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Buying

How to Buy Land: Tips to Pick the Perfect Plot

There's something thrilling about the idea of buying your own piece of land -- raw, untouched property on which you can build your dream home from the ground up. But picking the perfect parcel can prove a bit more complex than you'd expect. So know what's involved before you dig in! We're here to help you navigate this process.

Check local zoning laws

If you think you've spied the site of your future dream home, before you start drawing up an offer, you'll want to check local zoning ordinances. Because no matter how appealing a piece of land may appear on the surface, if it doesn't meet the specifications for your intended use, you'll find yourself with a costly but worthless hunk of earth.

"While a plot may seem like an ideal home site, local zoning may forbid construction of a home there," says Chris Chapin, a Realtor with Douglas Elliman. "The code might specify industrial use, or retail, or agricultural, or something other than what you need."

Zoning and other land regulations can be accessed through public records at your local zoning office or city hall (many also offer zoning maps online). Here are some other important things to check:

  • Access from a street: Unless you plan on parking your car on the side of the road and hoofing it to your home, your property must be accessible from a street or road. If the lot is landlocked, you will need to get an easement across a neighboring property, which means you get permission to pass through the neighbor's land to get to yours.
  • Setbacks: This refers to how far from a property line a structure must be situated. If you have 20-foot structure setbacks from either side, but your lot is only 50 feet wide, that means your home can be no greater than 10 feet wide! Odds are that won't work.
  • View ordinances: Some local view ordinances may limit your ability to add a second story to your house.

 

Figure out how much it will really cost

The cost of a plot of land to build on averages $3,020 per acre. But even if you're able to acquire the land for a song, you'd better have big bucks if you're planning to build something there from scratch. According to data from the National Association of Home Builders, the median cost of building a home is $289,415. Though, that's hardly where your expenses end.

"There are substantial expenses for getting land ready for construction," Chapin notes. "You will need a survey, permits from the municipality, and health department approval. The site must be cleared, graded, and excavated. Departments of local, county, and state governments can be involved, all with associated fees, of course." And this can take a while: "The process from identifying a parcel for purchase to receiving the certificate of occupancy can take a year or more."

Determine which utilities you want to install

Chances are quite good that you'd like your home to have water, electricity, and other modern-day conveniences. And these things don't come cheap. One major installation where the condition of the land itself is critical is a septic system -- a series of pipes that empty wastewater deep into the ground, where bacteria break it down. While most existing homes are connected to a municipal sewer system, for a new home you can go either way. But not all land can sustain a septic system.

"To determine this, you'll need to perform a percolation test," says Chapin. "This means that the ground must be able to absorb water at a specified minimum rate; otherwise the lot will not support a septic system."

Hire a land planner

If you want some help figuring out whether a certain lot is ripe for building a home and how much it will cost, the professional you'll want to turn to is a land planner. Much like home inspectors size up a house for potential flaws that you'll have to fix, land planners scrutinize land.

"This is an individual whose job it is to find out everything possible about the land related to getting it ready to be built upon," Chapin explains. "Vegetation, wetlands, soil type, water table, slope, and access are just a few of the items that will have an impact upon whether structures can be erected. It can happen that, for various reasons, a certain parcel will be unbuildable. If so, you do not want to be left holding the bag. Better to find out beforehand."

To find a land planner, go to Planning.org or ask your Realtor for a referral.

Prepare for financing

Getting a "raw land loan" is different from getting a loan for a home. Since there's no building on the property yet, it's easier for a buyer to simply walk away, leaving the lender holding the bag. Due to this risk, some lenders may require a higher down payment on land -- anywhere from 20% to 50%. The loan may also have more stringent credit score requirements and a higher interest rate. On the bright side, the U.S. Department of Agriculture offers loans called Section 502 direct loans, which help low-income people purchase plots in rural areas and prepare them for a new house from scratch.

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