While vacant land may be a more attractive and accessible real estate investment for many folks, it is not free from complications. Like all real estate investments, you must do your due diligence before making a purchase. Below are a few common errors when buying land.
1. Not Checking the Market Before Buying
You may have found a great deal on a plot of land and expect to build and sell a house for a nice profit – but this is not always the case. When the price of land is low (and even if it isn’t) check the local housing market. If homes are lingering for months or if the market is down, you may not be able to sell. In addition, there are areas where the cost to build is higher than what you can get for the final product – making new construction infeasible. Call a few local contractors and check the general cost per square foot for single-family homes to estimate how much you will need to spend on construction, then compare this to local home prices.
2. Skipping on the Survey
You may not think it’s worth the cost of ordering a survey, but this will come back to haunt you if the property is over $10,000. A survey will show you all possible encroachments and will verify the boundaries described in the listing. Be sure to order an ALTA survey. You may even want to order some additional Table A Items in your survey – such as flood zone boundaries, wetland locations, zoning information and utility locations.
3. Not Checking for Access
If you ordered a survey, this shouldn’t be an issue – but make sure you’re buying land that is accessible. It will surprise you how many parcels of land are landlocked. While you’re at it, also check whether you can connect to public utilities. If you cannot attach to a public water or sewer main, you will need to build out a well and septic system – something that is not always feasible. Before you can build a septic system, you will need to complete a percolation test. The test results will show you whether a septic system is workable – if not, you will have a hard time building anything on your land.
4. Not Visiting the Site Before You Purchase
If you buy land without first looking at it, you may be in for an unpleasant surprise. You could later plan a beautiful spec home only to find that someone had been using the lot as a junkyard for many years. If you cannot visit the lot, you can also leverage Google Earth to check current and historical satellite photos of the property.
5. Not Looking into Environmental Concerns
There are several potential issues that fall under the environmental category: are wetlands or endangered species found on your land? Is it in a flood zone? Are there environmental contaminants? You can check the US Fish and Wildlife’s website to look for wetlands. To check if you’re buying land in a flood hazard zone, go to the FEMA maps of your area (if your land is in a Special Flood Hazard Zone, you will need to purchase flood insurance for any property you build). Finally, if the site was previously used for commercial or industrial use, you may find that your land is contaminated. If you want to be very cautious, order a Phase 1 Environmental Report to ensure that there are no Recognized Environmental Concerns on your land.
6. Not Checking Zoning
Every municipality will have zoning restrictions on land under their jurisdiction, which will dictate the allowable use of any lot. If you are planning to build a house, be sure that zoning allows residential use on your land. Zoning will also dictate how tall your building can be and where on the land you may place it. Zoning regulations will usually impose setbacks, which will give a minimum distance from your lot line that must be maintained for all buildings.
7. Not Thinking About Topography
You probably know rock and steep cliffs will be a problem if you want to build on your land. Less obviously, if you are buying land far away from a major town or city, you will probably have issues transporting materials to the site or finding skilled labor nearby – and will have to pay extra in labor and materials to build something on your land.
This is just a sample of some common errors – so complete your research before diving in and buying land. The most important thing is to understand as best as you can what you are getting into before you purchase land for the first time.