Hardship to purchase land

[Guest anne1]

In a plan that uses the safe harbor hardship reasons, is it permissible for an employee to take a hardship for the purpose of buying land on which to build a home in the future?

[Guest TPA Guy]

I think has to be a PRIMARY RESIDENCE. If they cant live in it then it is not a residence. I had this same issue a few years ago. When I do hardships for primary residence I ask the Plan Sponser if they have closing documentation for the new home. Buying dirt is not a hardship.

[Guest gdburns]

Future use is speculative. Speculative investing should not qualify as hardship.

In any case, if there is already a problem in financing the purchase of land, How much more of a problem will it be to finance the house?

[austin3515]

What if there is already a contract to build the house?

[GBurns]

A contract to build a house on land not yet owned?

[Guest tsj513]

Related to this question. What if a plan uses safe harbor for hardship determination and a participant already owns the land, but is requesting the hardship for construction of the primary residence? Further, the participant is building the house themselves (i.e. no contracter or developer agreements exist for cost documentation). Can estimates from subcontracters for foundation pouring, electrical/plumbing etc. suffice for documentation? What about for costs that can't be documented in advance (i.e. Home Depot is not going to provide an estimate to the participant for supply costs)

This participant works in the construction field and the plan sponsor has no reason to doubt the money is going to be used for primary residence construction by the participant. How this cost gets documented for approval in advance is at question.

[GBurns]

A builder or developer usually gets an estimate of the cost to build before building is commenced. That is how financing need is determined and that is how selling price is determined. If there was no cost known nothing would happen.

This estimate is usually obtained from someone like a Quantity Surveyor, a Building Estimator or Consulting Architect. I am not sure what the professional designation for Quantity Surveyors is in the US but the function is the same, namely estimating the cost of a building.

I would expect that a private individual would also find out how much something will cost before they start. How do they know if they can afford it or can afford to finish it? How else would they know how much is neede as a hardship ?

A private individual should get a similar cost estimate. Estimates are all that will be possible since the job is not yet done.

Home Depot can and will supply an estimate of the cost of the materials, but some one would have to first create the list of needed items from the blueprint. I hope that this person is not thinking of building without a blueprint and I hope that they already have one otherwise they have bigger problems than a hardship.