Tips for Buying Land to Build a New Home
10 Factors to Consider
Whenever I discuss buying land with my real estate clients, I can't help but hear the theme song for that ringing through my head: "Green acres is the place for me." Laugh as you may, urban dwellers often idealize what it's like to live on an acreage outside city limits. So before you decide to dump it all for "give me that countryside" and buy land on which to build your dream home, consider first the realities. The realities are the things that could cost you big-time after closing.
Benefits of Buying Land
Land costs drop in the country. The further away from the city, the cheaper the acreage. Many people buy land because they want to build a custom home to their own specifications. They also want cleaner air and more space. Wide open areas without trees shading the house are perfect settings in which to install solar panels, which is a concern for many environmentally concerned buyers who use green building materials.
Drawbacks of Buying Land
Finding skilled craftsman willing to travel might be difficult. Some might not show up as promised and may want higher wages to compensate for the distance. Transporting building materials and paying for delivery will likely cost more over building a home in the city.
Although modern conveniences are available, they aren't always reliable in the middle of nowhere, which is why many homeowners in the country use generators as a back up when utilities fail. Going into town for groceries and other shopping needs generally requires planning and long trips. If it snows, and the roads aren't promptly plowed, you could be snowed in for days.
Renting Before Buying
If you are unfamiliar with an area, it might be a good idea to rent a home first before buying the land and beginning construction. As a new resident, you can get to know the community first hand and hear stories from local owners that you won't hear if you pull up in an SUV with a fat wallet in your pocket asking about MLS listings.
Resale value is often softer in the country than the city. That's because the pool of potential buyers is smaller. If demand is low and supply is high, home prices will be more negotiable. As a tenant, you can try to time the real estate market and be ready to buy that parcel of land when it first becomes available.
Check with local authorities (city, county, and state) to determine and whether you can build the type of home you want before committing to buying the land. A community within 20 minutes of Sacramento city limits, for example, does not permit construction of any structure on parcels smaller than 20 acres. Ask about future zoning, whether there are plans to put in shopping centers or airports, or to change nearby land uses that could also devalue your land.
Smells and Sounds
Realize that you might be trading exhaust fumes from city buses for the lovely odors produced by pig farms. Some farm animals such as geese and donkeys produce squawks and brays that travel for miles. Horses along country roads drop steaming piles of waste. It's not like anybody carries along a plastic bag and picks up after their horses.
Obtain a natural hazard disclosure and look for soil problems. Some parts of El Dorado County near the Sierra, for example, have naturally occurring asbestos in the rocks and soil. A disclosure will tell you if the land is a protected habitat, which would prohibit building. Is the area a known fire hazard? Is the fire department supported solely by volunteers? Many owners in the country maintain private ponds for fire emergencies.
If the land is located near hills, how likely is the land to move? Some slab foundations can crack if the land is unstable. Find out if your parcel lies within the path of a potential landslide, especially those lots on oceanfront cliffs. For construction near bodies of water, you might want to consider building a raised foundation and make sure to buy flood insurance. If the land was once a swamp, ask neighbors about the condition of their foundations.
If access to your land is provided by driving across an adjoining parcel, you should obtain an easement and make sure it is recorded. Find out who maintains the roads and what your pro rata share might cost for upkeep. What rights do neighbors have to cross your land? Are the boundaries clearly marked? Obtain title insurance, which will disclose easements and restrictive covenants or conditions. You might want to order a survey of the land.
Water is important. Not all water is potable. Sometimes water rights don't "run with the land," which would mean you could not dig a well. Find out the depth of your water table and determine the difficulty of digging. Is the ground mostly rock? It can be costly to bring electricity, telephone or cable services to the property if they are not already established nearby. Will you need to install a propane tank? Consider a generator for back-up to . If you cannot hook up to a sewer, what will it cost to install a septic system?
It's common to pay cash for land. If you're not planning to finance the land purchase through a conventional lender, which will require a lender appraisal, then obtain your own appraisal to determine an appropriate price before making an offer. Comparable sales are sometimes difficult to find when buying land. Further, some financing will allow for subordination to a new construction loan.
At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.