Presumably the homeowner doesn’t own the land, they have a mortgage. So their bank has first lien on the land. You could take a second lien but you’re behind the bank on the mortgage.

Right, you’d take a junior lien position and not extend credit beyond a certain percentage of total land value (aggregate loans to value), or you’d pay off the first, provide a financing bridge, and originate a new first, securitizing it to finalize the transaction.