Vacant land is both an overlooked investment opportunity and a misunderstood and complicated one – and there are plenty of land due diligence questions to ask as a first time land buyer.
Before you buy vacant land, there are some common tips and problems you’ll want to know about first.
This includes the fact that it’s up to you as the buyer to do your land due diligence on the property before purchasing.
Keep reading to learn more!
What is Land Due Diligence?
Due diligence is all about taking the proper precautions before buying.
It’s better to find any issues ahead of time (before you buy) rather than realize you should have looked harder into the land you’re now stuck with.
When we first started our business, we made a few costly mistakes that could have been avoided with proper due diligence.
This was largely because we could not find a comprehensive land due diligence checklist to guide us and, ultimately, we had to learn through trial and error.
Now, hundreds of deals later, we wanted to put together a list of all of the potential items of concern that we have encountered so you have a source to go to for guidance when buying vacant land.
We have aimed to make this land due diligence checklist as comprehensive as possible.
Thus, not every item will apply to the parcel of land you may be researching.
For example, a .25 acre infill lot in Philadelphia, PA will have a very different checklist than 640 acres in Pershing County, NV.
Keep this in mind as you read through the checklist and pick and choose those items that are relevant to your situation.
Please note that we are constantly updating this land due diligence checklist as we find more information or run across new situations, so please check back to see what’s new.
1. Assessor’s Parcel Number (APN)
The APN is the number assigned to a parcel by the county tax assessor and is used to look up the parcel’s tax records (it is also sometimes called the Property Identification Number).
Not every seller will list the property’s APN in their listing page so you MUST ask the seller for this before you do anything else.
Knowing the parcel APN will make it much easier to complete the rest of your land due diligence.
Go the extra mile to ensure that the individual listing the property is the individual who actually owns it.
Give the local recorder’s office a call to verify who the owner of the vacant property is.
You may initially find this strange, but in the event of a separation, estrangement, bankruptcy, etc., individuals will often sell properties that do not belong to them legally.
It’s important to purchase the property from the owner themselves because they could later come back and claim that the property still belongs to them.
3. Undivided Interest
Sometimes two or more owners will have “undivided interest” in the property.
This means that each owner holds a partial interest in the property as a whole (as opposed to dividing ownership by physically breaking the property in two through subdivision).
In this scenario, each owner has an equal right to use the property.
In addition, each owner can sell their undivided interest in the land separate and apart from the other owners.
When this happens, it can sometimes create confusing public records.
For example, we were recently looking at a property in Texas.
When we input the APN into the assessor’s database, the public records indicated that the property was six acres in size.
However, there was a note under the legal description that said “undivided interest in 1/2 of 12 acres.”
When we pulled up the assessor’s GIS map and measured the acreage of the parcel, the calculated size came out to 12 acres.
As it turned out, our seller only owned 50% interest in a 12 acre parcel.
When one of the original owners sold their share in the property, the assessor created two APNs for the same lot (one for each of the owners holding 50% undivided interest in the lot).
Thus, be sure to check for the line “undivided interest” in assessor records (sometimes abbreviated to “und int”) as part of your land due diligence.
Also, be on the lookout for a discrepancy between the calculated acreage in GIS maps and the listed size in the assessor database.
For more information, check out our article on undivided interest.
4. Mineral Rights
In addition to verifying general ownership over the property, you may also want to check whether your seller has the mineral rights to the parcel.
Mineral rights are the ownership rights relating to underground resources like oil, silver, or natural gas.
In the United States, surface rights and mineral rights can be severed, meaning that when you purchase a property you are often buying only the surface rights.
Typically, the only way to verify who currently owns the mineral rights is to have a title company complete a mineral search that goes back to the original homestead.
If another entity retains the mineral rights, this means that they can explore for and extract minerals from beneath the property’s surface – and use a portion of your property to set up the workspace they need to do so.
Whether this is a major concern really depends on the property, location (i.e. if there a history of mineral extraction in the area), and your expected uses for the land.
Either way, it’s to your benefit to know what you are purchasing!
5. Royalty Rights
Royalty rights convey the right to receive a percentage of the revenue from any minerals, oil or gas extracted from the land.
Typically, royalty rights are tied to mineral rights.
They come into play when a mineral rights holder enters into a lease or agreement with an exploration and production company so that they can extract the oil, mineral and/or gas beneath the land.
The lease will spell out the lease payments that the mineral rights holder is entitled to as well as any royalty interest on the minerals extracted.
However, royalty rights can also be separated from a property’s mineral rights in the same way that the mineral rights can be divided from the surface rights.
Thus, you sometimes have circumstances where one party holds the mineral rights, another the royalty rights, and another the surface rights.
When this happens, the royalty rights holder has the right to any royalties, but they cannot lease out the land, alter any existing leases or receive rental payments.
If you are looking to purchase a property for its mineral rights, be sure you also do a title search on the royalty rights.
You don’t want to go into a purchase expecting a steady stream of royalties from the minerals under the ground only to find that someone else is entitled to them.
6. Timber Rights
Timber rights are very similar to mineral rights except they convey the right to any timber on the land.
If the timber rights are divided from the surface rights of the property, then the owner of the timber does not own the ground upon which the trees grow, but they own the right to cut the trees themselves.
As with mineral rights, you will want to have a search done to determine the owner of the timber rights.
Often, if the sale does not include the timber rights, it will show up as a title exception in the title report.
Although, it is also the case that the title report may not catch any timber deeds in the chain of title.
Still, even if you don’t own the timber rights, you may be able to convince the current owner to sell the trees back to you.
After all, there is likely a reason they haven’t logged the property already.
You will also want to look into the details of the timber rights deed.
Sometimes, only certain kinds of trees are allowed to be cut.
Other times, the timber rights are only valid for a certain time frame.
If you are buying land for its timber, it’s very important to consult with a forester before purchasing.
Timber land is a complicated investment, and the value of your parcel can depend on the site index, proximity to mills, and state and local harvesting and management practices, among other factors.
Thus, it’s a good idea to have a professional analyze your land to make sure you are getting your money’s worth.
You can start with a free service from your state or local university.
The National Association of State Foresters can help you in your search.
You can also read more about timber land at our blog post on how to value timber land.
8. Site Index
Site index is a measure used in forestry that gives the expected height of the tallest (or the dominant) trees of a specific species at a particular age.
For example, if a tract of land has a site index for red oak of 25 feet at 50 years, then you can expect your oak trees to grow to 25 feet by the time they are 50 years old.
This measure is used to help determine the potential productivity of a forest and evaluate land quality.
After all, land with higher quality soil and climate conditions would be expected to grow taller trees than one with poor quality soils.
If you are purchasing timberland, you will thus want to understand the site index for the species you are looking to grow and harvest.
This will help you project the future value of your timber and will also allow you to compare the land to other tracts nearby.
You can find more information at our blog post on site index.
9. Crop Rights
You may be surprised to learn that many farmers do not own the land they cultivate.
Just as rentals are a big part of the housing market, the agricultural sector relies heavily on leases to meet the land needs of farmers.
In fact, more and more cropland is owned by absentee owners, who lease the land to the individuals who actively farm it.
For a land buyer, this means two things:
Leasing out suitable property for farming can be a great way to make money from your land.
The land you are buying may already have an active lease on it.
If the latter is the case, it could be great news for you.
You already have a tenant in place!
However, if you are looking to use the property yourself, you will want to understand the terms of the lease to see if it will extend past the closing.
In most states, landlord-tenant law applies to agricultural leases, so you or your seller may not be able to simply break the lease at will.
For example, some states require a six-month notice before an agricultural lease can be terminated.
Also, keep in mind that the crops grown by the tenants (called emblements) are typically treated as the tenant’s personal property, not the land owner’s.
Thus, a tenant often has the right to finish raising and harvesting their crops even if the lease ends.
10. Crop Insurance
Crop insurance is a risk management tool used by farmers and agricultural producers.
It is often provided through public-private partnerships wherein private companies are authorized by the United States Department of Agriculture to underwrite policies.
The federal government then subsidizes premiums for many farmers.
Because of this support, crop insurance is largely affordable to the vast majority of farmers.
Thus, it’s not surprising that more than 380 million acres of cropland are protected in the United States today.
Most crop insurance policies cover crop losses from multiple events, such as disease, drought, fire, flooding, insects and extreme weather.
This is a major benefit; therefore, if you are looking to buy a property with crops on it already, you should check whether there is an insurance policy for these crops.
If not, it’s worth researching what you need to do to obtain insurance.
11. Grazing Rights
Grazing rights give the user the right to allow their livestock to feed (or graze) in a particular area of land that they do not own themselves.
Grazing rights can be given by both public and private land owners and typically take the form of a lease or a permit.
As in other lease situations, the lessee pays a monthly or annual fee in exchange for the right to graze on the land.
While private land owners can execute such leases with a farmer or rancher, grazing rights are most often referenced in the context of public lands.
Grazing on public land has a long history,
Grazing on public land has a long history. In fact, prior to the 19th century, ranchers and farmers were allowed to graze their animals on open rangeland or in publicly-held commons.
For some time, this nonexclusive right to graze was unproblematic because the United States had so much unsettled land.
However, as more land moved into private hands, the remaining open rangeland became overgrazed resulting in the creation of federal regulations on grazing public land.
Today, only certain allotments (or areas) of public land (such as Bureau of Land Management and Forest Service Land) have been specified as available for grazing.
The right to graze on an allotment is conveyed through a renewable lease or permit that is typically given for a period of 10 years.
These leases and permits will also dictate the number of animals that may be grazed, the time period when grazing is allowed and any other terms and conditions that the rancher must follow.
Leases or permits are typically given to owners of private land that is adjacent to an allotment (or land that has been recognized by the managing agency as having preference for public grazing).
Therefore, if you are looking to buy a property that conveys grazing rights, you will want to verify that the land you are purchasing either already has a grazing permit, is designated as a base property (one with preference for public grazing), or is eligible to be considered as a base property.
Be sure to contact your local BLM (or relevant agency) field office to verify the above if grazing rights are vital to you.
12. Wind Rights
With the proliferation of wind energy in the United States, new kinds of property rights, called wind rights, are being formed to help property owners profit from wind production on their land.
Some have argued that these rights are similar to oil, gas and mineral rights and so may also be severed from the property’s surface rights.
Despite this, no state specifically recognizes wind rights, although some, such as Nebraska, North Dakota and South Dakota, prohibit their severance.
The reason for this has to do with the complexities generated by a severed estate in the context of wind turbines.
For example, when a land owner establishes a lease with a wind turbine developer, the lease will grant the lessee the right to access the property, place their equipment on the lot and develop and maintain the turbine.
The property owner has the uncontested ability to allow such uses since they own the surface rights.
Yet, what happens when one person owns the surface rights, one the mineral rights and another the wind rights?
When the mineral rights owner, wind rights owner and surface rights owner all want to use the property in different ways, who has precedence?
Because of these complications, wind energy developers may avoid properties where the wind rights have been severed.
Therefore, if you want to develop wind turbines on a parcel be sure to first check whether the wind rights have already been severed.
If not, take care to look into the current legal regulations in your state before proceeding with any severance or development.
13. BLM Land
Bordering Bureau of Land Management (BLM) land can be a huge benefit for a variety of reasons.
First of all, it’s public land, so simply abutting it means you have a much larger back yard than what is included with your property.
In addition, as mentioned above, land adjacent to BLM can often come with grazing rights on the surrounding public land.
Thus, many buyers specifically look for properties that are next to BLM land.
This is not as difficult as it may sound because there are many areas in the western states where land is owned in a checkerboard pattern.
This is to say that one section of land is BLM, the next is private, the next BLM, and so on.
Checkerboards were created by railroad land grants in the mid-to-late 1800s as an incentive to build railroads throughout the western territories.
Companies were granted every other section of land for 6 to 40 miles on either side of the rail corridor.
The idea was that the value of the remaining public land would go up once the rail was built, which would cover the cost of granting the alternating parcels to the railroads.
It didn’t quite work out that way, but the checkerboard pattern remains today, which does provide a great public resource for private landowners.
If you want to check whether a particular parcel adjoins BLM land, you can use the public lands layer in MapRight (referral link).
14. Wildlife Refuges
Are you looking to buy land in order to hunt?
You may be interested in buying property near a wildlife refuge.
These special lands were created by an active hunter, President Theodore Roosevelt, specifically to preserve wildlife.
Today there are 366 national wildlife refuges and countless more are run by individual states.
Refuges are unique among public lands in that their primary aim is to restore and conserve the nation’s wild species, including many of the birds and mammals that are most attractive to hunters.
Because these lands are very well maintained, they often provide some of the best hunting experiences out there.
So, if you buy land near or adjacent to a wildlife refuge, you may be able to dramatically increase the hunting territory available to you.
Should this be your plan, you will want to first identify wildlife refuges that are open to hunting.
Learn where and when hunting is allowed and plan your land search around these areas.
Just keep in mind that you will need the appropriate state licenses and/or permits in order to hunt in a refuge.
As part of your ownership research, you will sometimes find that the current owner has passed away.
What happens next depends on the circumstances. Below are some of the most common outcomes:
If the property is owned by two or more parties as joint tenants with right of survivorship, then, in many states, the surviving owners will automatically inherit the property and nothing further is required.
To check for joint tenancy, just look for the phrase, joint tenants with right of survivorship, in the deed.
Husband and wife:
In some states, the surviving spouse automatically inherits the property and nothing further is required.
Check with a local lawyer to confirm what the laws are in your state.
Sole ownership or tenants in common:
If the property was held solely by the deceased, or jointly with another party as tenants in common, then the property will need to go through probate or similar action to determine the heirs.
Be sure to consult with a lawyer or title company to ensure that the property title has transferred fully to the person who is selling the land.
16. Ancillary Probate
When probate is required, it is important to note that the property may also need to go through ancillary probate in the county where the property is located.
Ancillary probate is often necessary even if full probate was already done in the county where the deceased owner lived.
This is because probate proceedings are governed by the laws of the state where the property is located.
For example, say someone lives in New York and owns a vacation cottage in Florida.
When this person passes away, the bulk of their estate will be distributed through a New York probate proceeding.
However, the cottage in Florida will be distributed through an ancillary probate action in Florida.
Thus, it is always a good idea to call the county where the property is located and check if ancillary probate is required as part of your land due diligence.
17. Letters Testamentary
After an estate goes through the probate process, the probate court will issue a document, called the Letters Testamentary (or in some situations a Letter of Administration), which gives the designated executor of the estate the power to administer the will.
These Letters Testamentary are then used by the executor to prove that they are able to sell any property held by the estate as its authorized representative.
It is very important that you or your title company review these documents before you close to ensure that the administrator has the authority to execute the sale.
Otherwise, there could be a cloud on the title, which may hinder your ability to sell the property yourself or take out a mortgage.
18. Community Property States
As mentioned above, in certain states a spouse can automatically inherit property when a property is acquired by a married couple.
States where this is the case are called community property states.
Currently, there are nine such states, including:
The difference between these states and all other “common law” states is that assets acquired during marriage (but not prior to) are considered joint, or community, property.
Thus, property is collectively owned by the married couple.
Alternatively, in common law states, a couple will typically acquire property as joint tenants with each party holding 50% undivided interest in the land.
There are several key pointers to know about community property that makes it different from ownership by spouses in common law states:
Community property is automatically inherited by the surviving spouse without the need to specifically call out joint tenancy in the deed.
Just keep in mind that it is still sometimes necessary to record a death certificate upon the death of a spouse.
One spouse cannot sell their undivided interest in the lot without the consent of the other spouse.
If you are married and want to acquire a property on your own, you may need to record a deed in which your spouse quitclaims all interest in the lot.
As a side note, if you are buying a property in a community property state, make sure the deed lists your marital status.
This is true even if you are currently single!
Thus, if you get married later, it’s clear that the property was not acquired as community property.
19. Sole and Separate Agreement
In some community property states, both spouses may need to sign the deed when a parcel of land is sold even if the property was acquired by only one of the spouses prior to marriage.
Unless, that is, the spouses have signed a sole and separate agreement and recorded it with the county.
This agreement helps ensure that a property is kept as the sole and separate property of one spouse and is not folded into the couple’s community property.
For example, we recently purchased a property in New Mexico that was acquired by our seller prior to her marriage.
The vesting deed listed her name only as well as her marital status at the time of acquisition (unmarried).
However, because she had since married, our title company had both spouses sign the deed transferring title to us.
The rules governing sole and separate property vary from community property state to state.
Fortunately, your title company should take care of all these details for you.
Unless you are self-closing, in which case you will want to make sure you understand the rules of the state in question.
In addition, if you are married and are buying property in a community property state as your sole and separate property, you will want to verify that the appropriate documents are recorded to ensure title remains solely in your name.
As another example, we recently sold a property in California to a married woman who wanted to acquire the lot as her sole and separate property.
In this case, a quitclaim deed (not a sole and separate agreement) had to be recorded that transferred the husband’s interest in the property to her.
Again, be sure to check with a local real estate attorney or title company to ensure the appropriate documents are recorded with the county.
20. Power of Attorney
Every now and then, you may find that a property is being sold by someone who has power of attorney for the true owner.
This is often perfectly legal, but you will still want to verify that the person selling the land does indeed have a right to do so.
If you are closing through a title company, this will be part of the title research.
However, if you are going to self-close, be sure to ask for a copy of the power of attorney.
Confirm that the document clearly gives the power of attorney the right to sell the property.
You should also run the document by a local real estate attorney.
Also, keep in mind that you will need to record the power of attorney along with the deed.
21. Tax Auctions
Your title search or ownership research may sometimes reveal that your seller acquired the property with a tax deed.
This is a special kind of deed that conveys a property from a county to the winner of a tax auction.
Tax auctions are used to sell properties that have been taken by the county from a private owner due to non-payment of property taxes.
At the public auction, the property is sold to the highest bidder (usually the minimum bid is for the amount of taxes owed) and the county commissioner issues a deed to the winner once the purchase price is paid.
Many people like to purchase properties at tax auctions because you can often acquire the property for much less than its market value.
Sounds like a deal, right?
Unfortunately, it’s not quite as good as it sounds.
The problem is that most title companies will not insure properties if there is a recent tax deed in the chain of title.
This is because the owner who lost the property due to back taxes may have the right to redeem the property within a specific timeframe.
If a title company won’t insure a property, you generally won’t be able to take out a loan, so this can limit your ability to build on or sell the property.
In addition, if the owner who lost the property also wasn’t paying his or her income taxes, an IRS lien may have been placed on the property, which is not erased by the tax auction.
Although they are rare, an IRS lien will remain with the land and will generally need to be cleared before you can sell or acquire title insurance.
The same goes for any county or city liens for unpaid utility bills or special assessments.
Thus, you want to be careful with tax deeds.
Do a thorough title search, a municipal lien search and be sure you understand the potential limitations.
22. State Auction List
As mentioned above, when a property owner does not pay their property taxes for a certain number of years, the county will place the property on a state or county auction list.
Properties on this list will be sold at a public tax auction to the highest bidder.
In some states (tax lien states), the auction is not for the property itself, but for the right to collect the back taxes plus interest from the owner.
If the property owner does not pay the bidder the back taxes within a certain amount of time, the bidder can then foreclose on the property and acquire it.
In other states (tax sale states), the auction is for the property itself.
Either way, if you are looking at a property that has back taxes owed, be sure to check with the state or the county to see if it has gone to an auction or is already on the list to be auctioned.
If it has been auctioned or is about to be auctioned, you will want to avoid the lot.
If it hasn’t, understand how long you have until the property will go to auction and make sure that the taxes are paid in time.
23. Assessor’s Legal Description
Be sure you read the simple legal description of the property listed in the assessor’s online records as part of your land due diligence.
The assessor will often include their notes in this abbreviated description that can help you quickly catch any issues.
For example, we were recently looking at a property in New York that had a note in the assessor’s online database.
This note said, “Reserved for Community Use.”
We requested the vesting deed and read through the full legal description, but there was nothing that referred to a restriction of this kind.
However, when we reached out to a title company, they mentioned that there were CCRs associated with the subdivision that were not specifically called out in the deed.
These CCRs restricted only this one lot to community uses.
If the assessor hadn’t made a note in their system, we may have never caught this since the CCRs were very old and the previous owners were not aware of them.
In fact, the assessor no longer knew where the note came from.
In addition, the deed did not make reference to the subdivision or CCRs because the legal description came from a prior 20-year-old tax deed.
Tax deeds usually refer to a property by its APN, not the full legal description.
Thus, when the property description in the tax deed is carried forward to the legal description in future deeds, information can be lost.
Thank goodness for the assessor’s note!
24. GPS Coordinates
Since most vacant land parcels do not have an address, GPS coordinates can be a crucial way to identify the land you’re interested in purchasing.
Ask the seller for the GPS coordinates if they are not in the listing.
If the seller does not have them, you can use the parcel APN number to pull up a property report from a real estate research company, like DataTree, and get the GPS coordinates from there.
You can also use the APN to get the coordinates from the county’s GIS service.
However, you want to make sure your information is accurate so the below doesn’t happen to you!
Once you have the GPS coordinates, you can use them to measure the property size in Google Maps.
This is one of the most important questions to ask as part of your land due diligence.
Wetlands are commonly problematic for owners because there are federal and state regulations that make building on a wetlands difficult, if not impossible.
The best way to identify wetlands is to enlist the help of a wetlands consultant.
This can sometimes be difficult if you’re looking to close relatively quickly.
26. Wetland Mitigation
While it is true that building on wetlands is very difficult, there are a few options.
If there is no way to escape developing on your property’s wetlands, you may be able to mitigate your impact and continue your project.
Mitigation refers to the restoration, creation, or enhancement of wetlands to compensate for permitted wetlands losses elsewhere.
This can be done by restoring, creating or enhancing wetlands on another part of your site.
Alternatively, if you do not have the capacity to undertake the mitigation work yourself, there are some additional pathways, depending on the state where your property is located.
This includes paying for credits from a wetland mitigation bank or paying an in-lieu fee.
Depending on the situation, you may also choose to combine off-site and onsite mitigation tactics.
For example, a landowner may both purchase credits from a wetland mitigation bank while also restoring wetlands on a separate portion of their property.
For more information, you can read our detailed blog post on wetland mitigation.
27. Flood Zones
Flood zones can be challenging for several reasons.
Primarily, though, properties in a flood zone are particularly prone to flooding.
Therefore, they can be expensive to insure and can also make your investment vulnerable.
Understanding whether the vacant land you’re purchasing resides in a flood zone may help you reconsider your purchase.
Generally, when we talk about flood zones, we mean FEMA Special Flood Hazard Areas, or areas where there is a 1% chance of flooding each year.
These are the areas that have been designated as areas of high flood-risk.
Because of the flooding risk, your lender will usually require flood insurance if you are going to take out a loan to purchase or build on a lot in a Special Flood Hazard Area.
Thus, you will want to know if this is something you will need before purchasing.
To check your parcel’s flood zone, go to FEMA’s flood maps.
If the lot is located in a Special Flood Hazard Area, you will want to think carefully about whether you want to buy it.
Look into FEMA’s design requirements and the projected annual flood insurance premium to see if the extra cost is worth it.
Should you want to move forward with the purchase, read the sections below to understand what you need to know about building in a flood zone.
28. Base Flood Elevation
If your property is located in a Special Flood Hazard Area, you will want to know its Base Flood Elevation (BFE) as part of your land due diligence.
The BFE is the elevation of the surface water associated with a flood that has a 1% chance of occurring each year (or the surface water level of a 100-year flood).
Roughly speaking, this means that anything located below the BFE has a 1% chance each year of being flooded.
A 1% chance may not seem like a large risk, but these areas often also experience lower levels of flooding at a higher rate.
In addition, 100-year floods are massive events that cause billions of dollars in damage to homeowners, insurance companies and the government each year.
Given the extreme costs associated with these floods, any structure located in a Special Flood Hazard Area will ideally be elevated above the BFE.
To try and encourage this, premiums for flood insurance purchased through the National Flood Insurance Program are lowered for buildings that are certified as being elevated above the BFE.
To find the BFE of a property, you will need to look at FEMA’s Flood Insurance Rate Maps (FIRMS).
You can find the map for your property by searching for an address or a specific set of GPS coordinates (start with the longitude) at FEMA’s flood map database.
Once you pull up your address, you can open an image of the FIRM map for the area.
29. Elevation Certificate
As mentioned above, properties in a Special Flood Hazard Area usually require flood insurance.
The National Flood Insurance Program is FEMA’s flood insurance program and is the most common way to obtain flood insurance, although there are private options as well.
In order to acquire flood insurance through the National Flood Insurance Program, you will need an elevation certificate.
This is a document that lists certain key pieces of information, including:
the property’s location
the property’s flood zone
the property’s BFE
the building characteristics for any existing structures
the elevation of any building’s lowest level
This information is used to determine your flood insurance rate by comparing the height of any buildings on the property to the BFE.
If you are purchasing a property in a Special Flood Hazard Area, you should ask the seller to give you a copy of the elevation certificate at closing.
Should the seller not have one, you can check with the local Floodplain Administrator or Manager to see if they have one on file.
If this fails as well, you can also hire a surveyor to create a new certificate.
30. Floodplain Development Permit
If a property is located in a Special Flood Hazard Area, you will need to pull a floodplain development permit if you want to build on the property.
In fact, you will typically need a permit to undertake any activities in a Special Flood Hazard Area, including fill, clearing, constructing outbuildings, fencing, etc.
Keep in mind that cities and counties that participate in the National Flood Insurance Program (NFIP) are required by FEMA to enforce and monitor permits for floodplain development.
The purpose of this is to ensure buildings are built to meet the requirements of the NFIP and that any development activities do not increase the height and intensity of flooding.
To pull a flood plain development permit, you will typically need to submit at least the following items to the jurisdiction’s Floodplain Administrator (as well as additional materials):
Plan showing the proposed development in relation to the floodplain
Elevation of the bottom floor of all structures as well as mechanical systems, plumbing and electrical systems
Floodproofing methods for any structure certified by a Professional Engineer
Foundation and basement details
Fill and excavation details
Location of drainage facilities
An Elevation Certificate
Once you submit this information, the Floodplain Administrator will review the information and issue a Certificate of Compliance (if approved).
It’s very important to note that the Certificate of Compliance is not a building permit.
You will still need to go through the regular process of pulling a building permit before you can construct your building.
31. Terrain Issues
Depending on where you’re looking for vacant land, unpredictable elevations, cliffs, mountains, valleys, ravines, and more can occur.
While initially, you may not flag this as an issue, the topography can affect your ability to build on the property.
If you’re seeking to start a business, plant crops or build a residence, then you want to make sure that the land allows for that.
Visiting the property itself may reveal some of these features, but depending on how large the land is, it may not be possible to see all of its features.
Fortunately, an easy and free way to see the land’s topography is using Google Earth.
You can also hire a local photographer or real estate agent to visit the site for you.
Should you be looking to build on a sloped lot, you will need to factor in the cost of grading.
Land grading is when you make the ground level.
Typically, this is in preparation for new construction.
However, sometimes people use land grading to improve the landscape or to create a slope to improve drainage.
The land grading process will likely include digging, removing dirt, leveling slopes, filling low spots, compacting the soil, leveling the building site, and hauling dirt to fill a hole or hauling dirt out to level a slope.
Land grading is often done with heavy equipment like an excavator, skid steer loader, or backhoe.
Because of this (and based on a number of other factors), the job can be pretty pricey, especially if you have a large plot of land.
If you want to learn more, you can check out our blog post on land grading.
33. Site Preparation Costs
Not every parcel of vacant land is being sold “shovel ready.”
In these cases, you may be able to get a great deal, but you will also need to factor in the costs of site preparation should you want to build.
The average cost to prepare a lot is around $3,000, but can vary widely depending on the characteristics of the property.
There are two main factors that affect the price:
the cost to clear the land of vegetation and rocks
the cost to grade the land
There may also be additional costs to fix drainage issues, demolish existing structures, connect to utilities or dig out a foundation.
In addition, you may need to hire a civil engineer to perform soil tests to determine if further work needs to be done to prepare the ground for a foundation.
As you may guess, the cost of these items will depend on the amount of rock and vegetation currently on the land as well as its slope.
If the parcel you are buying hasn’t already been cleared and prepared, be sure you speak with a few contractors to get a cost estimate.
You don’t want to buy a property and later realize that it is prohibitively expensive to build on.
As part of your land due diligence, you will want to check that the property you are purchasing is actually the size that is listed.
You can verify this by checking county assessor records and/or the county GIS system.
As discussed above, you can also get a rough measurement of the land area in Google Maps.
Another important thing to check is whether the lot is going to be large enough for you.
If you are looking to use the property for a specific purpose, such as building a private lake, size will be very important.
This is because many counties have minimum lot size restrictions, especially if the property will need both a well and septic system.
These restrictions are usually not stipulated in the zoning code but are rather enforced by the agency that handles septic permits (typically the health department).
We made a video (see below) that may help you determine whether an acre of land is enough for you.
You want whatever vacant land you purchase to be useful.
If you purchase land that is 10 feet wide and 200 feet long, then you will likely have problems building a house and making a livable space (even if you can meet setback requirements).
Shop around and use your common sense before making a purchase.
36. Legal Access
Thousands of properties in this country do not have legal access, and whether the property is landlocked or not is one of the important land acquisition checklist items to cover.
If the vacant land you’re looking at is surrounded by other private property, then it may be useless to you as is.
Why? Because no one can legally access your property without going onto these other properties.
The only way to overcome this is to establish a legal, recorded easement to the property.
Typically, neighbors must be persuaded (in the form of compensation) to help.
It isn’t an unfixable problem, but it is one to be aware of prior to purchase because it requires some additional work to resolve.
If you need to negotiate an easement with your neighbor keep the following two items in mind:
It is usually better to sit face-to-face over coffee to discuss the situation. Keep things friendly!
Request an easement that is wide enough not only to access your property, but also to run utilities (~45-60′ wide).
We’ve run into many properties that don’t have legal access, and you can see one example in our video below.
As we discussed above, easements often come into play when a property doesn’t have access from a public road.
In these cases, an access easement is recorded against one or more of the neighboring lots.
Therefore, even if you have legal access to your property, you will also want to check if there is an access easement recorded against your property.
If there is, make sure you are comfortable with your neighbor using a part of your property for access!
Also, keep in mind that there are other kinds of easements that may affect a parcel of land.
For example, we were recently looking at a property out west.
It met all of the major land due diligence criteria: legal and physical access, no title issues, no wetlands or special hazard flood zones, etc.
However, upon further research, it turned out that the property was part of a new utility corridor.
This meant that there were multiple utility easements running right through the center of the property.
In just another few years, these easements would be used to build powerlines across the lot, effectively making it useless.
Moral of the story: don’t forget to check all recorded documents for easements!
38. Section Line Easements
A section is an area of land in the Public Land Survey System that is one square mile, or 640 acres.
Outside of the original thirteen colonies, most areas in the US adopted the Public Land Survey system, meaning that most properties are some fraction of a section.
Interestingly, in certain states, like Alaska, there appear to be laws creating public access easements on all section lines (AS 19.10.010).
But this is not true everywhere.
For example, we were recently looking at purchasing a parcel of land in Nevada that was a complete section.
There were no public roads leading to the lot and the county required legal access in order to issue a building permit.
Our seller informed us that, when he bought the property, he was told that it was Nevada state law for there to be public access easements around each section line.
However, we called four land use attorneys as well as the local district attorney, and all five indicated that there was no such law.
Therefore, be very careful to confirm the existence of any proposed access easements and check with a local land use attorney to verify all applicable laws as part of your land due diligence.
39. Conservation Easements
A conservation easement is a voluntary agreement that permanently limits development on a property in order to protect existing natural ecosystems and wildlife.
When a conservation easement is executed, the owner of the property retains title and control over the land, but allows a nonprofit or public land trust to place certain permanent restrictions on the allowable uses of the land.
The exact restrictions are negotiated between the land trust and the property owner.
But regardless of the provisions, the property owner is entitled to a tax deduction equal to the appraised value of the easement in exchange for agreeing to restrict future development.
For those who are not looking to further develop their property, this tax exemption can be of tremendous value.
However, if you are looking to purchase property and build, you should check the National Conservation Easement Database to see if the property already has an easement on it.
You can also find conservation easements on MapRight (referral link).
Read more about conservation easements in our blog post.
40. Conservation Reserve Program
The Conservation Reserve Program (CRP) is a rental payment program run by the United States Department of Agriculture.
Like a conservation easement, the CRP pays land owners to keep their property undeveloped for the sake of conservation.
However, unlike an easement, the property owner doesn’t have to place a permanent restriction on their property.
Rather, CRP pays yearly rental payments in exchange for removing environmentally sensitive land from active use as cropland.
To be eligible, a land owner must show that their property has been in active use as cropland for a certain number of years (usually 4-6).
If this and certain other eligibility requirements are met, a contract is signed for a period of 10-15 years that outlines the owner’s obligations under the program.
Should this contract be broken, all prior payments generally need to be repaid to the US government; however, certain CRP contracts may be eligible for early opt out to allow for the transfer of the land.
Either way, you may want to do a quick check to ensure there are no active CRP contracts already in place before purchasing a property.
41. Agricultural Easements
An agricultural easement is a kind of conversation easement.
Like other conservation easements, it is a voluntary agreement between a property owner and a land trust that permanently restricts the use of the land (in this case to agricultural uses).
The purpose is to protect existing farmland and ensure that it is not developed in a way that alters the existing character.
The property owner typically retains the right to keep using the property as they have been (assuming they are actively farming the land).
In addition, further agricultural or residential development is also typically allowed, although the details will be negotiated between the owner and the land trust.
Because the goal is to allow the farmer to keep productively farming their land, agricultural easements are often flexible in a way that other conservation easements aren’t.
Also, like other conservation easements, the property owner is eligible for a tax deduction in exchange for providing the easement.
Therefore, if you are looking to use a parcel of land for agricultural purposes, granting an agricultural easement can a profitable option.
However, if you are purchasing a parcel of vacant land for non-agricultural purposes, you may want to make sure an easement hasn’t already been recorded that will restrict what you are able to do on the lot.
42. Wetlands Reserve Program
The Wetlands Reserve Program (WRP) is very similar in concept and practice to a conservation or agricultural easement.
Like other easement programs, the land owner agrees to restore and protect the natural resources on their property (in this case wetlands) by recording an easement.
In exchange, the government provides payment of up to 100% of an easement’s value to the owner.
The WRP program is a bit more flexible than other programs in that it offers a range of timeframes, from a 30-year easement to a permanent easement.
In addition, there is a simple cost-sharing option, where the government pays up to 75% of the wetlands restoration costs without requiring an easement
As with all other easement programs, the WRP places restrictions on the lot’s use.
Thus, it is a good idea to check for any WRP contracts or easements before purchasing a lot to ensure you are not inadvertently purchasing a property you cannot improve.
43. Physical Access
Physical access is a relatively easy item to check for.
We generally just look at Google Maps to see if there is a road leading to the lot.
You can also have a photographer send you a report on the road conditions.
It is important to note that just because a physical road appears to exist does not mean that (1) it is accessible at all times of the year, or (2) the road constitutes legal access.
While you are looking into physical access, be sure to either drive out to the property yourself or have someone else do so.
Make sure there are no locked gates on any of the roads leading to the parcel.
It goes without saying that a gate can be a major headache, especially if you don’t know who put it up.
If it is clear who the owner is, you can try reaching out to them as a neighboring property owner to ask for a key.
Alternatively, if the gate is on a public road, you can call the county and see if they will have it removed.
45. Back Taxes
Understanding your tax obligations as part of your land due diligence is crucial.
Some properties have high taxes compared to their property values, which is something you’ll want to keep in mind before purchasing.
You’ll also want to make sure that the property taxes are paid up to the date of the transfer.
You can request the original receipts from your seller for these payments for verification.
Most county assessor’s offices have online tax records that allow you to look up the current amount due on the property.
You can also call the county treasurer or tax collector to verify that the taxes have been paid.
This way, you don’t get stuck with anyone else’s property taxes!
Keep in mind that many counties will reassess a property when it is sold.
During a reassessment, the taxes can go up or down.
It’s worth giving the county assessor a call to see whether they will reassess the property once it is sold.
Also, ask for the general method the assessor uses to calculate the tax rate.
This will help you calculate your future tax burden.
47. Land Use
As begin to discuss zoning and building regulations, it’s important to state that land use and zoning are not the same thing!
This was a big point of confusion for us in the beginning.
You will want to understand the differences, especially if you are looking to build something that will deviate from the norm of the neighborhood.
Broadly speaking, land use is the “character” that the city wants to maintain in a particular area, usually accomplished through density restrictions and land use designations or classifications.
Land use designations typically come from the city’s comprehensive plan (also called a general plan, master plan or land-use plan), which is designed to help guide the future growth of the city.
For example, if you are living in an area on the outskirts of town, the land use designation could say “rural residential,” which may place a density restriction of one house per every three acres.
Alternatively, the area near the town center may be “residential high density,” which could allow for up to three units on one acre.
These density designations can be separate and apart from the zoning code, so it’s a good idea to give the comprehensive plan a read as part of your land due diligence.
The zoning classification is another important land acquisition checklist item as it dictates what you’re able to do with the property after you own it.
The zoning code is the instrument that implements the city’s land use intentions, primarily by making specific “zones” guided by the land use designations outlined in the comprehensive plan.
Each of these zones will have a list of the allowable uses on any property located within the zone (i.e. residential, mixed, commercial, industrial or agricultural uses).
For example, below is a screenshot of the legend from an old New Jersey zoning map.
You can see that each single-family residential zone has a minimum lot size (RA-35 has a 35,000 sq ft minimum, RA-15 has a 15,000 sq ft minimum, etc).
If you look at the below portion of the old zoning map, you will find that the RA-15 zones are closer to the city limits and the RA-35 zones are further out.
This fits the typical zoning pattern, where higher densities occur closer to city centers.
The zoning code will also lay out setbacks, minimum lot sizes, and height, yard, and road frontage requirements for development within each zone.
Therefore, it is vital that you research your property’s zoning designation as part of your land due diligence.
If you purchase a piece of land intending to use it as farmland, but later realize that you can only build a house on it, then you’ll have wasted both your time and money.
Be sure that the land you wish to purchase will fit your needs from the get-go.
Most cities and counties will provide an online version of their zoning map and zoning code so that you can find your property’s zoning designation yourself.
Keep in mind that even if your project complies with the allowable uses outlined in the zoning code, you may still need to obtain a zoning permit or other discretionary approval in order to complete your project.
If the current zoning on your property does not work for your intended use, you can look into the possibility of changing the zoning of the lot.
This can be done through a rezoning, or a change in the property’s use district.
Lest you get too excited, keep in mind that rezonings are costly and difficult.
Zoning is not meant to be changed purely because a single property owner wishes it.
Thus, there are no guarantees.
In fact, many jurisdictions frown upon rezonings and rarely provide them for private property owners.
In some cases, “spot zoning” (or zoning changes to a parcel for the sole benefit of a single owner) is even illegal.
If you believe a rezoning is necessary to make a parcel work for you, make sure you contact the planning office so you thoroughly understand the process.
You may also want to consult with a land use consultant or attorney to get a realistic assessment of your chances.
All in all, it may just be easier to find another parcel that better suits your needs.
You can learn more on our blog post on rezonings.
50. Zoning Variance
Unlike a rezoning, a variance is an administrative action (not a change to the zoning map or text) that provides a limited waiver or modification to a zoning requirement.
It does not change the designated use district of the property, but can grant some relief to certain typical zoning regulations due to a proven hardship.
Most commonly, this is used to waive or modify area requirements (such as set backs, height requirements or minimum lot sizes) for owners of oddly shaped lots.
Sometimes, a jurisdiction may also allow a use variance, which gives a property owner the right to use a lot in a specific manner that is typically prohibited by the zoning use designation.
However, these sorts of variances are rarer as they could be considered equivalent to a spot rezoning.
51. Conditional Use Permit
Sometimes, a particular use may be conditionally allowed under the zoning code.
This means that you can’t use the property in the designated manner by right, but you can apply for a permit (conditional use permit) to use the property in this way.
A conditional use permit will allow a particular use on a permanent basis so long as all other zoning regulations and conditions are met.
For example, a residential use district that restricts commercial uses may allow a home-based business on a conditional basis so long as the business falls under certain select categories.
Keep in mind that you can’t just apply for a conditional use permit for any use you would like.
The uses that are eligible will be listed in the zoning ordinance.
As mentioned, you must apply for a conditional use permit, and it’s at the county or city’s discretion to approve or deny it.
Thus, it’s not a guarantee, although it’s generally much easier to obtain a conditional use permit than a rezoning or variance.
If you are looking to use a property for a particular use that’s listed as conditional, be sure to call the county planning department.
You’ll want to understand the application process as well as how likely it is that you will receive the conditional use permit.
52. Comprehensive Plan
As mentioned above, a comprehensive plan is a document created to guide future actions taken by the city and the broader community.
The community plan covers a broad range of issues, including land use, infrastructure, education, recreation, transportation, natural resources, and cultural resources.
For the landowner, the most important part of the comprehensive plan is the land use section.
Let’s return to an earlier point: it is important to distinguish between land use and zoning.
This is because land use (or the comprehensive plan) takes precedence over zoning (or the zoning code).
If the project you are looking to complete does not comply with zoning, it is often possible to request a zoning variance or a rezoning.
However, changing the land use designations outlined in the comprehensive plan can be very difficult.
To get an amendment to the comprehensive plan passed, you will need to convince the city that the change complies with all other aspects of the plan and is also in the interest of the community as a whole.
53. Comprehensive Plan Amendment
If your project does not comply with the jurisdiction’s comprehensive plan, you may need to request a plan amendment in order to move forward.
An amendment is a change to the comprehensive plan’s policies or the land use designations shown on the comprehensive plan map.
As mentioned above, this can be very difficult.
It can also take a long time (five to six months or more!) and come with a hefty review fee (up to $10,000 or more).
The proposed amendment will be evaluated by the jurisdiction for consistency with the plan, the impact on the neighborhood’s character, availability of alternative options, and impact on transportation, open space, schools and infrastructure.
The proposal must then generally be approved by planning staff, the planning commission and the city council, or other equivalent government bodies.
If you would like a detailed example of a jurisdiction’s comprehensive plan amendment process, you can take a look at this PDF from Phoenix, AZ.
Keep in mind that there’s a reason Phoenix’s guide is 28 pages.
The process is complex!
As a simple rule, it is usually better to avoid requesting a comprehensive plan amendment if at all possible.
If your primary goal in purchasing the vacant land is to build, then you’ll want to dig a little deeper into zoning regulations.
As mentioned above, a jurisdiction’s zoning code stipulates a lot more than just allowable uses.
One of the important land due diligence questions to ask is whether there are any setbacks requirements dictated by the zoning ordinance.
Setbacks are common and usually impose a minimum distance that must be maintained from your building to each lot line.
Although not often an issue, you may sometimes have a hard time meeting these setback requirements if the parcel is shallow or small.
Just be aware of the setback requirements and do a gut check to see if you think there is enough space on the lot to meet them.
55. Road Frontage Requirements
While you are researching your property’s zoning as part of your land due diligence, you will want to get information on road frontage requirements.
Some counties require that all parcels have a certain linear footage of public road access in order to build on the lot.
This is to ensure that properties are accessible and have sufficient space to install a driveway and/or connect utilities to any planned building.
It usually isn’t hard to meet road frontage requirements, but if the lot is oddly shaped, this can be a problem.
56. Illegal Subdivisions
These days, many jurisdictions have subdivision codes that dictate what must be done if a developer wants to subdivide a parcel of land.
This means a landowner or developer cannot just subdivide their land whenever or however they would like.
However, some sellers do not always follow these rules, either because they are not aware of them or they don’t want to go through the lengthy subdivision approval process.
In these circumstances, a seller will subdivide by deed only (that is they include only a portion of their property in the legal description of the deed transferring title to the new owner) without submitting their proposed subdivision to the county planning department for approval.
When this is done, the subdivision is effectuated and a new parcel is created, but the subdivision is deemed illegal.
It is important to call the county and check the subdivision status because you will typically not be able to pull any permits or obtain title insurance on an illegally subdivided lot.
At least not until the subdivision is brought up to the subdivision code, which is costly and, in some circumstances, impossible.
57. Public Utilities
The availability of public utilities is something that buyers sometimes take for granted.
However, this isn’t always the case for vacant land.
Be sure to investigate whether water, sewer, electricity, waste management, internet, gas, and phone services are available as part of your land due diligence.
You can contact the county to ask who the local utility providers are.
Then give these providers a call and see if they provide service to your lot.
If the property doesn’t have any public utility service, understand what you need to do to bring utilities to your land and how much it will cost.
Important questions to ask yourself are whether you would want to build a house where you need to provide your own water and electricity, or if you want to live in an area without Wi-Fi or phone service.
Check ahead of time so that your house or business is useable.
All homes must have some way to remove household waste.
If you are fortunate, you will be able to hook-up to the city or county’s public sewer line.
You can typically do so if:
There is a public sewer main running along at least one side of your property.
This line has the capacity to handle the extra volume generated by your property.
Your property is within the municipality’s jurisdiction.
Connecting to an existing sewer main is the simplest way to handle household waste, but is generally not free.
You will need to pay a contractor to install the sewer lateral line that runs from the public hook-up in the road to your house.
Now, should you be buying a larger parcel of land and are looking to subdivide it, connecting to a public sewer system can be more complicated.
A bit of planning will be required on your end since the location of the available public sewer hook-up in relation to the planned homes is extremely important.
This is because sewer drainage pipes must usually run downhill at a slope of at least 2% (or a 2′ drop for every 100′ of distance) from the home or homes to the point of connection.
If the point of connection is uphill, it’s going to be very expensive to run a drainage line to it if not impossible/in violation of code!
Thus, a public sewer connection will often do you no good if it is uphill from the home you are building.
Work with your engineer to find the best spot for your home relative to the public sewer connection.
If there is not an ideal location, your engineer may be able to give you some recommendations on how to work around a less than ideal slope.
If a public sewer connection is not available, you will most likely need to install a septic system.
This system has a much higher upfront cost than a public sewer connection, but will generally have lower operating costs once it is installed.
Should you know that a septic system will be required, you will want to give the local environmental health department a call to go over their regulations.
These departments will usually administer septic permits and have requirements for system design, capacity and location.
Many jurisdictions will also have a minimum lot size that is required to pull a septic permit, which can make or break your project.
Per the American Planning Association, a septic system can technically be built on a lot as small as a quarter of an acre if public water is available.
Still, we have seen some jurisdictions with minimum lot sizes of two acres.
Thus, in these areas, a parcel of only one acre would effectively not be buildable unless it has public sewer.
60. Perc Test
Checking for prior perc tests is a must if your vacant land does not have access to a sewer system.
The perc test evaluates the soil percolation rate, or the rate at which water drains through the soil.
A perc test is typically an indicator of whether a septic system can be installed on the property.
Each county has its own rules and regulations around perc tests so it’s a good idea to speak with the relevant county agency (usually the health department) to understand what is required to get a septic permit.
It’s important to know that if a perc test does not meet the county requirements, you will generally not be able to pull a septic permit.
One of the important questions to ask your seller is if a perc test was ever done on the lot and get a copy of it
If the seller has no record of a perc test, then you must decide whether you want one done before purchasing.
This will depend on the price of the property and what you want to use it for.
If you want to build a home on the lot, it may be worth the investment in a perc test prior to purchase.
Having access to water on your property is essential if you want to build.
A lot of properties (especially rural properties) do not have access to a municipal water supply.
This doesn’t mean you shouldn’t purchase a property, but you should look into alternatives to see if they are feasible and within your price range as part of your land due diligence.
For example, are you able to drill a well?
Although there are alternatives to a well, the last thing you want is to have problems accessing water.
To check whether a well is feasible, you should call the county and state to determine what is required to pull a well permit.
Keep in mind that in certain western states you may need to purchase water rights in order to drill a new well.
Water rights are usually administered at the state level, so check with the state on how water rights work in your area.
You may also want to check with a local contractor on the cost of installing a well.
If you are in a desert area, or a location where you may have to drill to a significant depth to find water, wells can be fairly expensive.
One helpful tip is to check out MapRight (referral link).
This mapping program can give you information about surrounding water wells so you can see if wells have been drilled in the neighboring area and what the water depth was for each one.
Knowing the typical well depth can help you estimate the price of drilling a well in your location.
If you feel uneasy about water availability early on in the process or feel that it may be a problem, it may be best to pass on rural land altogether as a first time land buyer.
62. Well Testing
If you are purchasing a property with an existing well on it, you will want to get it inspected and tested as part of your land due diligence.
Remember that you cannot make any assumptions about well water quality.
For example, we recently watched an episode of Homestead Rescue in which a couple bought a 5-acre parcel of land with an existing well and cabin.
They moved into the cabin and started clearing a garden on the first day.
After an hour they got hot, went in for a drink of water…
…and found saltwater coming out of the tap.
It turned out that the well had been contaminated with sodium and no longer produced drinkable water.
This is why it’s important to test before you purchase!
Now, there are actually two different tests that assess a well’s usability.
The first is for water quality.
A water quality test involves sending a well water sample to a lab to analyze it for various substances, including PH levels, heavy metals, bacteria, minerals, VOCs, and other compounds.
Keep in mind that many standard tests will not check for radon, so this is something you will want to pay extra for if necessary.
The second major test is for quantity.
You don’t want to buy a property assuming that you are getting a ready-made well only to find out it doesn’t have enough water to meet your needs!
A typical home needs a well that can deliver water at a rate of ~3 to 5 gallons per minute.
Finally, if you decide that you are not going to use the existing well on your property, there are often regulations governing the proper procedure to decommission a well.
Typically, the well will need to be professionally filled and sealed so that it does not drain, contaminate or otherwise harm the groundwater.
For more information, check out our blog post on well testing.
63. Prior Appropriation Water Rights
Because much of the southwest is desert, there is often more cultivable land than is able to be irrigated with the water available.
This means that water is a scarce and often contested resource.
Thus, to handle budding conflicts over its use, a principle of “first come, first serve” was established in many states.
Roughly speaking, this meant the first person to make use of a particular public water resource would have the right to use that resource in preference over those who came later.
In law, this was known as the Doctrine of Prior Appropriation.
So, if several people need to use a local stream in order to irrigate their farm, the first person to make beneficial use of the stream would have the first right to its use if there is not enough water for all.
In this context, a water right is a right to make use of a public water resource (such as a stream or underground aquifer).
The key thing to understand here is that property owners generally don’t own water on their land.
Rather, they can have a right to access the water and use a certain amount of it.
These water rights run with the land (not the owner), so when a property is sold, the water rights transfer to the new owner.
Water rights can also be severed from a particular estate and sold separately from the land.
Once sold, the rights will then be attached to the buyer’s property.
The point behind this system is to ensure that any one property owner’s use of a water resource does not impact the long-term sustainability of that resource.
Water rights will generally have certain defined elements, including:
the quantity of water you are allowed to divert (by volume or flow rate)
a specific point or source from which you can draw water
a specific place where the water can be used (i.e. the water should be used on your property and not taken somewhere else)
It’s also important to know that in some areas just because you own a property does not mean you have the water rights to any groundwater beneath the property (remember, “first come, first serve”).
Thus, be sure to check what water rights come with the property as part of your land due diligence and what the state’s rules are regarding water use.
In some states, you are allowed to drill a single domestic well without any water rights, but in others you will need to have water rights before you can do so.
If you do not have the water rights you need to use the property in the way you would like, you may be able to purchase water rights from a different owner and allocate it to your property.
If you wish to do this, it’s a good idea to call a local realtor to see if there are water rights for sale and how much you will need to pay for the right to use the amount of water you are going to need.
You can also find more information on our article on Water Rights in Texas.
64. Riparian Rights
The riparian water rights regime is a system of water rights that allocates water among those who possess land along a stream or river.
This system is most often encountered in the eastern states (western states more often follow the concept of prior appropriation shown above).
As we mentioned previously, waterways are typically considered a public good; thus, landowners cannot own a stream or river itself.
Rather, under a riparian system, they have a right to make reasonable use of the waterway at the point where it flows next to or over their property.
Riparian rights can include not only the right to use the stream’s water, but also the right to swim, boat, fish or build in the waterway.
When there is not enough water to go around, allotments are given to each riparian rights holder, which are generally proportionate to the amount of frontage an owner has along the water source.
Therefore, if you are buying waterfront property in a riparian state, it’s important to know what usage rights you will have to the waterway.
You can ask your title company if they will provide information on any riparian rights associated with your property as part of their title search.
If you would like to learn more, you can read our blog post on riparian rights.
65. Littoral Rights
If riparian rights are the rights that apply to owners of property bordering rivers or streams, then littoral rights are those that apply to landowners whose land borders a lake or ocean.
Littoral rights are very similar to riparian rights in that the landowner will have certain rights to use the water, but does not own the water itself.
In addition, waterfront landowners will typically only own the land up to the median high water mark, while the public owns the land after that point.
Like riparian rights, littoral rights are attached to the land and not the owner; therefore they should transfer when the property changes hands.
Keep in mind that each state has different laws regarding littoral rights, but such rights often include the right to:
access the water
reasonably use the water
accretion (or the additional land that is created as water deposits soil on the shoreline)
Therefore, if you are looking to buy waterfront property along a lake or ocean, you will want to check what rights are granted to you under state and local laws.
66. Correlative Rights
Correlative rights doctrine limits how much groundwater a landowner may use from a common source of water (for example an aquifer).
The point is to make sure that each property owner only uses a “reasonable share” of a limited water source.
What constitutes a “reasonable share” is often based on the amount of land that the owner owns above the groundwater.
In some states, this doctrine also applies to any oil and gas below the property.
Thus, if you are buying land and are planning to draw groundwater or oil from beneath it, you will want to check how state law governing correlative rights will apply to you.
67. Standby Fees
If you are purchasing a parcel of vacant land that is within a public water and sewer district, keep in mind that local jurisdictions have the right to charge a standby fee.
This is a fee that is charged to all property owners to ensure that adequate water and sewer services will be provided when the landowner needs them.
The fee also equalizes the cost of providing these public services between current and future users.
Thus, the first ones to use a public water or sewer line aren’t on the hook for paying the full cost of installing the service.
Therefore, if you are purchasing a parcel of land and are planning on keeping it vacant, keep in mind that you may still have an annual standby fee to pay.
To check whether electricity is available, you can call the local power company (the county will usually be able to tell you who that is) to see if they provide power in your area.
You may also want to ask the power company for a cost estimate on extending power out to the lot.
If electricity isn’t available, you will want to consider alternative systems, such as solar or a generator, if you want to build on the lot.
One of the important questions to ask the building department is if there are any permit requirements for solar or other alternative systems.
69. Homeowner’s Association (HOA)
Knowledge of an HOA or POA (property owner’s association) is necessary because it can later limit what you can use the land for.
You will also want to thoroughly review the HOA’s Covenants, Conditions and Restrictions (CCRs) as part of your land due diligence.
Most of these CCRs will place further limitations on what you can do with the property beyond the municipality’s or county’s zoning restrictions.
Several things to look out for include:
Limitations on building materials
Aesthetic requirements (siding or fence colors, etc)
Minimum home square footage requirements
Restrictions on commercial uses (including home businesses and Airbnb)
Restrictions on camping and hunting
Some people like HOAs because the CCRs generally help maintain property values.
However, many others don’t like to deal the additional restrictions.
Furthermore, most HOAs charge fees, so you’ll want to know ahead of time if this is something you’ll be responsible for paying.
It’s worth doing additional research on the HOA even if the seller doesn’t list it.
Sometimes, like taxes, the buyer may have neglected to pay their HOA fees.
Much like property taxes, you don’t want to purchase a property with a lien on it for HOA fees.
Be especially careful when buying properties on marketplaces, like eBay.
We once looked into an eBay listing that specifically stated there were no HOA fees.
Yet, when we spoke to the county assessor, she told us that the property was in fact in an association.
It turns out the property had a lien on it for unpaid HOA fees!
70. Time Limit to Build
While you are reading through any applicable CCRs, be sure to check and see if there is a time limit to build listed.
This may show up as a deadline by which you have to start construction once you purchase a property.
If you are not planning on building right away, you will want to know whether any such requirements exist so you don’t get in trouble.
We should note that we have never actually seen a time limit to build in any of the CCRs we have reviewed, but we get asked about this often enough to suggest that these provisions do exist.
Having said this, many counties do have a time limit by which you have to complete or initiate construction after you pull a building permit.
For example, most jurisdictions have a requirement that construction progress be shown every 180 days.
This usually means that you will need to request a progress inspection every 6 months or so in order to keep your permit active.
If no progress is made, the permit will expire, which can result in violations that will attach themselves to the property if not resolved.
These violations can, in turn, create issues when selling the property or requesting additional permits.
Therefore, be sure you are truly ready to construct your project before you put your shovel in the ground.
71. Existing Junk
You may initially be excited about your purchase of vacant land only to discover it’s filled with random bits of junk.
If there are tires, rubble, oil or other contaminants on the property, step away immediately.
These types of messes are expensive to clean up and will ultimately cut into your own pocket.
72. Previous Uses
You absolutely don’t want your vacant land to have been used as a landfill, but what other types of previous uses could affect you?
Believe it or not, prior farm use can be a red flag.
For example, we heard a story about a luxury home builder in North Carolina who had recently constructed a new 12-unit subdivision.
The developer had bought a large parcel of land, subdivided it, built the 12 homes and sold them.
However, after a few years, the purchasers of the homes began to get sick.
The homes were all served by a well, not a public water main.
A study of the well water was done and it turned out that the land had at one point been an apple orchard.
The farmer overseeing the orchard used arsenic as a pesticide and this material had leached into the groundwater.
Neither the developer nor the developer’s seller had known about the arsenic.
Here’s another story:
We were recently watching an episode of Homestead Rescue in which a pair of homesteaders were struggling to find water.
Their property had once been a coal mine and acid mine drainage had contaminated the land.
Acid mine drainage is another form of water contamination where heavy metals from a coal mine are oxidized after coming into contact with the air and then leach into the groundwater.
This just goes to show how careful you have to be!
When purchasing a lot with heavy previous use, such as agricultural lots or infill lots, you will want to check for groundwater or soil contamination (underground oil tanks, lead, chemical contaminants, etc) as part of your land due diligence.
There are also various state laws regarding commercially zoned property, so if you’re looking at a commercial investment, then you’ll want to make sure you’re not inheriting any environmental contamination.
Leaving aside critical concerns over the health of any future inhabitants, contamination can also fall on your shoulders as the new owner.
73. Underground Oil Tanks
Many areas in the US (particularly New England) have a long history of using oil as the primary fuel source for domestic heat.
In fact, a surprising number of homes still use oil as the main fuel for heating.
Now, not every home that is heated by oil has an underground tank – many will have above-ground tanks located in the basement or outside.
But underground tanks are of primary concern because they can fail without your knowledge and leak oil into the ground (keep in mind that oil tanks are only supposed to last 15 to 20 years!).
In addition, underground tanks are more likely to be abandoned when no longer needed.
When an abandoned underground oil tank leaks, it will be very expensive to clean as you often need to remove and replace all or most of the soil on your property in addition to cleaning up any water sources that were contaminated.
There are many laws that require and regulate clean-up activities, and a major spill can run up to $100,000.
Not to mention that the leak poses a health hazard to your family and your neighbors (and they can sue you for this).
Even worse, your insurance will usually not cover any costs arising from the leak (although you can purchase a separate oil tank insurance policy).
Thus, if you are purchasing a property in an area where oil heat is, or was, common, it may be worth your time to hire a professional to conduct an underground oil tank scan to make sure there isn’t an old tank on the property before you purchase it.
If there is, you can have the tank and soil investigated by a properly licensed professional to assess its condition and potential for harm.
However, generally speaking, if there is an underground oil tank on the property, you don’t want to take the risk unless the seller can provide documentation that the tank was properly decommissioned.
This is because chances are high that a discovered underground oil tank will be past its reasonable lifespan.
Thus, it’s a very good idea to ask the seller to remove the tank before you proceed with the purchase.
74. Phase I Environmental Site Assessment
To protect yourself against any potential environmental contamination, order a “Phase I Environmental Report” as part of your land due diligence so you can know the property’s history before you purchase.
The Phase I is completed prior to closing on a property and can protect the landowner from liability should contamination be found later.
As part of the process, an environmental professional will conduct a site investigation, review historical documents, and even interview past owners to determine what the historic uses were in and around the property.
They will then produce a report that assesses whether further testing needs to be done based on prior use.
If the property’s history and surrounding context indicate the potential for Recognized Environmental Conditions (for example, if there was a dry cleaner or gas station nearby), it’s a good bet that Phase II environmental testing will be recommended.
If no Recognized Environmental Conditions are identified, no further action is needed.
75. Phase II Environmental Site Assessment
A Phase II Environmental Site Assessment is follow-up testing and sampling should Recognized Environmental Conditions be found by the Phase I report.
This process will involve sampling the water, soil gas and soil and testing these samples in a lab for contamination.
The Phase II can take several months depending on the initial test results.
If initial tests turn up positive for hazardous material, further testing will be undertaken until the entire area of contamination is determined.
If a structure is already on the property, the Phase II process will also involve checking for mold, lead and asbestos.
Once all testing is complete, a plan for remediation can be crafted.
76. Phase III Environmental Site Assessment
Phase IIIs are also known as Remediation Investigations as they determine the scope of work for any remediation required.
The Phase III will determine the amount of clean-up required and will also notify regulatory bodies of the contamination.
A Remedial Action Plan will also be developed to dictate how the contaminates will be removed or remediated based on federal and state criteria.
This action plan will help you assess how much the remediation work is going to cost so you can make a decision on whether to move forward with the purchase.
77. Endangered Species
In 1973, congress passed the Endangered Species Act (ESA), designed to protect species from extinction.
Under the ESA, it is prohibited to harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect an endangered wildlife species.
A development project can fall under this umbrella if it is seen as destroying critical habitat or having the potential to impair an endangered species’ essential behaviors (such as nesting).
Terrestrial and freshwater species are protected by the Department of Fish and Wildlife Service (USFWS).
You can use the USFSW’s IPaC Tool to search the area around your project and see whether there are species of concern.
For example, here are some of the most common endangered species found in the San Francisco Bay area:
Bay Checkerspot Butterfly
California Clapper Rail
California Tiger Salamander
Salt Marsh Harvest Mouse
Valley Elderberry Longhorn Beetle
If you find critical habitat or endangered species on your land, you may need to apply for a Section 10 Incidental Take Permit.
Your state USFSW office can help you determine whether this permit is required.
Also, keep in mind that many states have their own endangered species lists and regulations.
You will want to understand if your project will be affected by these laws as well.
78. Feasibility Study
If you are looking to buy land for a development project, you will absolutely want to have a feasibility study done.
A feasibility study is almost synonymous with land due diligence as it considers every aspect of the property and the project, including economic, technical, and legal factors.
The goal of the study is to uncover any potential problems and help plan out the project.
This can also assist you in obtaining financing because it will delineate the project cash flow and profit margin.
Some technical steps of the feasibility study overlap with the land due diligence items outlined in this article and can be done in house.
However, many aspects will require outside help (geotechnical studies, wetland consultants, etc).
In addition, certain components may be foreign to you, such as the project pro forma and schedule.
If you are not familiar with how to produce these items, it is possible to hire a feasibility consultant to help you.
Just keep in mind that a feasibility study will always involve a significant cash outlay, so be prepared!
79. Real Estate Pro Forma
If you are looking to develop the property you are purchasing, you will want to complete a pro forma to ensure the project makes sense.
A real estate pro forma is a financial model that looks at estimated income and expense projections to establish the net operating income and cash flow for the property.
This will help you determine whether the project pencils out and what your expected profit may be.
The pro forma is also used to help obtain financing for the project, and many construction lenders will require you to complete one before providing funding.
And don’t worry, if you don’t know how to create one yourself, you can always hire a real estate consultant to help you.
80. Opportunity Zones
Opportunity zone funds are vehicles that provide tax incentives to encourage investments in low-income communities.
They do this by investing in opportunity zones, which are qualified census tracts designated by the US Treasury Department.
Currently, about eleven percent of US census tracts have been selected as opportunity zones.
Any individual or company with taxable capital gains income may participate in the program by investing in an opportunity zone fund.
When an investor invests their capital gains in a fund, the taxes on these gains are deferred until 2026.
However, the gains must be invested within 180 days of receipt.
For example, if someone sells a property for $1 million that they bought for $500,000, they would have $500,000 in capital gains.
If they invest that $500,000 in an opportunity fund within 180 days of the sale, they will be able to defer paying capital gains taxes on it until 2026.
Some of these gains will also be eliminated from the taxable amount if the investment is held in the opportunity fund for at least five years.
So, in the above example, if the $500,000 was placed in the opportunity fund in 2021, in 2026 the investor will pay a capital gains tax on $450,000 rather than $500,000.
In addition, if the investment is held in the fund for at least ten years, any appreciation on the assets held by the opportunity fund are not subject to the capital gains tax.
Thus, if the $500,000 invested in a fund appreciates to $1 million in ten years, no capital gains taxes would be owed on the $500,000 the investor made.
This last tax benefit in particular can be very appealing.
A property in an opportunity zone can be of great value to a developer since they can use an opportunity fund to help finance the construction of their project.
To check whether a parcel of land is located in an opportunity zone, you can use this map.
81. Tentative Map Approval
If you are looking to develop a subdivision (or sell to a developer who will create one), a tentative map approval is an important milestone in the land due diligence process.
The tentative map is the plat map of the subdivision, which is submitted to the local planning department for review and sign-off.
Approval of this map is key because much of a development project’s uncertainty is resolved once the tentative map is blessed by the relevant agency.
However, getting to this stage requires a significant expenditure of time and money, so developers are often willing to pay more for a property if closing happens after approval.
Consider whether you will need to go through this process and, if so, whether you want to wait until you receive approval to close.
Also, be sure you understand all of the local jurisdiction’s rules and regulations before starting the process.
82. Land Annexation
Land annexation is the process by which a city incorporates new land into its boundaries.
Municipalities will typically consider annexing surrounding areas as a way to increase the tax base and spread the cost of providing utilities among more users.
Should you be looking to develop or subdivide a parcel of vacant land, it might make sense to petition the city to annex the lot into the city limits.
This can be advantageous if the city has more favorable zoning or building laws, or if the city is willing to provide public water and sewer services.
Alternatively, if the county already provides utilities and annexation will significantly increase property taxes, it makes less sense to pursue this option.
Keep in mind that the parcel will generally need to be adjacent to the city limits for your case to be successful.
For more information, you can read our article on land annexation.
83. Land Assemblage
If you are looking at investing in land for a profit, you may be considering an assemblage.
This is the process of combining two or more adjacent parcels into one larger parcel.
In other words, it is the opposite of a subdivision.
An assemblage is done because the bigger acreage may open up more possibilities in a city.
For example, a larger lot may be able to be rezoned for commercial or mixed-use.
Alternatively, the larger lot may be capable of supporting a larger building with a higher net return than three smaller buildings.
Because of this higher potential, the larger lot may also have a higher value than the three separate lots.
For example, say a developer decides to acquire three adjacent parcels of land from three separate owners.
Each parcel is bought for $50,000, or a total of $150,000.
The developer then assembles the parcels into one lot that is worth $200,000, creating a $50,000 profit when sold.
Now, as with anything related to development, assembling land is a formal process that requires county approval.
Thus, it can be a long and complicated procedure, and it does come with a cost.
So, if you are considering an assemblage, be sure to research the county requirements as part of your land due diligence.
Compare the cost of going through the process to your projected profit to ensure it makes sense.
Erionite is a naturally occurring material that can cause health problems when it is disturbed and the airborne fibers are inhaled.
The Centers for Disease Control and Prevention (CDC) began looking into this material when it discovered that the gravel used for surface roads in parts of North Dakota came from gravel pits that had been excavated in areas containing Erionite.
The agency began monitoring individuals in the area to determine whether the gravel was causing health risks.
Based on this report, two road maintenance workers were identified with changes in their lung tissue that was likely caused by the material.
Still, there is currently no guidance on the exposure limit.
Keep in mind that Erionite is only considered to be a concern when the fibers become airborne (i.e. during construction work or while working in a gravel pit), and exposure varies with weather conditions, the degree to which the gravel is being disturbed, and the concentration of the Erionite in the gravel.
As of now, the best approach is to take appropriate precautions when undertaking construction work.
While searching for land, take a quick look at the CDC’s helpful map to see if Erionite may be present in the area.
Remember, this material can be found throughout the western United States.
85. Superfund Status
Superfund sites are designated by the Environmental Protection Agency as locations that require long-term cleanup due to extensive pollution.
These sites are a relatively recent phenomenon, having come into existence with the Comprehensive Environmental Response, Compensation and Liability Act of 1980.
This act allowed the EPA to identify sites as Superfund sites and use trust funds (the Superfund) to help fund their remediation.
While the Superfund is an income stream for remediation, the EPA also works to identify the parties responsible for the pollution.
The EPA then compels these parties to either clean the sites themselves or reimburse the government for the clean-up.
In fact, 70% of Superfund sites are cleaned by the polluting parties, not the government.
While it is rare to find a property for sale that is an active superfund site, it doesn’t hurt to check the EPA database as part of your land due diligence.
Just select the state where the property is located, then search by county and scroll through the sites in your property’s county to verify your property isn’t near one.
There is also a map view you can check as well.
If you’ve ever purchased a house in a suburban or urban setting, you know that your property value is severely impacted by the neighborhood you’re in.
Well, the same holds true for vacant land.
Your property’s value is affected by the value of the land around you.
Who you live next to and how they take care of their property matters.
You’ll be much better off if you’re in a desirable area and if someone else is eagerly trying to purchase land near you.
Think about it this way…would you rather live near a national park, a winery or a landfill? One of those things is not like the others.
The value of farmland or ranchland is also impacted by the natural surroundings and characteristics.
What is the soil like? How much water is in the area? How productive are nearby farms?
If farm or ranchland is what you are looking at, you can read more on our post on Farms vs. Ranches vs. Homesteads.
87. Fire Department Registry
If you are looking to build or live on the property, take a look at the FEMA Fire Department Registry.
You will want to ensure that your property is within a fire department’s district.
Otherwise, you are going to be on your own in the event of a forest or house fire!
88. Recorded Deeds
Look at public records for all the documents associated with your vacant land as part of your land due diligence.
Do this even if you have a title search commissioned!
Your search may include historical deeds, mortgages, covenants, restrictions, liens, and easements.
To find these documents, you can go to the public records database and then search where your parcel is located. This website will bring up the county clerk’s/recorder’s public database (if there is one).
You can then search the county clerk’s/recorder’s online database for all relevant documents.
When doing land due diligence, it’s recommended that you check all the recorded deeds.
89. Title Report
The process of reviewing a property’s title is known as a title search.
To produce a title report, a title company or attorney reviews the public records associated with a property (deeds and mortgages, etc) to lay out the chain of title.
At the end of this review, the title company will issue a title report that will summarize their findings (in some states called an Abstract of Title).
This summary may include potential issues liens, errors in public records, voided or incorrectly filed documents, easements, encroachments, unreleased judgments and other ownership issues that could cloud the title.
Without the information contained in the title report, your title insurance company won’t be able to make an informed decision as to whether the property is insurable.
This is very important because most lenders will not issue a mortgage without title insurance.
Thus, you will be required to have a title report done if you need a loan to purchase the property.
The title report can also help you understand whether there are issues that could prevent you from selling the property in the future.
Having said this, the title report is not a guarantee of clear title, so it’s important you do your own land due diligence as well.
You can learn more at our blog post on title reports.
90. Abstract of Title
As mentioned above, in some states you may receive an abstract of title instead of a title report.
In many cases, this is simply a difference in nomenclature.
However, in a few states, such as Oklahoma and Iowa, a title company is required to compile a full report of every document in the public record going back to the original grant deed.
This report is the abstract and the states where it is required are sometimes called abstract states.
The abstract is a very extensive search, which can sometimes involve over 200 years’ worth of records.
Alternatively, a title report in a non-abstract state may only cover the past 40 years.
However, it should be noted that, even in non-abstract states, you can often request a title search that goes back further for an additional cost.
For more information, you can check out our blog post on abstracts of title.
91. Title Insurance
Title insurance protects against financial loss caused by defects in a property’s title.
If you have a claim that attacks the title or experience a covered loss, your title company will defend, cover, reimburse, or insure your property up to the policy limit.
Thus, it is a key item to obtain before closing.
There are generally two types of title insurance policies issued.
One is the owner’s policy and the other is the loan policy.
The owner’s policy is issued to you and protects you against losses from ownership problems that arose before you bought the property (but weren’t known at the time of purchase).
The loan policy is issued to the mortgage lender.
It protects the lender’s interest in the property until the buyer pays off the mortgage.
Most lenders will require a loan policy.
Please note that a loan policy will not protect your interests as the owner.
If you want to be insured against potential unknown title issues and you are taking out a mortgage, you will need to purchase two policies.
92. Merchantable Title
Merchantable title means that the lot is able to be readily sold or mortgaged to a reasonable buyer or lender.
In some circumstances, merchantable title is also called marketable title for this reason.
Many assume that merchantable title means that the property is completely free and clear of all potential liens or encumbrances.
However, it’s important to know that this does not mean the title is completely free of defects, but rather free of those encumbrances or issues that a reasonable, educated buyer would accept.
It is generally implied in any Purchase and Sale Agreement that the seller has merchantable title, and the agreement will often allow the buyer to rescind the contract and recover their deposit if it is found otherwise.
One of the key roles that a title company plays in any transaction is to help ensure that merchantable title is being passed to the buyer.
This is why it is often a good idea to have a title search done before closing on a purchase of vacant land.
93. Title Exceptions
If you purchase title insurance, you are protected from all future title issues, right?
Every title insurance policy lists certain exceptions that are excluded from coverage.
While this is nothing unusual, it is essential that you (as the property owner) are aware that this happens.
A buyer that accepts an exception to the title accepts whatever rights have been withdrawn or limited.
For example, if there is a title exception for an existing access easement, you are accepting that easement and the easement holder’s right to use your property for access.
Purchasing a piece of land with a title exception means that the buyer cannot challenge the seller on that matter in the future.
Nor can they look to their title company for financial recompense.
Thus, you must carefully read your title policy to see what is excepted and whether you are comfortable with these exceptions.
For more information, you can read our article on Title Exceptions.
94. Earnest Money
When you are purchasing a larger parcel of land, you will likely need to make an earnest money deposit prior to closing.
This deposit is typically placed in escrow when you sign the purchase agreement.
It represents a good faith gesture that you are going to purchase the land.
The earnest money deposit is typically 1-5% of the purchase price, but the exact amount depends on the location of the property as well as what you negotiate with your seller.
Now, the earnest money deposit is not your down payment.
But, if you do decide to move forward with the purchase, the earnest money is applied toward the purchase price.
However, you can also lose your deposit if you do not craft the purchase agreement correctly.
Several ways this can happen include:
The property doesn’t appraise at the agreed-upon purchase price
The property doesn’t pass inspection
You can’t get financing
You can’t get financing before the closing deadline in the contract
It is, therefore, very important to work with your lawyer and/or real estate agent to build contingencies into your contract that cover all foreseeable issues.
This way, you don’t lose your deposit if something comes up during your land due diligence.
Before you agree on a price for vacant land, check what other parcels in the area are going for.
This can help you avoid overpaying.
If you’ll be building on the property, you’ll want to make sure you look for other homes in the local market to ensure that the housing market is solid.
In worst-case scenarios, vacant land investors have found that the home they built is worth less than it cost to build.
Call a few local contractors to get a rough price per square foot to build a home.
Make sure that the cost to build the house isn’t higher than the market comps in the area.
For more on how to buy cheap land and build a house on it, see our video below.
96. Residual Land Value Analysis
If you aspire to develop on a property, you will want to look at more than just comps.
This is because the land’s true value is based on the potential of the site, not just the land itself.
If you are planning to develop a subdivision on the lot and you just look at the comps of other raw land sales, you may not get a good sense of what the land is worth given the potential revenue and costs of your project.
To properly take into account the specifics of your deal, you can use a residual land value analysis.
At a high level, this involves subtracting your projected expenses (minus the cost of the land) and required profit from your projected revenue.
These costs include, but are not limited to:
Architect and engineering fees
Consultants (environmental engineer, surveyor, geotechnical engineer, etc)
Studies (environmental study, traffic study, wetland delineation, etc)
Costs of financing
What remains is the maximum amount you can pay for the land.
For example, say you are looking to develop five homes on a parcel.
You can sell each home for $200,000.
It costs you $100,000 to construct a house and you want to make a profit of $50,000 at every sale.
You can therefore afford to pay $50,000 per home for the lot (or $250,000 total).
Sometimes this residual amount will be higher than the comps you have found, sometimes it will be lower.
When it is lower, you may need to walk away.
97. Absorption Rate
The absorption rate measures the rate at which individual properties are sold over a particular time period.
Broadly speaking, it’s an indicator of whether the current market favors the buyer or the seller.
To calculate the absorption rate, you divide the number of properties sold each month by the total number of properties on the market.
For example, if there are 1000 properties on the market and 100 are sold each month, you have an absorption rate of 10% (100/1000).
The higher the rate, the more the market favors a seller.
If you are looking for the perfect time to get a deal on land, you will want to wait until the absorption rate is below 15%.
Alternatively, if you are looking for the best time to sell land, you will want to wait until the absorption rate is above 20%.
For more information, you can check out our blog post on absorption rates.
An encroachment refers to a situation where a building or structure built by one property owner extends onto a neighbor’s property.
Often, an encroachment is a result of disputed property lines.
However, it can also occur when a property owner is not aware of the property boundaries.
For example, one property owner’s fence may extend an inch or two into a neighbor’s property without either owner ever being aware of the situation.
This may not seem like a big deal, but even small encroachments can create title issues that hold up closings.
Not to mention the fact that they are illegal.
Thus, you will want to undertake a thorough search for potential encroachments as part of your land due diligence.
These can be found with a title search or survey.
You can also learn more at our blog post on encroachments.
99. Lot Line Adjustment
If you do find potential encroachments on your property, one way to resolve the issue is with a lot line adjustment.
A lot line adjustment is an extensive process that involves altering the property lines of two or more parcels of land.
The primary aim is to change the existing legal boundary lines.
This is, therefore, a process that can be used to bring any encroaching structures clearly onto one property or the other.
Just keep in mind that both property owners will need to agree on the proposed adjustments.
A lot line adjustment should be codified by a deed so that the new boundary lines are of public record.
To learn more, you can read our blog post on Lot Line Adjustments.
100. Boundary Survey
A boundary survey is a key item for it verifies the boundaries of the lot and also shows all possible encroachments.
Therefore, most buyers will want to commission one before closing on a purchase.
When you do order a survey, be sure it is an ALTA survey.
ALTA surveys are completed according to the requirements set by both the American Land Title Association (ALTA) and the American Congress on Surveying and Mapping (ACSM), and generally provide more information than a basic boundary line survey.
ALTA surveys can help with a number of the above-listed land due diligence items as they often show flood zone boundaries, wetland locations, zoning information and utility locations (although sometimes for an extra cost).
101. Topographic Survey
While a boundary or ALTA survey will show you the horizontal measurements of your property, a topographic survey will show you the vertical ones.
It provides the height and contours of the land and any structures on the property.
This information will generally be required by the architect or engineer in order to determine the best location for a building.
The data can also be used to project where water will flow on the property to help avoid or mitigate erosion hazards.
To get the required information, a global positioning system (GPS) unit and an electronic distance measurement (EDM) total station theodolite (TST) are used by the surveyor to pull location and height information.
The exact amount of information collected will be determined based on your project needs.
Please note that it may also be possible to add topography to an ALTA Survey as an optional Table A item so you don’t have to do double the due diligence work.
You can also look up a property’s contour lines with MapRight (referral link).
102. Historical Topographic Map
Recently (2011), the United States Geological Survey released high-resolution scans of more than 178,000 historical topographic maps.
These maps show how a particular area looked at a point in time and provide a detailed view of any changes to the land over time.
Historical maps are useful to scientists, researchers and historians, but also land buyers.
Primarily because these maps not only show topography, but also other site features, like wetlands.
As an example, we recently used a historical geological map to uncover wetlands on a property in New York.
The wetlands mapper did not show any wetlands, but Google Streetview seemed to indicate that there was standing water on the property.
We pulled up the historical topographic map of the area, which clearly delineated flooded areas dating far back in time.
Without this resource, we would not have caught the wetlands!
If you are interested in researching the historical maps of a property, you can use the USGS topoview application.
103. Online Soil Report
If you are looking to build or grow crops on a property, it is very important to understand what kind of soil you are dealing with.
Good soils are vital for growing crops, but they are also important for building.
Before designing your foundation, the engineer will need a full geotechnical study (see below), which can be expensive.
You will, therefore, need to decide whether it is worth getting one done before purchasing.
One option is to use a program like MapRight to pull up a very basic soil report as a starting point for your investigation.
If you are interested in a Mapright subscription, you can use our referral link.
104. Land Degradation
Simply put, land degradation is the loss of soil productivity.
Land degradation largely occurs due to unsustainable agricultural practices and it is currently estimated that 24 billion tons of fertile soil are lost each year.
Thus, if you are looking to use a property for agriculture, you will want to make sure that the soil is not severely degraded.
A soil report can help you determine this.
Fortunately, you may be able to have one done by your state university’s agricultural lab for very little cost.
This test will help determine the nutrient-holding capacity of the soil.
Key nutrients that the report will be looking at include phosphorus, potassium, pH (acidity), and organic matter content.
Now, what happens if this report shows that the soils are degraded?
There are a few things you can do to help the soil recover:
Maintain a perennial plant cover
Plant a cover crop
Add compost and manure to the soil
Rotate land being used as pasture
The USDA also has a number of programs for farmers, and you may be able to ask for their assistance.
105. Geotechnical Study
As mentioned above, you will need to have a full geotechnical study completed by a geotechnical engineer before building on your property.
Every foundation needs a strong base, and you must be sure that the soil is sturdy enough to support the weight of your building.
To properly design your building’s foundation, a geotechnical engineer needs to undertake a subsurface investigation of the property’s underlying soil and/or rock in order to determine its physical and mechanical characteristics.
The process involves taking soil samples using a drilling rig or hand auger, which are sent to a lab to be analyzed.
The information gleaned from this process is used to generate a report detailing recommendations on foundation and construction solutions based on the soil composition, strength and density.
At a very high level, there are six basic kinds of soils that the report may discover, and each will require different foundation strategies.
Peat is partially decayed organic matter.
It is a highly compressible soil that can become extremely dry in the summer.
Because it shifts and changes structure, it is a very poor quality soil for foundations.
Clay is a fine-grained soil that becomes elastic when wet.
It stores water well and so it tends to expand and contract making it hard on foundations.
Silt is a fine-grained soil somewhere between clay and sand in terms of particle size.
Like clay, soil retains water easily and tends to expand and contract making it a poor soil for foundations.
Sand has the largest particle size of any soil type and so does not hold moisture well.
When compacted, it holds together and can support a foundation.
However, when moist, sand can erode, potentially causing settlement.
Loam is a combination of clay, sand and silt.
Because it mixes the best properties of all of the above soil types, it is an ideal soil for foundations.
Not strictly speaking a soil, rock has great strength and can support all kinds of building types.
However, it can be expensive to excavate and/or drill into rock depending on the rock’s size and depth.
The kind of soil on your property can have a big impact on the cost of your foundation.
Thus, you may want to bite the bullet and have a full geotechnical report done as part of your land due diligence so you can understand how expensive it will be to build on the property.
For more information, check out our blog post on geotechnical surveys.
106. Landslide Hazards
If you are buying land in a coastal or mountainous area, you may want to look into whether the location is vulnerable to landslides as part of your land due diligence.
Some counties will provide a landslide hazard overlay in their GIS system, which can give you a rough evaluation of the hazard level for your potential site.
You can also have a formal landslide hazard study completed to ensure that you are buying in a safe location.
In some instances, the local jurisdiction may even require such a study to be completed prior to pulling permits.
The landslide hazard study should be handled by a Geotechnical Engineer or Certified Engineering Geologist.
Note: If you are already getting a geotechnical study done, you may want to ask if a landslide hazard study can be done simultaneously.
During this process, the engineer will evaluate the entire site as well as the surrounding sites and submit a report, which will detail:
a review of current landslide hazard inventories and maps
the results of the visual inspection of the site
a description of the topography and potential hazards
a statement on the slope stability after the proposed construction is complete
a statement on the proposed construction’s impact on storm water runoff and how this will impact slope stability
107. Land Erosion
Land erosion is the process by which soil and other material on the land’s surface is removed by rainwater runoff.
This matter then makes its way to waterways, where it can affect water quality.
Erosion is a natural process, but it is exacerbated when development increases the amount of impervious surface and removes the tree and plant material that holds soil in place.
In addition, developed land does not allow rainwater to infiltrate into the ground at the same rate as natural ground, which increases the quantity and speed of runoff, thereby increasing erosion.
Excess erosion causes all kinds of problems, including soil deterioration, loss of production on agricultural lands, contamination of groundwater, foundation settlement of buildings, and increased flooding.
If the property you are purchasing has a heavily eroded area or areas, you will likely need to plan on budgeting for remediation techniques in order to prevent further erosion or flooding.
Examples of certain mitigation techniques include terracing, retaining walls, and drainage techniques.
You can check with a local soil engineer to understand what needs to be done based on your projected use.
108. Soil Drainage
Soil drainage is the process by which water moves through and out of the soil.
It is a key factor in evaluating cropland because poor drainage results in water-logged soils, which can kill timber, impede crop and plant production, and lead to flooding.
In some instances, you may not even be able to improve a property until you properly drain it.
Alternatively, good drainage will ultimately enhance everything, from crop yield to nutrient loss to machinery and fertilizer costs.
You can tell if your land has poor drainage by the soil color as well as the amount of standing water on the property and the number of earthworms in the ground.
A simple test can also help you check your soil’s drainage.
Dig a small hole and fill it with water. Then measure the depth of the water every two or three hours.
Well drained soils should show a water drop of at least an inch per hour.
If you have a concern, you should have a civil or soil engineer take a look at the property and see what needs to be done in order to use the land as you would like.
109. Natural Disasters
Almost every area in the United States has some susceptibility to natural disasters.
There’s no way to avoid it, but almost always a way to mitigate it.
Many counties have a layer in their online GIS systems that shows the risk of certain disasters, such as fires or earthquakes.
You should take a look at this system to see what you need to prepare for.
Should the property be at high risk, you will want to research what solutions are available and how much it will cost to implement them.
For example, if the area is at high risk for fires, you should plan to install an ignition-resistant roof.
Or, if you are in a hurricane zone, you will want to build with hurricane shutters and impact-resistant doors and windows.
It’s always a good idea to consult with an engineer or architect to understand design best practices and the costs associated with them.
110. Stormwater Pond
Stormwater ponds are designed to catch and filter runoff from developed areas.
Their purpose is to collect the water that drains from impervious surfaces (such as roads and driveways) as this runoff is often contaminated by oil, fertilizer, waste or other harmful compounds and will damage the surrounding ecosystem and groundwater if it is allowed to drain directly into the earth.
The stormwater pond holds the water while it slowly drains through layers of soils and gravel into the ground, or to a downstream water body.
If you are looking to buy a property to subdivide or develop, keep in mind that the county or city may require that you build a stormwater pond if you will be increasing the amount of impervious surface by a certain percentage.
Be sure to factor in the costs that will be added to your project if a stormwater pond is required.
For more information, check out our article on stormwater ponds.
111. Traffic Study
In some instances, when you are developing in a built-up area, the local jurisdiction may require a traffic study before you can pull a permit.
These are generally required for larger projects that have the potential to create congestion (generally 100 or more new trips in an hour).
For context, 100 trips in an hour is the amount of traffic a 90-unit project or 67,000 sq ft office building would be projected to create.
In addition, a traffic study could also be required when:
a neighborhood or advocacy group has an issue with the project
an environmental review process is required
Regardless of the trigger, the study will be calibrated to the size of the project (i.e. a mall will have different requirements from a 100-unit apartment building).
If you think your project may require a traffic study, be sure to check whether the jurisdiction has written guidelines.
If not, give the jurisdiction a call to see if they can provide guidance.
You can also check the Institute of Transportation Engineers Transportation Impact Analyses for Site Development.
112. Demolition Lien
When we first started our business, we were advised that it was always a good idea to purchase property with an improvement on it, regardless of its condition.
However, experience has shown us that this isn’t always the case.
For example, we were recently researching a property in Arkansas with a burned down mobile home on it.
We called the county and they told us that the mobile home was on their list of structures that required demolition.
This meant that the county would eventually come in, demolish the structure and place a lien on the lot for the cost.
We had about two years before they would do so, but we decided not to purchase the land given the potential complications.
As this example shows, you have to be careful when there are dilapidated buildings or structures on a lot you are looking to purchase.
Many jurisdictions have the authority to demolish unsafe structures and place a lien on the property for the cost if the owner is not willing to clear the condition themselves.
You do not want to buy a property and find yourself stuck with a $10,000 demolition lien!
It’s also important to note that demolition liens are often not recorded, which means they may not show up in a title search.
So, at the very least, take a look at google maps for any evidence of buildings or structures and ask the owner about the history of the lot.
Was a building ever built on the lot?
If so, was the building fully demolished?
If not, what is the current condition?
Has the county or city already reached out about the condition of the structure?
If you see evidence of a possible structure on the lot and can’t visit the property yourself, it’s worth paying a photographer to go out and take photos for you.
Trust us, this can save you money later on!
If the photos show a structure that looks like it may be unsafe, you should give the county a call to see if the structure is on their radar and if they have received complaints about it.
Counties will generally move faster to clear unsafe conditions if there have been numerous complaints!
Even if there is no structure on the lot, there may be existing demolition liens if there had been a structure on the lot in the past.
If you think this may be a possibility, you might want to run a municipal lien search as part of your land due diligence to check for any existing municipal liens.
113. Demolition Permit
If you do end up buying a property with a structure that must be demolished, be sure you check with the county to go over their rules and regulations.
Most counties will require you to pull a demolition permit before commencing demolition and will also require that proper site control procedures be adhered to in order to protect public safety.
These procedures may include (but are not limited to):
An asbestos survey