So maybe you’re sitting in your apartment in a crowded city thinking, man, even buying a house in a Zoom Town seems too crowded right now. As a good friend of mine once said, “They’re not making any more land.” How about buying your own raw land, then? And then you can build your own home there – but that’s another blog. Let’s get back to land. How do you buy it?
Check your finances
Before you start looking for land in all the right places, you need to ensure you’ve got your finances in order. A few things will help you here, since land loan mortgages are not the easiest to obtain, and you’ll likely encounter some unexpected costs. Make sure you can work with the following:
- Debt free – You’ve paid off all your debt including credit cards, cars, student loans, and other houses.
- Emergency fund – A decent emergency slush fund is something you’ve got covered, which will last you for at least 3-6 months of expenses.
- Down payment – On top of all that, you’ve got at least 10–20% on a 15-year fixed-rate mortgage, if it comes down to it.
- 25% income – Your payments on your land will be no more than 25% of your take-home income.
The seller will want to see proof of your funds. Sellers want to see that you can cover the down payment and closing costs. Proof of funds should be on an official letterhead with documentation from the institution where your funds are.
This is one smart way to buy a piece of land. But a smarter way is to buy it with cash. If you’re also going to build a house and plan to finance both the land purchase and the construction, there may be some complications. Keeping things simple (or at least less complicated) is a good idea, if possible.
Get a real estate agent
If you hire a real estate agent to represent you with a land purchase, finding a top local agent that’s experienced in negotiating with land owners is going to be one of the most important things you do. Buying land can be as complicated or more complicated than buying a house. You must ensure your agent is someone that will work well with you. Don’t be afraid of a transparent agent, because they’ll tell you the truth about your questionable land-value choice.
Find the land
So you’ve got the scratch, but you don’t yet have the dirt. Now you can start looking, and there are a lot of options for land. One website to find what you seek is landwatch.com. There you’ll be able to look at numerous rural areas, suburban areas, mountainous areas, and so on.
They list such land options as:
- Farms and ranches – These are pretty self explanatory. You’re looking at areas where you could practice or where there has been practiced (at least some time in the past) active agriculture and/or animal husbandry. Many of these properties come with built in agricultural amenities, there may be numerous outbuildings, and so on.
- Hunting land – Properties such as these are often recreational already, properties that other people have used in the past for purely entertainment purposes. Typically, these will have no utilities, wells, public roads on hand.
- Homesites – Obviously this can often be more of a suburban thing, but it can be one of the more obvious plots of land where you should probably plan to build a home
You’ll want to be sure you get your money’s worth, so when it comes to land, always buy property that will grow in value over time. That can be really tricky to predict. Remember that no matter how good the deal looks, don’t buy land in a horrible location just to get a bargain.
If you’re buying a pre-made plot in a new construction subdivision, the decisions are relatively simple. But when you buy land outside a subdivision, you have to investigate all the things a developer or builder would normally look at. Make sure your research is thorough:
If you want this land to be an investment, then it shouldn’t take more than an hour to reach civilization. If it takes more than an hour, then you might not be able to find future buyers easily. Also, figure out which schools you’re zoned for, the property’s proximity to highways and stores, and distance from emergency services.
Check with your city, county and state zoning to see if it’s even possible to build your dream home on the land you’re looking at. Examine any future plans the government may have that could impact the land value like new highways, power plants, or secret military bases. It’s common for problems like this to pop up, so watch for those possible red flags.
Unless you’re a farmer or geologist, this is easy to overlook. But it’s very important! Consider the type of soil, the number of trees and the elevation or flatness of the terrain. Those are all things that will affect where you can build a home and how much it’ll cost. For instance, hard, rocky soil may mean you can’t build a basement (or at least not as easily). And if you buy property in the swamp, you’ll have to deal with difficult flooding regulations and pay for an expensive septic system.
When you buy land, you need to be able to reach it by road right?That means you need to know if the roads leading to your land are on somebody else’s property. If so, you’ll have to obtain legal permission (easement) to use them. Legal permission to get road access may come with a fee and agreement that you’ll share road maintenance costs. If you don’t have an easement, then you can’t get to your property. So you may as well not even buy the land.
The land might not come with access to city water, electricity, cable lines and city sewage systems. Check your local city limits to see if you’ll have to invest time and money into building your own septic system, water well or electricity access. You’ll also want to check your cell service there too.
Buy the land
Just as with a house, you’ll need to either use cash, as mentioned before, or take out a loan to offer the seller. Once you find the land you love, make an offer. Keep in mind, it might not be accepted right away, and if it’s a popular mountain area for example, you may even encounter multiple-offer scenarios too.
When the seller replies, they’ll either not accept your offer, accept your offer right away, or you’ll negotiate back and forth on price and terms.
It’s likely you’ll still have a few lingering questions about the land when you make your offer. In which case, there might be contingencies. And that means if anything unsatisfactory turns up during the inspection period, you’ll be able to back out of the deal.
The most common contingencies for buying land with cash include:
- The land can pass an environmental test
- You’re able to get a septic system permit for the land
- There’s a survey that shows the correct boundaries and parcel size, as well as any possible easements or encroachments
- Zoning regulations work for the buyer
Once the offer is accepted, the next form you might use is a Sales and Purchase Agreement (SPA). Both forms are legal, binding documents. Once everyone agrees, the contract will be signed by both parties and the closing process will officially begin.
Working with Trelora
Buying land can be incredibly challenging. Be prepared and know what matters to you. If you’re looking for land, whether it’s a ranch, hunting land, or suburban plot, Trelora can help you. Our expert real estate agents have more knowledge and experience than 99% of the real estate agents in the country, land, sea, or sky.
Mike is the Market Director for Colorado at TRELORA. He is personally responsible for closing over 600 successful real estate transactions and has played a role in closing hundreds more. He started at TRELORA in August of 2016 and began his real estate career in Jacksonville, FL in February of 2011. In his tenure at TRELORA he has been a Buy Manager, Buy Agent, Listing Agent, and Field Agent before accepting his current position as Market Director in January of 2021. Mike has a Bachelor of Science in Finance and a Master of Science in Entrepreneurship both from the University of Florida. Go Gators!