The Do's & Don'ts of Buying Vacant Land

Building a custom home is hard work, don't get me wrong. That reward is pretty sweet once you move into the home you designed and dreamed up along the way, though! The crucial first step is finding the perfect lot to build on. Before you purchase, be aware of some do’s and don’ts below.

Do work with an agent to find the land. Your real estate professional can help to research the property and make sure you are making a sound investment for your specific needs. Buying vacant land is vastly different than buying a home so it's crucial to work with an agent who knows what questions to ask and knows how to negotiate on your behalf.

Do have your finances in order. You will need to have proof of funds for the purchase amount, so make sure you understand what you can afford to spend on your lot. What I like to do is work backwards. Have a good understanding of what your home will cost to build, work backwards from there to figure out what is left over for your budget when it comes to purchasing raw land.

Do find out what utilities service the area. If you are looking outside of a developed area, you need to know what utility services are available already, or if any infrastructure needs to be added. Think electricity (if available, and if not solar power), water (city services or do you need to drill a well), sewer (city services or do you need a private septic system), garbage service, etc.

Do find out if incentives are available. In areas where natural disasters have occurred, local governments may offer incentives for building where previous homes have been destroyed.

Do visit (or call) the tax assessor’s office. The tax assessor can tell you the estimated value of your lot as well as your projected property taxes.

Do price the neighborhood. Your agent can help you with a market analysis of the surrounding homes. You don’t want your home and land cost to be vastly higher than the rest of the neighborhood. Don't overbuild for the area!

Don't expect to finance your lot. If you need to, expect to put down anywhere from 20-40% of the land value as a down payment. It’s so important to talk to your financial advisors before you start looking to figure out what your buying power is.

Don't skip tests/inspections. You should have the soil tested to make sure there aren’t pollutants or foreign materials buried beneath the surface. Have your agent ask questions about whether or not the property already has septic approval. If not and the property requires a private septic system, you'll likely need a percolation test to make sure the property is fit for a septic tank. In areas where sinkholes are common, a soil test can tell you if clay layers deep in the soil make your property more susceptible to foundation issues.

Don't forget to have a survey or the property completed. Before you purchase the lot, ask to see a recent survey or have one done to validate property lines and make sure other neighbors aren’t already encroaching on the lot with access roads, fencing, or structures.

Don't let neighbors know of your plans. Don’t get too friendly just yet. If the land you plan to build on has been enjoyed by nearby property owners for the view, for parking, or for recreation, your plans to build may be met with resistance.

Don't assume you can have property rezoned. Make sure you know the property zoning regulations for the property. If you are in a rural area and plan to have chickens or horses, make sure that is permitted. Be wary of sellers who tell you that you can subdivide the land or build two homes on one lot, as this may not be the case. Look for HOAs , CC&Rs, zoning restrictions, etc.

Don’t rely on a drive-by. You need to walk the property, no matter the size or your plans for its use. If you are buying multiple acres, don’t assume that the topography is consistent throughout with no hidden problems. Things to check for include flood-prone areas, environmentally protected-animal dwellings, trash deposits and neighbors that are involved in activities that may affect your enjoyment of the property, such as dog kennels or shooting ranges.

There's lots more to it but this is just the tip of the iceberg that should get you started.