A QUICK GUIDE TO
BUYING LAND by Shannon O'Brien on March 4, 2012
Whether you crave the seclusion a couple of acres in the country promises, or you’ve got your eye on a cute little residential lot in a subdivision, buying a piece of land is a bit different than buying a house. The following is a quick guide in buying land as an investment or for residential use. Consider Zoning & Future Plans When Buying Land When you purchase a home, the zoning issues were dealt with prior to it being built. This is not always the case when buying vacant land, and it’s important information. Zoning issues can dash your dreams, according to planners with the County of Ventura, in California, so the first step to take when buying land is into the county zoning and planning office. Look at the long-range general use plan for the area in which the lot is located. Not only will this plan tell you with certainty about the permissible use of the land, you can also find out about what the future holds for the immediate area. If you plan on building a home, look for things such as a future landfill or power plant in the area that may negatively impact not only value but lifestyle as well.
Have you ever driven down a major highway and wondered why on earth anyone would build a home so close to it? The chances are pretty good that the house was built before the highway, and the homeowners had no idea the highway was in their future. Most of the time, they didn’t even bother to check before building on the land. If you can’t decipher the plans enough to tell whether road improvements or highways are planned, ask one of the county planners for assistance. Does the Property Have Deed Restrictions? If there’s a homeowner’s association governing the land, you’ll need to abide by the restrictions they’ve set forth, in addition to whatever zoning rules apply. Read the Covenants, Conditions and Restrictions (CC&Rs) carefully. These documents outline what you can and can’t do with your property. If you have any questions about anything in the CC&Rs, consult your attorney as it’s vital that you understand everything in them. Are You Buying Land With Easy Access? How will you get to the property? If it’s on a main, public road you’ll most likely have no problem. Many times, especially in rural areas, the only access to a piece of land is over someone else’s property. In these cases, without what is known as an “easement,” your property is considered landlocked. Ensure that a right-of-way easement is granted, in writing, before agreeing to buy the land. Additionally, if there is no existing road to the property, you’ll need to factor the cost of building one into the purchase price.
Don’t Forget About Utilities In larger, planned developments, the builder generally takes care of bringing utilities, such as water, natural gas and electricity, to the lots. With country property, buyers may need to secure the utilities and sewage system and sometimes may be forced to take on the cost of drilling a well or installing a septic system. Get bids on any work that needs to be performed before signing a purchase agreement, or have your real estate agent make your agreement contingent upon your acceptance of the bids. Financing Your Land Purchase When buying land, financing your purchase is vastly different than the process to obtain a mortgage. If you are buying raw land – without any utilities or streets – the lender will generally ask for a 20 to 50 percent down payment and you’ll receive a higher interest rate, according to Laura Bramble, in the San Francisco Chronicle. Not all lenders deal with vacant land loans, so it may be a bit of a challenge financing your purchase. Many sellers offer financing. If not, try local banks, suggests John L. Pehrson, author of “Investing in Vacant Land: It’s Not What You Think.” Pehrson claims that these institutions typically employ local decision makers who are more familiar with the local economy and market than decision makers at the national bank branches. He also suggests trying your local credit union. One of the biggest mistakes residential land buyers make, according to Pehrson, is not factoring into the loan the cost of developing the land. So get all the bids required in advance of seeing a lender.