From: Jim Snyder-Grant (
Date: Tue, 3 Aug 2004 08:33:36 -0700 (PDT)
Linda Gluck at Ulster County Cohousing asked a bunch of questions about pre-construction financing.

We at New View (Acton MA) were in a somewhat similar situation in 1992: no developer but we did have a development consultant, and we were looking at major financing costs for land acquisition and early expenses.

At the time of land purchase, the minimum investment was $5,000. But we needed much more than the minimum to proceed with the bank & the landowner- households were given notes for additional money, which were to be repaid with no interest if they left (or the project failed), and repaid with interest as discounts on their house price if they stayed in. We raised just under a million dollars this way, among the 20 or so fully-participating households at that point. This was all in addition to much smaller, monthly or so, assessment fees to pay for ongoing costs: mostly professional fees & permitting fees, etc. These assessments were written up as being credited to house price if the project worked out, and lost if the project didn't work out (or households left). The only variance we had here was that single-adult households paid 2/3rds of what multiple-adult households paid.

The bank wanted about 20% of the anticipated loan max (it was structured as a revolving loan). The bank required all households to sign scary-looking agreements that said the bank could go after any of us for the full amount if stuff went south. We signed a side-agreement among ourselves to share any losses equally by household.

The actual closing of the construction loan was a bit complicated because it ended up being a three-way agreement between us, the bank, and the town. the town wanted certain agreements (a largish escrow account, for example) in place to make sure we didn't dig up the land & then go bankrupt and leave.

I don't know what minimum percent of buyers the bank needed. We were fully sold and were able to sign funny P&S agreements as part of the construction loan. ('Funny' because they were essentially written to say. 'well, we are going to make up a price now, but it may go way up because there are lots of unknowns'. And there were, and it did..)

I keep waiting for the traumatic amnesia to kick in so that I can forget these details, but there it is, burned in to some part of the cortex, ready to spill out at the touch of a question.


Jim Snyder-Grant
18 Half Moon Hill
Acton MA 01720
978 266-9409

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