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Things To Consider When Buying Vacant Land
Things to Consider When Buying Vacant Land
Borrowed from USNews.com
Finding your dream home isn’t easy. You'll spend a lot of time to scouring online listings, attending open houses and scoping out neighborhoods – and you may still come up empty-handed. Maybe your dream home just doesn’t exist yet. In this case, building a home on a vacant piece of land may be the perfect option. But before you get serious about laying a foundation, be aware that a land purchase may yield more surprises than buying a home – from easements and zoning restrictions to environmental conditions that could easily turn your dream build into a headache the size of a McMansion.
Whether you’re buying vacant land to build a home for your family or you hope to sell the plot for a profit in the future, follow these rules to avoid buyer’s remorse.
Do work with a pro who knows land. Working with a real estate agent when you purchase a home is important to help you navigate the finer details, especially when you’re unfamiliar with negotiations, due diligence and closing the deal. But when you’re purchasing land, hire an agent who has extensive experience negotiating land deals, and who is willing to do the research needed to ensure you know what you're getting.
Don’t expect to get a loan. A land purchase can’t be leveraged with a bank the same way a home purchase can, so you’ll likely have to pay cash if there’s no structure on the property yet. You'll have a much better chance of being approved for a construction loan on the building you want to put on the land, since the house you'll build serves as collateral on the loan.
Do consider the value of homes in the neighborhood. One of the biggest draws of building your home is the ability to customize it, but be sure you’re building your dream home in a neighborhood with similar taste. Have your Realtor research home values in the neighborhood and make sure your new home will not be over-priced, making it difficult to resell in the future. This could also adversely affect your ability to obtain a construction loan.
Don’t skip the survey or environmental tests. Similar to a home inspection and background research on a house, a plot of land needs to be subjected to tests and checks to ensure you know what you’re buying and that you’ll be able to build on it. Environmental tests check the soil for contamination from previous use. The site of a former gas station or auto body shop is more likely to have contaminated soil, for example, and residential homes can’t be built there. The land's potential for flooding or poor soil conditions for building are also of concern. You’ll also want to have a surveyor take a look at your property to identify the boundaries. Especially if the land is in a neighborhood and has been vacant for years, neighbors may have encroached beyond the property lines, intentionally or not.
Do take utilities and road access into account. It’s easy to take access to running water, electricity and sewers for granted when you’re buying an existing house, but with vacant land these are not always a given. There may be added costs associated with running water and sewer to the house, obtaining proper access, etc.
Don’t talk to the neighbors. While speaking to neighbors when you’re looking at a house may be a great idea to get a feel for the area, discussing your plans to build on a vacant lot can easily lead to organized opposition to your future dream home. Neighbors who are used to that vacant lot next door may get upset when they find out that's no longer the case.Hold off on making friends with the neighbors until any home is built and you’re moved in. Otherwise, discussing plans could lead to a neighbor dispute before you’ve even broken ground.
Don’t assume you can have property rezoned. Your local governing body will have zoning ordinances and building codes that limit what can be built on any property or require certain steps to build a sound structure. For example, there may be required setbacks from the edge of the property, mandates to build a sea wall if you’re on the waterfront, or a percentage of the land may be restricted from development. Knowing the rules ahead of time will help you avoid having to get an exception, which isn’t always easy and will likely add time and money to your plans. Rather than trying to rezone property, it’s best to keep your vision within existing limits. Seek land that will allow you to build the home you want, but know your plot’s restrictions before finalizing the plans.
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Robert is the co-founder and Broker at PAX Real Estate in Prince Frederick, Maryland. He brings with him over 30 years experience building successful companies as an entrepreneur and business owner. W....