Buying a piece of land to build on can relieve the headaches of buying an already-built home. You might have spent hours or days searching unsuccessfully for the right home location, type or size. You might want to avoid surprises and problems, such as foundation or roof problems. Buying just the land takes less money than buying a home. While it might be appealing to build your home from scratch, you need to line up your finances and thoroughly investigate the land. Soil scientists and lawyers can help you avoid pitfalls.
Get your financial house in order. Obtain preapproval for a mortgage; this tells you how much you can borrow from a bank, how much land you can buy and how much house you can build. Look for other sources of money, such as your 401(k) retirement plan, savings account, stocks and bonds, and loans from family, especially for a substantial down payment.
See the land. Search for vacant land at websites such as mls.com or fsbo.com, or visit a real-estate broker's site. Pick up a booklet of properties for sale next time you go to a restaurant or a grocery store. Find bargains with foreclosed land from Multiple Listing Service or government agencies, such as the U.S. Department of Agriculture. Go to the website of your state's tax or revenue department for a list of properties being foreclosed upon because of unpaid taxes. Get the physical address of the land.
Learn all you can about the land. Locate the boundary lines and determine the size of the land; get a licensed surveyor to help. Contact your local zoning department to know what you can build and do on the land. Read or ask a lawyer to read the restrictions on building size, appearance and location on the land. Go to the Federal Emergency Management Administration site (fema.gov), click on the "Flood Maps" link to pull the "Map Service Center" page and select the "Map Search" tab to see if your land is in a flood zone. If it is, you must get flood insurance. Enlist a lawyer to help determine if the seller owns the land or has the right to sell it.
Inspect the property to determine if it is suitable for your use. Contact your local health department or a laboratory for a soil test to check how well the land absorbs liquid and its ability to support a septic system. According to North Carolina State University Department of Environment, Health and Natural Resources, you should have at least one acre of land with suitable soil and land surface so you can repair or expand a septic system and keep water wells at least 100 feet from septic lines. If there is a well, have your local health department or an environmental laboratory test a sample of the water. See if the land takes in rainwater and whether there are steep hills.
Present a written offer. You can do it yourself, although you should get an attorney to review the offer or write it. Before making the offer, decide when closing will occur and who will pay for the title search, inspections, tests and closing costs. Include conditions that the land must be suitable for a home at the time you close. Alternatively, have your money placed in escrow, in which the seller gets paid after your conditions have been satisfied. Take a certified check to the closing.
- Don't get emotionally attached to land. You can't transform unsuitable land into buildable land.
- If you are buying a lot in a subdivision, the local planning or zoning office might have already verified the lot's suitability for building a home to approve the subdivision.
- Avoid borrowing from your 401(k) if possible. According to Smart Money, you might lose tax benefits, have less money at retirement and, if you leave your job, you must immediately pay back your plan or face taxes and penalties.
- Smart Money: 7 Tips for Getting a Preapproved Mortgage
- Smart Money: 401k Calculator: Should You Borrow from Your 401(k) or 403(b)?
- United States Department of Agriculture: Real Estate for Sale
- Michigan Department of Treasury: Michigan Taxes: 2012 Tax-Foreclosed Real Property Parcel Listings
- Federal Emergency Management Administration: Map Service Center: Definitions of FEMA Flood Zone Designations
- North Carolina State University: Soil Facts: Investigate Before You Invest; Publication AG-439-12; Aug. 1990; Updated Dec. 1997
- Calvert County Health Department: Perc Test
- American Ground Water Trust: Water Testing
- State of Colorado: Department of Regulatory Agencies: Division of Real Estate: Contract to Buy and Sell Real Estate (Land)
- Multiple Listing Service Listings: Home
- Multiple Listing Service Listings: Find Foreclosures: "Uncovering Bargains in Bank-Owned Real Estate"; James J. Saccio
- For Sale By Owner: Sell Your Home: Homes for Sale
- Lane County, Oregon: Departments: Public Works: Land Management: Build: Introduction
- Federal Emergency Management Administration
- Illinois Environmental Protection Agency: Well Water Testing
- Jupiterimages/Photos.com/Getty Images
- Basic Steps on How to Get a HUD Home
- What Type of Loan Is Needed to Purchase Land?
- How to Make Sure an FHA Appraiser Doesn't Undervalue Your Property
- How to Get a Mortgage on a Rental House
- How to Subdivide a Lot & Refinance
- Using Land Titles as Collateral for Building Homes
- How to Transfer a Mortgage to a New Owner
- Can a House Be Sold Without Clearing the Title?