Whether it’s a sprawling creek-side lot along a mountain road or wide open pastureland perfect for a small ranch, finding and purchasing a piece of land with no home on it requires special considerations. From choosing a property to securing a loan, certain steps need to be undertaken to ensure you get the most out of the experience. Landing yourself a piece of vacant land is a budget-friendly way to make an investment, but only if you are smart and aware.
Got a plan? If you don’t know why you’re buying land, it’s about time to figure that out. While buying a home involves a whole series of procedures and protections, buying raw land can involve certain risks that require special consideration of different varieties. Do you plan on building a home in the near future, or opening a ranch or farm? Are you holding onto land in the hopes it will grow in value? Get this all sorted out before you enter the ring.
Sewer. One of the most important things you need to consider: what to do about your sewer. Land that is far off the grid often cannot be connected to any municipal sewer system. When you are planning out your purchase, make sure you factor a septic system into the equation. Also, be sure to double and triple check that your property is zoned properly for septic–in some places, particularly environmentally protected areas, you may be prohibited from installing septic due to a sensitive ecosystem balance.
Water access. Land without access to water–either from a well or municipal connection–is basically worthless. Trucking water in is prohibitively expensive, collecting rainwater is inconsistent in most places, and any type of activity is going to require water. Make sure you have access and rights to water. Also, if you are planning on digging a well, be sure to factor that into your decision . . . installing a well can become expensive very quickly, especially in arid and semi-arid climates.
Getting there. Does your property currently have an access road? If not, you’d best be willing to build one. Making sure you can get to your new land seems like a no-brainer, but in the heat of the moment people often buy properties they can’t easily access. If you are looking to buy in a climate that has cold and snowy winters, it is important to consider your ability to get through snow and ice along existing routes. Ditto several times over for mudslides or flooding.
Various rights. Make sure to secure all applicable rights to minerals and other resources on your property, if available. It’s best to know if you have the right to whatever may be found on your land–oil, natural gas, gold, who knows?–ahead of time to save yourself a long legal battle if you get swindled. Owning property also gives you the right to encourage or refuse hunting on your property, if it is sufficiently rural.
Topography. Not all land is created equal. Remember this as you are shopping. That view of the Eastern Sierras may be stunning, but if you’re standing in a runoff ditch on loose sand with no quality bedrock to establish a foundation . . . building a house is going to be a major issue. Take special notice of where water runs, signs of runoff and flooding, soil types, and grade. While it is possible to build a structure on a steeper grade, certain expenses and considerations about soil and stability make it more difficult than it is often worth.
Zoning. When you buy an existing home, chances are very good it’s already zoned residential–hence there being a home on the property. With unimproved land, the possibility exists that your property is currently zoned differently and may prevent you from immediately building a home. The property may be unzoned as well, depending on how rural you are going. Changing the zoning on a property can be a time consuming and laborious process. Be sure to double check before signing on the dotted line. Checking the zoning also gives you an idea of whether or not the property was previously used for something that may depreciate its overall value, such as industrial farming which may leave residual chemicals and damage on the site.
Electricity. Simple amenities like lights and the ability to contact the outside world are necessary even for the most headstrong homesteader. If your property is off the grid a considerable distance, how are you planning on getting electricity into your new home when you build it? Are you planning on paying the power company to string a pole out your direction–an option that may prove to be very expensive–or going off the grid with solar and wind?
Environmental restrictions. The further you go into nature, the more likely there is someone looking to ensure that space is disturbed as little as possible. Especially when dealing with sensitive ecosystems like waterfronts or wetlands, a variety of environmental protections may limit how and what you can build and where. This is for the good of the environment, but can be problematic for homebuilders who are unprepared. Double check for any restrictions on building. Also, if you are planning on farming on any scale beyond a simple home garden, you should ensure that your property is zoned for agricultural development.
Permitting. If you’re planning on building any structures or developing the land once you close on the sale, make sure you have your permits in order. Nothing will ruin the afterglow of a new property buy quite like having the authorities stop construction midway through because of inadequate permitting. Make sure everything is in order long before you break ground.
Surveying. Even if the seller or real estate agent offer a survey of the property, hire your own surveyor to double check. Unlike property in urban and suburban areas, rural plots can be irregular in size and shape. You may also be getting shorted on the sale by an unscrupulous or underinformed seller. Make sure you know the full scope of what you are buying, and of course study the topography of the plot and its neighbors before making a decision. Make note of any existing survey flags when you check the property and see that they match up with the results.
Check plat. First of all, what is a plat? Simply put, a plat is a map drawn-to-scale that shows the size, shape, and location of your property. Plats are drawn by public works departments and urban planning organizations rather than private entities, making them more informative and legally binding than a standard survey. They lay out where lots begin and end, as well as development plans for streets, alleys, and more. A plat is a great resource to make sure you are getting what you are paying for.
Check for liens. An existing lien on your property can snag the purchase for months or years, depending on the type of lien. If the previous owner owes back taxes on the property, getting them to level may prove difficult, and this can prevent the deed transfer from going through smoothly.
Consider your neighbors. The beauty and peacefulness in your little corner of the world is directly affected by what’s going on in surrounding properties. While this may seem apparent to urban dwellers, it’s an especially important consideration for rural land buyers, as open land can be used for a variety of industrial or agricultural purposes–purposes that can spoil serenity and affect property values in the long term. Have a solid understanding of how much property surrounding your land is for sale, common uses for local plots, and any subdivisions that may be in the works nearby.
Tax ID number. Make sure your seller is up on their taxes and confirm you aren’t getting bilked by acquiring the tax ID number on your property and reviewing its public records. You can often do this while you are checking the plat and inquiring about building codes to save time.
Look at the land. Never buy something you don’t see first hand. Even the most reliable realtor may miscommunicate some key factor in the property, leaving you with a flawed piece of land that doesn’t suit your needs. Undeveloped land is also more difficult to turnaround on the market, meaning you will be stuck with it until a suitable buyer comes along. If the seller will allow it, consider spending a night camping on the property. This will give you a better idea of what to expect before you sign on.
Find an agent you can trust. Buying land isn’t rocket science, but it’s also a fairly specialized purchase process. Getting someone in your camp who knows the ups and downs of buying undeveloped land can save you unexpected hurdles. Vet your agent thoroughly.
Or go it alone. Check federal and non-profit resources. Examine local public listings in the area you are interested in buying for foreclosure and pre-foreclosure notices.
Beware of scams. Be sure to dot your proverbial T’s when buying land. Like any other real estate purchase, range of scams exist to try and defraud buyers. Be smart, be informed, and never hesitate to consult with a real estate lawyer if you’re unsure about anything.
Securing a loan. Getting a raw land loan can prove more difficult than getting a loan for an existing home. Because undeveloped land is often slow to sell on the market, lenders take on more risk giving out a loan. If you aren’t planning on immediately developing the property, lenders feel that there is a risk you will choose to walk away from paying back the loan if the property doesn’t appreciate value adequately and may be wary of lending for investment.
Down payment. Many lenders will expect between 20 and 50 percent as a down payment before approving a loan. Unless you’re planning on immediately making the property your primary residence, FHA loans also do not apply (consult with someone at the housing authority for more information). For people who are having difficulty securing a mortgage loan, looking into alternative types of loans such as business or personal loans.
Rent to Own. Owner financing and other lease-option styled agreements are common in undeveloped land real estate. Many people are purchasing a vacation spot or investment property when they buy raw land, and creative financing offers buyers a range of options outside the standard mortgage world. If your seller is interested in establishing a financing plan, be sure to thoroughly examine the agreements and consult with a local real estate lawyer. If you decide on going the Rent to Own route, you can start looking for available open spaces here.
And finally . . . price. Bargain, bargain, bargain. Whether you’re getting into the undeveloped land game because you see a financial advantage or not, it’s important to be a strong bidder and be ready for the back and forth. Undeveloped land is often priced up when it’s put on the market, and frequently buyers can land a deal somewhere between 80 and 85 percent of the original listing price. This has a lot to do with the somewhat ambiguous nature of how much undeveloped land costs–without a home on site or a good solid set of local sales to draw from, it is difficult to assess what the market’s natural pricing is. Also, inquire into the potential for property-tax savings programs ran on a state level if you plan on leaving the land undeveloped for a period of time, as this can save you boatloads of money.
Happy hunting, homesteader!