How to Buy a Piece of Land

Property bordered by water may be subject to wetlands laws.

Vacant land image by Yuriy Rozanov from Fotolia.com

If you're looking to build your own dream house, you may be considering buying a piece of land. You may also want to buy an empty parcel next to your home in order to expand your yard or a plot of land for a commercial purpose. And who wouldn't want to choose the perfect location for their dream house, especially if you're looking to move to a more rural area or want to build in a brand new neighborhood? The process to buy land, however, can be different than the process to buy a residential home and requires a skilled real estate agent to help you navigate the process.

Find the Right Agent

When looking to buy a parcel or land, it is important to work with a real estate agent who has experience working with vacant property. Many realtors specialize in residential properties and may not know the market for properties as well as they know the housing market. Working with a real estate agent who specializes in land will ensure that she is familiar with your local market and can show you land parcels that meet your specifications. Many real estate agents who specialize in helping buyers find vacant land to buy list that specialty on their website. You can also call your local real estate agents association to get a list of qualified agents. Feel free to work with a few different agents until you find one who understands your needs and has navigated the land purchase process before.

Beware of Zoning and Other Restrictions

When buying a residential home, you already know that the property on which the house sits is zoned for residential use. Zoning restrictions are less clear for vacant land, however, so you will need to make sure your real estate agent shows you only land zoned for residential use if you intend to build a home on the land. Additionally, you should always check with your local zoning office before finalizing a purchase. Likewise, your real estate agent can help you check the property title for easements or liens which may encumber the property. If the property doesn't yet have any structures on it or is in a rural area, make sure you contact the local utility companies to make sure they will serve the parcel.

Prepare Your Financing

Unlike purchasing a home, many banks and lenders will not issue mortgages or other finances for empty land. This is an important consideration if you planned on using a loan to buy your land. Although some banks do offer land loans to finance the purchase of an empty parcel, these loans may have higher interest rates than a traditional mortgage and can require as much as 50 percent down according to Bankrate. Instead, if you can come up with the cash to buy the land outright, many lenders will issue construction loans using the land as collateral. These loans are easier to secure and generally have more favorable terms.

Account for Extra Costs

Although it can be cheaper to buy a parcel of land and a home built to your specifications, don't forget to plan for the unexpected costs of improving the vacant land. It is common for land that has never been developed before to be leveled and assessed for stability before building. Likewise, your local water utility might charge for the cost of connecting pipes to your land, and the county may charge a fee for maintaining private roads you build to access rural land. These usually don't apply when purchasing land with a house already on it, and can be unexpected costs for new land buyers. Planning ahead will help make sure you're prepared.

Items you will need

  • Real estate agent
  • Budget
  • Deposit
  • Down payment
  • Insurance
  • Codes, covenants, restrictions
  • Title company
  • Real estate contract
  • Deed

Tip

  • It's okay to negotiate for two pieces of vacant property simultaneously if they're equally desirable, are priced similarly and you're eager to strike the best deal.

Warning

  • Apply due diligence to your land purchase; you wouldn't be the first person on the planet to get in on a land-buying deal that's too good to be true. It bears repeating: Don't buy land you haven't seen.

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About the Author

Bea is a personal finance and legal writer based in Texas.


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