Thinking of building your new home?
Searching for land to build a new home is exciting. However, buyers should be aware that purchasing raw land will require extensive due diligence. Do you know the right land buying questions to ask? Do you have the right help in making this purchase?
You should know that most sellers won’t have all the answers. So the responsibility is on you, the buyer and your Real Estate agent - to investigate the issues thoroughly until you’re confident in the purchase.
Important Land Buying Questions
1. Do you have a topographic survey or grading plan?
When a lot is surveyed by a professional surveyor, you can feel confident in the amount of acreage being sold. A topographic survey shows lines of elevation change along the site, thus giving you a two-dimensional representation of the site’s slope. This will help you determine a location for a building location and site access. The survey may also show existing utilities, site features, trees and right of ways.
Sometimes sellers have gone through the process of hiring a civil engineer to create a grading plan, which is a site plan showing how the existing topography can be manipulated to create a driveway to a potential building foundation. This will help you evaluate what it will take to develop the site. Grading can get to be expensive, so the less you have to do, the more you can spend on your home construction.
2. Are the boundaries clearly and accurately marked on site?
Typically, corners of the property lines should be marked on the site. Sticks or flags that can easily be seen from a distance. In urban areas, the boundaries can be more easily discernible with neighboring structures and utility markers. However, be aware that some existing structures may be encroaching onto the property of interest and a survey will show if this is the case.
3. Are there any Covenants, Conditions & Restrictions (CC&R’s)?
Covenants, conditions, and restrictions (CC&R’s) are used by many developments to regulate the use, appearance, and maintenance of property. CC&R’s are most commonly drafted and enforced through the homeowners associations (HOAs). They often restrict what the property owner can do on the property. These set the framework for the long term look and feel of a neighborhood.
One of the main restrictions that affects buyers looking to build a home is minimum home square footage. Many CC&R’s set minimum home sizes as a way to protect home values of neighboring homes.
Another restriction may involve the design of your home. Many developments where a landowner subdivided land into lots and is selling them individually have design restrictions to ensure all of the homes built have a cohesive look. They may include type of exterior materials, home orientation and specifications on potential outbuildings a buyer may want.
4. Is the title to the property title clear?
Property with a clear title is far more attractive than a property which is encumbered by liens, taxes, or easements. A title company will help you determine this and often the seller has already engaged with a title company.
5. Do you have a preliminary title report?
Sellers may want to consider a preliminary title report too. This can be very beneficial for both the seller and the listing agent.
As a buyer, you don't want any unwelcome surprises. And they occur more often than one would think. Examples such as, a contractor didn't get paid or property taxes went unsatisfied. Sellers too benefit from preliminary title reports as it helps them to understand if they are going to have enough at closing to pay off an existing mortgage. Which will help determine a sellers net proceeds from the sale.
Having full knowledge of everything pertaining to or affecting a property's transfer is critical to a smooth, problem-free transactions.
6. What utilities are available in the area?
Providing utility infrastructure to a site is a significant expense - so it is important to know what is existing and what you will need to improve. There are five main utilities to make sure you understand before removing contingencies during escrow. You will want to know about the following utility information to fully understand costs.
Power – This could be overhead or underground. Talk to the local power company and learn about the process of bringing power to a new home on this site. Even though power lines may be nearby, there is still time required for the power company to survey the site and make the connection.
Telecom – Find out what your options are for phone, cell phone, cable or satellite television, and high-speed internet.
Gas – Is it available? Natural gas may be accessible from your local municipality - or you may need to use a propane tank. If you are using natural gas from the city or county, just like with power, there is a process to making the connection - so reach out to the local gas company.
Water – This may come from a well or from the local municipality. Connecting to public water can be costly. Fully explore your options for any propery of interest.
Sewer – Will either connect to an existing sewer line or a septic system. If there is no municipal sewer line available, you will need to have a septic system layout designed. This will involve drilling holes in the ground and a percolation test to determine the absorption rate of soil for a septic drainfield or “leach field”.
Another consideration is how far from the future home site the existing utility sources are located. Trenching lines long distances will add significant expense to your project.
7. What are the current taxes on the property?
The seller should know this, but if there is any question, refer to the preliminary title report if provided. The county Auditor will also have the tax information to help guide you. The county Auditor can also tell you the status of property tax payments and the most recent tax on the property. Understanding the annual tax amount will be essential in understanding your ongoing holding costs.
8. Do you have a geotechnical report?
In certain areas, the local jurisdiction having authority of building permits will require a soil report. A soil report – sometimes referred to as a geotechnical report – gives you an understanding of earth conditions. It will guide a structural engineer in designing a home’s foundation. Lots with expansive soils, low strength soils, on steep slopes, or on fill often times require a soils report. If you have a flat lot with good soils, then this report may not be necessary.
9. What is the property’s zoning?
Every property is assigned a zoning type. The property may be zoned for residential or commercial. If it’s residential, you may be limited to a single home – sometimes called dwelling units – or be allowed to build multiple units. Zoning will also tell you other restrictions like how tall a building may be on the lot and how close you can build to a property line. Talk to your local planning & zoning department to determine the property’s zoning if the seller does not know.
10. Are there any other offers on this lot?
You need to know if you are competing with another buyer. Raw land tends to stay on the market longer than a home, because there are less buyers willing to go through the process of building a new home. If there is another offer in on the lot and you really want it, you will need to bring your best and highest offer.
The one good thing about land is that they aren’t making any more of it.