as an insurance policy against the vagaries of “Murphy's Law”. Further, the more limited the customer's ability to deal with “Murphy's Law”, the greater this reserve must be. For the lender, this is an invaluable consideration…that the customer realizes unforeseen circumstances can drive up even the most well conceived plans. Contained within this realization is the budgetary restraint to leave, within his pricing, sufficient room so that if an unavoidable up charge is required, not only does the money exist within the loan, but also the customer has already qualified for the funds…the inclusion of a sufficient reserve all but guarantees that the customer will finish his home safely.

At the same time, the reserve may provide an excellent opportunity to the customer should he find that his budget was accurate to begin with and that the additional funds contained within the reserve were, indeed, superfluous to the construction. In this case, the owner/borrower is left with a pleasant alternative. He can elect to return the reserve to the lender, thereby reducing his final mortgage to the dollar amount truly represented by the building costs, or he may instead utilize the reserve to upgrade desirable home products.

This then is the “Builder's Assist” program as developed by Eagle's Nest Homes. It is a plan that combines safety and maximized the potential for equity. It affords their customer the peace of mind to know that their project has real safeguards to protect against serious mistakes, regardless of their origin, while at the same time allowing for the greatest possible flexibility in his choices. It is a program that should have much greater appeal to the lender than the alternative of leaving the owner/builder responsible for all phases of his project. Even the general contractor can endorse a plan that gives him a low risk, low cost customer. It is a win…win…win program.

When contemplating new construction as an alternative for their families, many customers ask if the salesman's contention that the home will appraise for more than its cost is true. In many cases my response is yes, but often for a different reason than the builder claims. When a home is appraised to determine its market value, whether or not the home is new construction, the value assigned it by a competent appraiser has nothing, whatsoever, to do with its cost. Some customers bristle at the thought that their time and effort is of little consequence in the process of determining the new home's value, especially if they are competent to do some of the actual work themselves. But there is a vast difference between reducing cost and determining value.

If value were a function of cost, then a 2000 square foot home in a good neighborhood in Buffalo , New York would have the same value as a similar home located on the ocean in Naples , Florida . Realtors, who help set the price of homes for their listing customers will tell them over and over again that value is a function of “location, location and location.”

The first way I gauge the importance of increased value in the customer's profile is to determine how long he intends to live in the new home. Customers, who perceive their prospective purchase as short term, are much more likely to have maximized value at the top of their list than a customer who intends to live out his days in his home. The long-term buyer can be self-centered in his thinking. He can choose a floor plan that is more suited to his particular taste and lifestyle because he's not planning on selling, at least not for a very long time. I've had many customers who are essentially uninterested in their new homes appraised value. They are buying the home to live in and in a very real sense, to die in as well. If their home is short in appraised value, they simply make up the difference with a larger down payment from their personal savings. These customers evaluate the home based on how its usefulness bears on their ownership…. not on how the desirability of the home affects a prospective buyer.

My insights into the value of new residential construction come from reviewing thousands of appraisals, ordered by the lender, and paid for by the borrower, as a condition to granting the construction loan. The bank requires the home to be worth at least as much as the purchase price. In order to protect itself, it orders an appraisal of the home. But, wait a minute… the home doesn't exist. How can a lender determine the value of a non-existent home? The answer is that the house does exist… as a one-dimensional drawing in the blueprints. A trained appraiser can review the blueprints, and the specifications that summarize the details to be installed in the home, together with the land on which the home is to be built, and accurately judge the market value of the home. He accomplishes this valuation by comparing the home to be built, feature for feature, with substantially similar existing homes in the same neighborhood, that have sold within the last six months.

As very few homes are identical as compared, the appraiser uses a plus/minus system to approximate the value of one home relative to the other. A home with three bedrooms will get less value relative to a similar four-bedroom house that recently sold in the neighborhood. A home's brick façade will be judged as more valuable than a similar home whose façade is vinyl siding.

A curious sidebar to this discussion is that the appraiser is not concerned about the home's cost, as represented in the builder's contract, at all. Nor is he concerned by the building cost of any of the existing homes he is comparing, when they are new. You should also note that he cannot use in his comparative values, a newly built home as sold by a builder to his customer. That home is not considered as a reliable benchmark of value until the owner sells it to somebody else.

Most customers, who shoot themselves in the foot, do so by building a home that is out of conformity for their neighborhood. This means an exterior façade or shape that doesn't fit in, or fewer bed or bathrooms, or no garage when everyone else has one. Two bedroom single-family homes are almost certain to be low equity propositions. They simply will not attract a mainstream potential buyer. The customer who opts not to build a garage may be fine in the south, but, in the north, where it snows, a home that has no garage will simply be passed up. When you are building in a tract development that has a certain look, and an easy to define average home, you are asking for trouble to go against the grain. Remember this isn't a beauty contest, this is maximizing resale value. The average purchase price in such a development should be fairly easy to ascertain. Any home that deviates too high or low from the average price will be a white elephant. And if you have to deviate, it is much safer to do so on the low side.

Simply put, most customers, who fail to maximize equity, do so because they overbuild. There is a temptation to include more than is necessary to make the home pleasing to a prospective buyer. If every other home on the block has vinyl flooring and yours has wood and ceramic floors…. that flooring will not create equity…. it will lose equity. The home may sell faster if it is in competition with another house down the street, but it won't sell for more money. The same thing is true for finished basements and attics. Some customers spend a fortune making their basements into additional living space for their families, and are truly shocked when the appraisal community fails to show that space as contributing substantial equity to their homes. “Luxury” amenities fall into the same category. Don't count on your Italian Marble foyer, your granite counter tops, or your ground source heating system to fund your retirement, especially in neighborhoods where those features are not commonplace.

What does add to the value of new construction? The three assets all appraisers will agree on as having universal value are square footage, bathrooms, and bedrooms. Let's examine how each factor contributes to equity.

There are many other choices a customer must consider when building, many of which will compete against each other for the customer's dollars. Although the three factors above must always be considered there are many others that might also be valuable from house to house. For these options, the home site location or nature may be compelling. A few examples might be revealing.

I think that most customers think of the appraisal process in exactly the wrong way. An appraiser, operating free from pressure to arrive at an arm's length and meaningful opinion about the value of your prospective project, is rendering a service that is far more valuable than the approximate three hundred dollar plus fee he is likely to charge for his trouble. His opinion should be regarded as a traffic light, for the lender and the customer alike. If it supports the value as in excess of cost, then the light is green and the lender will be much more comfortable granting a loan. After all, he now knows that in the worst case, where the property must be sold, there is sufficient market value to cover the mortgage. The homeowner knows that he can anticipate getting a positive return for his time and trouble. On the other hand, an appraisal that considers the value of the project to be lower than its cost should function as a red light. The homeowner should review his project and make either appropriate adjustments, or inform the builder that his bid for the work is not supported by the appraisal report. Customers who pressure the appraiser about his report just don't get it. They are confusing cost for value, and, are deluding themselves that breaking the appraiser's arm in the hope of getting a higher number is somehow going to help them. I would much rather see the customer fold his cards and go back to the drawing board than to move forward in light of a borderline appraisal.

Customers should also understand that if the cost of the project is $200,000 and the appraisal matches it dollar for dollar, then they are going to lose money. Why? Because they are going to have to pay closing costs for the construction loan, and then interest on the draws during the course of the homes construction. If the home can be completed in eight months, then these costs alone will approach $5,000.

On the other hand the customer that uses the feedback generated by the appraisal in a positive way has added a very important tool to his decision making process. He can sit down with his appraiser, go over his plans in detail, and use him as a sounding board to select one amenity over another. By doing this the customer can assure himself that he is getting reliable input about how to proceed before committing himself to proceed in the first place. In every other real estate purchase the customer's choices are to take it or leave it. But in a pre-construction meeting the appraiser can give the customer meaningful insight into what amenities can maximize resale value based on the actual local market, and statistics about home sales right in the neighborhood. Additionally, there is no self-interest in the appraisers' recommendation because he does not benefit from whether or not you proceed. He may be the only player in this process who can truly make that statement. Everyone else has a vested interest in you moving forward except him. His services are strictly limited to his area of expertise, and end once he renders his considered opinion.

No group of customers has a harder time understanding these concepts than those committed to the ideal of “sweat equity”. As I use the term here, “sweat equity” is the theoretical process by which a customer can do some of the physical work on his house, himself, thereby contributing to its value. There are companies that exist, or, until recently existed, that base their entire sales strategy upon inducing their customer to go forward on the basis of this magical “sweat equity”. I call it magical because its existence is purely a matter of “hocus pocus”. Like the Easter Bunny, there simply is no such thing. For some, the question of sweat equity centers around the ability of the customer to actually do the work. But for me, the customer's ability is truly beside the point. In the best case, what the customer is hoping to achieve is a reduction in cost. Obviously, every hour of work he does himself is an hour of wages saved. I have absolutely no argument with that fact. But, as I have urged everyone to understand, equity is different from reduced cost. There is no reliable link between the two. In many cases the “sweat equity” customer actually loses equity, if for no other reason than the amount of labor saved in the course of weekend after a weekend of toil, is lost by adding a few more months to the interest due on the construction loan. There is no method by which you can use the sweat off your brow to guarantee equity in a new home project. Use the power of your mind, instead, to create a home that is capable of generating the highest possible appraisal.

As a final comment, I suggest that you review the appraisal to determine an accurate representation of the house and its environment is portrayed. Appraisers are human. Errors can be made. Check that the square footage is correct, the number of bedrooms and baths are reflective of the house plan and that no special features such as a fireplace, garden tub, etc. are missing.

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