The land is the collateral. The risk is the homeowner forecloses while you're mid project (or the title is otherwise impaired, making it difficult to unwind the transaction or recoup any funds).
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.