How To Buy Land for a New Home

From Janet Wickell,

You've found the perfect house, but the land it sits on isn't quite what you have in mind. Or maybe you've seen a great piece of land, but the house doesn't fit your needs. If nothing really says home to you, it might be time to consider building.

Buying land may seem intimidating at first, but it really isn't difficult at all if you plan a course of action and stick to it.

Know Your Budget
Talk with a loan officer to find out how much you can afford. Both down payments and interest rates can be higher for land than for homes, so it's important to get the facts before you go shopping. If you plan to build soon, the loan officer should explain construction loans, including the closing procedures you'll encounter while the house is being built.

Building Costs
Talk with area contractors to determine the average price you can expect to pay per square foot for the type of home you wish to build.

• Include estimates for building a driveway or road to the homesite.
• Don't forget estimates for well digging and septic installation if your home will not be connected to community water and sewer.
• How will it take to construct the home?
• To find the maximum amount you can spend for land, deduct building costs from your total budget, then deduct a bit more for unexpected expenses.

Target A Location

If you've already looked at homes in the area, you may know where you want to build.

Your Wants and Needs

Make a list of all features that would exist on the ideal piece of land. Review the list, highlighting your must-haves, such as a great view, privacy, or a waterfront building site.

Land Use Considerations

How will you use the land? If you plan to build a duplex, you must choose a site where zoning or other restrictions allow multifamily dwellings. If you know you want a manufactured, consider only tracts of land where those structures are allowed.

Consider Restrictive Covenants

Developments are governed by guidelines called Restrictive Covenants. I know of one development where cats are not allowed, even if they are indoor pets. Some prohibit metal roofs, which are very popular on log homes. Some dictate paint colors or have an architectural review committee that must approve your home plans. Study covenants carefully to determine if you can live with them.

Start Your Search

• Look for 'For Sale' signs as you browse the area.
• Search for properties on the Internet.
• If you see interesting tracts of land, note their exact location. A visit to the county tax office is usually all it takes to find the owner.
• Find a real estate agent who likes to work land sales. Talk with the agent about all of the categories above, and any others that might help her locate the perfect tract.

Does the Land Suit Your Home Plans?
Ask a builder to accompany you to your top choices, to offer advice about the best building sites, and to suggest home plans that will work with the topography.

Utilities
Be sure to consider well and septic installation expenses for land without community water and sewer hookups. Check availability of electric, gas, and telephone services.

Easements
An easement is the right to use another person's land for a stated purpose. Does someone else have the right to use the property you want to buy? Find out before you make an offer, or add a contingency to the offer that you must approve of existing easements or the offer is void.
One way to find easements is to take a look at past deeds for the property you are considering and for surrounding parcels, but a real estate attorney or other title researcher can give a more accurate opinion.

Surveys
Does the bank require a survey? Updates to existing surveys can often be used, and are less expensive than a new survey.

Road Maintenance
If the property is accessed from a private road, there should be a formal Road Maintenance Agreement. Some banks will not lend without a recorded agreement that shows all owners have promised to help with road upkeep Restrictive Covenants normally cover road maintenance issues.

Environmental Liabilities
If homes or other structures were on the land in the past, ask for a signed statement that discloses facts about buried items, such as oil or gas storage tanks. Their removal and cleanup can be expensive.

Contingencies
Before you make an offer, think about the what ifs--things that would make the property unusable for your purposes. Add these to the offer as contingencies, which means if they do not happen, the offer or contract is void.

• All offers for land without sewer hookups should be contingent on your ability to obtain permits for a septic system.
• If an architectural review committee must approve your home design, the offer should be contingent on obtaining that approval.
• The offer should be contingent on obtaining the type of financing you desire.
• There must be a deeded right-of-way to the property.