Hard Money Loan for Residential Construction

[Carl E.]

I am a home builder in Northern Indiana. The biggest challenge I run into is getting my customers approved for a construction loan. Most banks (if they even do construction loans), will require a 700+ credit score and 20% down on the hard costs of land acquisition + construction.

Here is what I'm thinking:

1) Get a pre-approval for my customers for a traditional loan

2) Get some sort of equity down from the customer (cash or land) so they've got skin in the game

3) Do an appraisal on the after construction value of their home

4) Assuming the numbers work out and we're covered in the event that the original customer can't close, build their home for them with us fronting the money

5) Sell them the home at completion

I have two questions for you all:

1) Do you think a hard money or private lender would be interested in this, assuming I'm offering 12% interest on their money for the 3-4 month build time

2) Do you see any legal problems with taking money from the customer and then selling the property to someone else if the customer screws their credit up during the build and is unable to close? I would refund them any portion above the sale price + our profit margin + hard money.

Thoughts?