A Guide to Buying Land: FAQ's and Tips
Total Read Time: 6 minutes
Do I need a Different Agent to Buy Land?
No! All real estate agents are qualified to help across the board, whether it be selling, buying, land, homes, commercial, ect. You do not need a specific agent for different types of real estate. However, agents do tend to grativate towards different areas of the market and make that their niche, which could mean that if you find an agent that tends to do more land deals than say, commercial, then they could potentially know more as that is something they specialize in. If you are still looking for an agent, it could be a good idea to ask them what type of clients they typically work with. Agents will often refer you to a colleague of theirs if they know they are not the perfect fit for you.
Is Purchasing Land Different from Buying a House?
The process whether you are buying land or buying a house is the same, except for the feasibility period. This process usually takes an average of 60-90 days compared to a week for home inspections.
For those that don't know what the process looks like, here is a quick summary:
1. You'll want to visit the property. Walk through everything. How was the drive? What amenities are available nearby? If possible, have your realtor ask if the owner is available to walk the land with you. They will often have a deeper knowledge of easements, boundaries, landmarks, and even neighborly disputes.
2. If you like what you see so far, you'll put an offer in along with an earnest money deposit.
3. If the offer is accepted, than you can do an "inspection of the land". This is the so called feasibility period, where you can get soil tests done, surveys, and find if you can do what you want building and permit wise.
4. If necessary, you'll do any negotiations based on the findings. If everything is good, then you will move forward.
5. The property is now yours! Hoorah! (Sounds simple, but it could be rather complicated and expensive.)
What are Land Categories?
When it comes to real estate, there are different classifications: raw land, commerical, residential, industrial, and special use. "Land" often refers to underdeveloped properties; such as timberland, farms, ranches, orchards, and raw (untouched) land.
It is important to note what classification the undeveloped land you are looking at is before buying, as that can tell you whether it will suit your needs or not. A vacant lot that does not allow for anything to be built on it is a lot less desirable from an investment standpoint versus a property that allows for a variety of uses (such as farming, residential building, ect).
Commercial = Any property that is intended for a business. This includes offices, retail stores, warehouses, hotels, hospitals, ect.
Residential = Any property that is intented for residential purposes. This includes homes, condos, townhomes, and multi-family residences.
Industrial = Any property that is used for the purpose of manufacturing and production (this includes farms), storage, or even research and development.
Special Use = This is any property that used by the general public; such as schools, parks, government buildings, schools, churches, ect.
Within each of these categories, there are even further distinctions about land use often referred to as "zoning." For example, land that the county classifies as okay for residential use, doesn't mean that you can go and start building apartments on it. Depending on what type of residentail land it is, there are often limits on minimum or maximum number of dwellings per acre/square footage. There can also be rules regarding your building materials, number of outbuildings, and how close to certain landmarks (such as water) you can build. Each city has it's own rules and regulations regarding zoning and it is vital to know this before proceeding. A real estate agent often has easy access to these details, or you can personally contact the local zoning office or city hall yourself.
Plan to Build?
It is important to note that if you buy land and then improve it--via building, putting in utilities or agricultural purposes--the property taxes will not be based off of your original purchase price, but the value of everything within the boundaries of that lot as a whole. Counties and cities will know the value of your land through all of the permits that are submitted, the inspections, and the assessments.
That being said, it can sometimes be difficult to get financing for land, as lenders are more hesitant to provide funding for something that has no collateral to take from if payments aren't made. Due to this, land purchases often require higher down payments and higher interest rates compared to purchasing homes. If your intention if to build soon after buying land, it might be worth it to look into construction loans and tying your land purchase to that type of financing if you are having difficulty getting approved by a lender.
What is the Resale Value of Land?
Land tends to take longer to resell than homes, as homes are more in demand. Selling land attracts a much smaller pool of buyers, that often have a particular interest and reason for buying land.
Critical Questions to Ask Before Buying Land
Depending on what your ultimate goal is with purchasing land, the questions to keep in mind can vary. In general, good questions to have are:
1. Can you do what you want with the property? What is its category/zoning regulations? What were the results of the land survey? Is it part of a HOA? Can it be subdivided?
2. Are there utilities? If not, is a connection possible and how much would it cost?
3. Is there access to water? This is oftentimes a lot harder than utilities, and a well may have to be dug.
4. Do you have road access to the land? If it is landlocked by other properties, is there an access easement? Or a bridge if you have to cross a river?
5. Are there public services available such as trash collection?
6. Do you get cell reception?
7. Is there a plan for the nearby properties? It would be a buzzkill to move up to the mountains to have a feeling of being away from it all, only to find out a ski resort is going to be built next door within the next couple years.
When it comes to buying a home with acreage, it is important to not only go through the steps of purchasing a home (such as inspections), but all the critical add-ons that come with land as well so you know exactly what you are buying. It pays to have a professional real estate agent by your side. The support and knowledge that they can provide is something they not only are trained for, but are happy to provide to help you find that perfect property that you are looking for. They are your representative for all negotiations and communication between all parties involved in the transaction. We hope this guide was helpful and wish you the best on your search for the perfect property!