Buying a vacant lot may not be the same as buying a house, but similar rules can apply. Know what you are getting yourself into.
Buying a vacant lot can be a complex decision, just like any real estate purchase. For starters, there are plenty of reasons to buy a parcel of land. If you buy a house, it’s probably so you can live in it.
But you might buy land for a variety of reasons: you could choose to build your own house; use the property as a long-term investment; or even to start a business. Vacant land can also introduce issues you don’t normally face when buying a house.
Ten Things to Consider When Buying Vacant Land
The old real estate adage of “location, location, location” is the first basic concern in land purchasing. No matter why you are purchasing a piece of property, nothing is more important than location. If you are making an investment, don’t buy land with no resale value. If you are aiming to starting up a business, don’t buy land isolated from potential customers. If you are building a house, buy where you can enjoy spending your time.
In shopping for a piece of land, you should develop a general idea of where you would like to buy. You can go for an exploratory drive and use online resources to help you. For example, if you are buying land to build a house, you will likely want to consider things like access to schools, your job, grocery shopping and restaurants.
If the land is for business use, choosing won’t be so easy; you will have to carefully analyze a prospective location’s business value. Whatever kind of land you are looking for, the costs can add up quickly even before you start construction.
- KNOW THE COSTS
Real estate is an investment of time and money; the more time you spend preparing, the more ready you will be to spend your money wisely. What kind of expenses can you expect to incur when buying a vacant lot?
At some point during the purchasing process, you might want to consider title insurance. It protects owners and lenders against property loss or damage they might experience because of liens, encumbrances or defects in the title to the property. Consider it a shield against legal complications involving your property. While title insurance isn’t necessarily required during a property transaction, if you apply for a bank loan or a mortgage, the financial institution may recommend you purchase title insurance to protect their investment and your own.
Another potential cost is a land survey. It is possible you won’t need a survey done on land you are interested in buying. The land could have been recently surveyed, and with a little legwork you should be able to find out if and when a survey has been done.
Keep in mind that you may need to hire a professional surveyor to chart out the boundaries of your property. Because surveys vary based on location and a host of other factors, it is hard to give a general estimate of how much one will cost.
Finally, remember that utilities and building costs will be expensive. In some cases, you may have to pay to have electricity and water run to your house before you even begin monthly service fees. On some land, you will have to drill a well or install a septic system before home construction.
- ZONING RESTRICTIONS
Zoning laws govern what can and can’t be done with land. Zoning can be complex. It is the local laws that regulate how property can — and cannot — be used in certain areas. Make sure you would even be allowed to build a house on a vacant lot before buying and trying to start construction.
Figuring out the basics of zoning should not be too difficult. For instance, certain areas will clearly be zoned residential. You can seek out the zoning office in any county or go online to find useful records for any parcel of land. While you are digging around in those records, make sure to pay attention to the county’s long-term land use plans and scheduled road additions. Those will dictate future construction and could spell the difference between a nice quiet front yard and a house uncomfortably close to an interstate 10 years from now.
- ORDINANCES AND COVENANTS
Land destined to be built on or sold is often carved up into smaller parcels that make up subdivisions. The land in a subdivision likely has some restrictions placed upon on it that you will want to know about before buying. If the vacant lot you are eyeing is in the middle of an already developed community, chances are good that a homeowner’s association governs that area.
Homeowner’s associations command membership fees and set the rules for behavior and decorum in the area. Following their rules could dictate how frequently you cut your grass, where you park your car or even what kind of pets you have.
On a more general level, subdivisions may have covenants in place that lay down specific rules for the use of the property in question. These covenants — or deed restrictions — are private agreements between the landowner and the buyer, which is what separates them from the zoning restrictions. Within city limits, you may also be held to city ordinances that govern certain behaviors or land uses.
All those restrictions may sound like a real headache, and they can be. But they can also be a blessing. After all, the rules apply to everyone else, too. If you find a piece of land you like with covenants you can live with, you will know everyone else in the area is bound to the same standards.
Access to utilities is a vital element of buying land. Any vacant lot you are eyeing for a home or business will need utility access. That includes electricity for power, gas for heat, and lines for internet, television and phone. You will want some or all of those piped into your property when construction begins. They all cost something.
Water and sewage could potentially be more work. Vacant lots that are not close enough to water and sewage lines will need wells and septic systems to gain access to these utilities. That means added expenses and added hassle, as you will need permits for drilling a well and installing a septic system.
Access might sound like a no-brainer, but it is a surprisingly complex issue when you are purchasing a vacant lot. In urban areas, it is rarely a problem. But in the countryside, rural land for sale could potentially be cut off from a major road and be available only via private access. This lack of access can introduce a number of problems.
If land truly isn’t accessible via public roadways, it might not have access to city water or sewage. You could end up requiring a septic system and a well to handle those basic utilities, which will add to the construction costs.
More important, however, is the issue of access. A public road obviously guarantees a route to a vacant lot at all times. But when private roads enter into the equation, things get complicated. If your property is landlocked, the typical solution is to make an arrangement with a neighbor for guaranteed access via a private road through their land, known as an easement.
With easements, we delve into the world of real estate law. An easement is an interest in land owned by another that entitles the easement holder to a specific limited use. Imagine you find that perfect piece of property. It has everything you are looking for; but there is a problem. There is no public road with direct access to the property, and the only way to access it is via a private road owned by your would-be neighbor. That is where easements come in.
With some luck, you will be able to establish an easement on a neighbor’s property through friendly discussion. The nature of your easement will vary by situation. Maybe you need to run a power line across a corner of a neighbor’s property, or perhaps you want to install a driveway running to their private road.
With easements it is essential to consult a real estate lawyer. Even if you get along well with your neighbor, drawing up official documentation will allow you to lay out the terms of the agreement and protect yourself from liability. If your neighbor isn’t too agreeable about negotiating an easement, things can get tricky. You may be able to sue to establish a “way of necessity,” meaning you will have to prove in court that you require an easement on a neighbor’s property for access.
You may also be able to sue for an easement based on prior use, if it is clear that the previous owners had access to a neighbor’s property before you purchased the land. If there is any legal involvement, be smart and hire a real estate lawyer.
A new lot will require a survey to clearly define the property lines. When you look at property boundaries on a map (in real estate, often called a plat) it won’t be immediately evident how those boundaries line up with the land itself. That is where surveying comes in.
Professional surveyors research your property and use a plat to determine and mark the exact property boundaries of your vacant lot. When you look into buying a piece of property, it is possible a survey has been done recently. The evidence of a survey should be visible on the property with markers identifying the corner boundaries. You may even come across evidence of a survey when investigating the paperwork of a vacant lot yourself.
Even if a survey has been done, it could be old and outdated. Getting a new survey will clearly define your property line — quite important when you delve into legal matters like easements. And surveys can serve purposes beyond plotting out property boundaries.
For example, a construction survey can help you make precise elevation determinations and plan out the dimensions of a house. And floodplain surveys provide critical information about the chance of flooding on your lot.
The cost of a survey will hinge on a number of factors:
- The size of your property
- The amount of time it takes to complete the survey
- How much research the surveyor has to do with plats
And the type of survey will impact the cost. While a floodplain survey could end up costing you more, few things could wreck your building plans like being caught unaware in a flood zone.
Unless you are buying a vacant lot with the goal of turning land into a swampy mess, flooding is no good. It is a powerfully destructive force that can outright destroy buildings or cause thousands of dollars of water damage. You want to make sure you are not buying land that will flood.
So how can you know if a vacant lot falls within a floodplain? First, check the plats. Past research on the land may well have done your work for you already by mapping out the property’s elevation and determining potential flood areas. If you strike out, turn to a surveyor for help.
FEMA flood zones are clearly defined with letter designations. Areas in Flood Zone A have a 1% chance of annual flooding; flood insurance is required for building here. Zones X or C are the ideal ratings; these areas have a less than 2% chance of annual flooding.
- BUILDING PERMITS
It is a sad fact of real estate life: just about everything you build is going to require a building permit. You will have to deal with government zoning before starting construction, and obtain permits for building, permits for burning, and permits for, well, the list goes on and on. Construction permits help protect the land and keep you honest to building codes, and those building codes ensure you can’t haphazardly build a structure that is going to collapse on itself.
Be ready to apply for permits, permits and more permits as construction progresses. Need to drill a well on the property for water? You will need a permit. Need to install a septic system for sewage maintenance? You will need a permit. The construction process is laden with permit requirements, from plumbing to electrical work.
On the bright side, at the end of the day, all that paperwork will guarantee you have a solid, completely legal investment after all the work is complete.
WHAT DOES DUE DILIGENCE MEAN WHEN BUYING LAND?
Due diligence simply means doing your research on a piece of land and taking precautions before you make a purchase. Engaging the services of a reputable real estate attorney is recommended to ensure due diligence.
WHAT SHOULD I CHECK BEFORE BUYING LAND?
There are a number of things to check before making an offer. These include checking to ensure the title on the land is clear, that you can legally carry out your plans for the land, and whether it is hooked up to utilities. A real estate lawyer can be of great assistance in carrying out some of the checks, as there is a long list of them.
IS IT BETTER TO BUY VACANT LAND FIRST AND BUILD LATER?
Buying the land first and then building on it later allows you more freedom to do what you want with the property, but it likely won’t save you money. Be sure to double check that government zoning restrictions won’t prevent you from building your dream home on the land you are purchasing.
Alternatively, a house and land package may help you save costs but will likely limit the amount of customization you can do. This sort of option is often available when a big developer buys a large plot of land and subdivides it into lots for a neighborhood. You may also be limited as to what you can do on your property. For example, you may not be allowed to build a fence, put in a pool or hot tub, or have campfires.
IS BUILDING A HOUSE CHEAPER THAN BUYING ONE?
At one time, purchasing a home was cheaper than building one. But according to the National Association of Home Builders 2019 Construction Cost survey, the median sales price of an existing single-family home in the U.S. was $485,128, the highest in the survey’s history. The average construction cost of a typical single-family home in the 2019 survey was $296,652.
But keep in mind, construction, labor costs, land and materials prices will vary from city to city. These costs have also risen drastically in the last two years.
For More Information
For more information about buying land, or if you have a problem with vacant land you have already bought, contact the attorneys at Aronoff, Rosen & Hunt. You can contact our office at (513) 241-0400 or use our contact form to schedule a time to talk with us.