To protect yourself you should educate yourself *before* you make any big decision. It would be a good idea for you to know the market value of your home-based on the 'sold' prices of homes like yours in your neighborhood. The situation you are talking about - with homes selling after a long time on the market, way below their asking price reflects sellers/agents not pricing the homes correctly for the current market. The builder you are meeting with sounds like a large one, they may have their own agents who will do a market analysis on your home to find out what they could likely get out of it. For them to take the risk of owning your home and the hassle of re-selling it they need to make some money. If they do not make 'much' on the sale of the homes they take in trade then you have to look at other areas where they are making their profit. Some builders will offer you financing-they may make a great deal of their profit from this avenue of income. You really need to shop other loans and compare fees, interest rates, loan structure etc. We had some problems in our area with builders offering financing packages to buyers with their 'preferred lenders'. The loans were above market interest, had higher fees and prepayment penalties. The builders in question offered incentives to their buyers to go with the preferred lenders-they would knock several thousand dollars off of their asking price, which of course was not a 'real' savings just a way to get a buyer to go with their loan program. When such loans are sold to larger banks the originator of the loans gets 'back end' money in addition to their up front charges because the terms favor the lender vs the buyer. Finally, even if the house trade in and the builder financing checks out, you still need to be comfortable with the builder's ability to build you the house you want with the level of quality you desire. To be honest it would surprise me if a large builder that offers these services and is building subdivisions would also build a single custom home on acreage or lot that you found. Perhaps I am overstepping here and should just stick to the original question but I'm reading between the lines a little bit... I feel a little concerned for you because it seems as if the convenience of having a builder buy your home and provide financing might be so attractive that you would jump on that opportunity without shopping around or really examining your options or the builder in question. Perhaps that would work out ok for you if you 'lucked' into the right builder and if the security and convenience of having some of the steps handled for you and not having to move twice is worth the higher cost you will pay. But then again you might choose the wrong builder for the wrong reasons. While the sale of your current home and financing your new construction are definately key to the success of the entire project, remember that the most important qualification of a builder is that they can provide you with a well built home. Perhaps you should get together with a good lender and learn about different ways you can make this work beyond the ones you have thought of so far. I hope that helps, and if I've misread the situation I'm sorry. :) Good Luck!

Do your homework - lots of it. Find an honest contractor - talk to his last three clients. Did he finish on time and on budget? Were there tons of adders to his bids? Simply doing this will potentially save you thousands. Not a theoretical answer - this is what we did. We have about 4200 sq ft finished - 4 car garage - 3 sides brick w/ custom rock retaining wall and all hardwood floors on the main - ground source heat pump and all LED lighting - 9' - 8' and 18' ceilings in various rooms on the main. Attic storage - Storage in the basement - 4 br / 3.5 bath w/ patio and a large screened in porch. All concrete decks and extended concrete driveways on the upper and lower garages - all of this is on 20 acres w/ a road - well - and septic. Septic was engineered to code. All of this -including the land - was less than what you're talking about spending. This is how I saved money - I cut the trees and took the saw-logs to the mill to have our hardwood flooring made - I installed all of the ceramic tile in the lower finished basement - I installed all of the light fixtures / fans / and networking cables - I hauled in gravel for the roadway - I did all of the final landscaping and final seeding - I built the custom rock retaining wall (that saved $12k+ right there). I guess what I'm saying is you can save real money if you get in there and work it...

Re credit score. When I applied for a loan, the broker requested credit reports from 3 companies, each inquiry reduced my score by 2-4 points. The 7 point drop did not affect my rate, my broker expected my score to drop as a result of the 3 inquires. If you are concerned about the getting the “best” rate, use a broker. A broker usually works with several lenders. Let the broker shop, vs you contacting multiple lenders.

Yes to your own RE attorney. Yes to a methodology of lien release tracking. Yes to setting up a construction draw schedule even if you don't have a loan. Your builder should know when he needs draws and design a schedule for you. Planning is everything. Know what you want and stick to it. Strangely enough, once the foundation is dug, a lot of risk diminishes. If there are no rocks or water, your foundation costs drop off. Shop around for other lenders. You only need a construction loan. Not a construction to perm. They are different. It's good to have a line of credit in your back pocket when building. I suggest you explore a home equity line of credit on your current home. If you need it, you have it. If you don't use it, you were prepared. Lenders will love you. They love to lend to people who don't need the money. And, they love lending to people who already own the land. Expect and prepare for cost overruns. Construction lending is high risk and you are lowest level of risk of a high risk endeavor. Make the lenders compete for your business.