You’ve decided to build your dream custom home, but first, you need a spot to put it. But buying a lot where you can build a home is not as simple as flipping through the classifieds. There are a number of considerations to think about prior to purchasing a lot. Step No. 1? Research, research, research.
One option, if you don’t want to want to tackle all the legwork yourself, is to consider finding a lot through a builder. But if you’re ready to dive into the lot search (and research) process,use the following list to investigate available home lots in your area as you search for the ideal piece of land for your new home.
- Growth— If you are looking at lots in the vicinity where you live, you likely already have an idea of the areas where you’d like to build a new home. Maybe it’s an area surrounded by beautiful nature or an up-and-coming neighborhood that will be a great investment. Even if you already have a sense of the location you’d like, it’s a good idea to check your city’s comprehensive plan to see which areas are planned for growth in the near future. Also check your region’s transportation development and bike share stations. According to Jennifer Jones, an agent with Realty Mark in Philadelphia, these are indicators “that the community is seeing a steady incline in population and popularity.”
- Readiness — Not all lots have the same level of readiness for building a residence. Lots are categorized in three ways: build-ready, unimproved and raw. Raw lots are for speculative investment and not intended for building anytime soon. Unimproved lots do not yet have basic services or utilities, which means there could be additional unforeseen problems and expenses. Because of the improvements that need to be made before an unimproved lot is ready for construction, the timeline for building will be months longer (and it is more difficult to secure a bank loan for this kind of lot). Build-ready lots are, as the name indicates, ready for immediate construction (as long as all necessary permits have been obtained). Of the different kinds of lots, banks prefer this type because there is less risk involved.
- Flood Plains — Flooding can seriously affect your property, home and quality of life. Flood insurance for those who live in high-risk areas can cost hundreds or thousands of dollars per year, depending on the risk level. And a house built on a flood plain can be difficult to sell down the line. These risks are avoidable, so you should investigate if the lot area is in a flood zone on the Federal Emergency Management Agency’s website. To avoid flood risk, look for a lot labeled Zone C or Zone X.
A professional surveyor will research a property and determine the exact boundaries of the lot. Buyers should always have a new survey done, even if one was done recently. Says Flavia Berys, a real estate broker and lawyer in Southern California: “A survey can only be relied on by the party named in the surveyor’s certificate. No other party has the right to rely on the survey, meaning that other parties not named in the certification don’t have recourse if there’s a mistake in the survey. For that reason, it’s important that the buyer is named as a party in the surveyor’s certificate to help avoid boundary disputes or issues with the physical location of easements and other property characteristics.”
Zoning and Ordinances
Prior to purchasing a lot, you will want to check that you can actually build a residence there. Your city or county likely has a zoning search tool online that you can use to quickly research the lot. Purchasing non-residential lots happens more frequently than you would expect, so this is a simple yet crucial step! You should also pay attention to the city’s or county’s long-term land use plans and scheduled road additions, as those changes could affect the property you’re interested in (and it’s good to be prepared). Cities and counties also have ordinances that govern such things as animal control, local law enforcement, local parks, local roads and even garbage removal and recycling. It’s good to research which ordinances will apply to your property in advance.
HOAs and Deed Restrictions
Zoning isn’t the only potential limitation for what you can build on a lot. Many lots for sale are part of subdivisions that have covenants in place. If you’re looking at a vacant lot in a subdivision or in an already developed community, there is likely a homeowners association. HOAs can have costly membership fees, in addition to setting the rules in the area. These rules may dictate everything from the color of your front door to what kind of pets you can have. One of the upsides of an HOA is that they also prevent your neighbor from painting their house pink from top to bottom or turning their property into a petting zoo. Communities governed by HOAs also often have community centers and pools, which are a wonderful perk.
Subdivisions have covenants, or deed restrictions, which are private agreements between the landowner and the buyer. Common deed restrictions include obstructing a neighbor’s view, the type and number of vehicles allowed to park on a property, building fences, removing trees, adjacent structures and even the number of bedrooms allowed. Be sure to obtain copies of an HOA’s rules and regulations and the subdivision’s deed restrictions (which should be included in either the property deed or master deed) prior to purchasing a piece of land.
A lien is a legal notice that is attached to a property’s title due to an unpaid debt. It gives the unpaid party a legal claim to a portion of the property when it’s sold. Sometimes, property owners do not even know there is a lien on their property. You can find out if there is a lien on a property with a simple search on the website of the county recorder, clerk or tax assessor’s office. If the property you are interested in has a lien, you will need to make sure the debt is resolved and the lien removed prior to purchasing the lot.
Basic utilities include electricity, gas, phone, internet, water and sewage. If there are no connected utilities on the property, getting those utilities in place can be a hassle (at best), not to mention expensive and time-consuming. You can avoid dealing with installing utlities by purchasing a build-ready lot. But if the lot you love is unimproved, you can still make it work with some effort. If your property doesn’t have direct access to public roads, be prepared to install a septic tank and a well.
Believe it or not, it is possible to buy a piece of land without having a legal way to drive to it. If a property cannot be accessed via public roads, it is possible that the only way to get there is by driving on private property belonging to neighbors. This is especially likely in country or rural settings, and not all neighbors are friendly. If a property is land-locked and there is no way to access it from public roads, an easement will be necessary.
Merriam-Webster Dictionary states that an easement is “an interest in land owned by another that entitles its holder to a specific limited use or enjoyment.” This could include running a power line across a corner of the neighbor’s property or installing a driveway from their private road. You will likely have to pay for that use, in addition to the cost of hiring an attorney for the official paperwork. If the neighbor isn’t agreeable, you may be able to sue for the easement, but that’s a worst-case scenario and one that can be avoided if you have road access and a build-ready lot.
As mentioned earlier, build-ready lots are preferred by banks when it comes to obtaining a loan. After you have found the lot of your dreams, you will need to provide the bank with a new survey and information about zoning and land-use restrictions on the property (including access to utilities and public roads). The more improved the land, the lower your borrowing cost. Amanda Bolton, a Realtor with Platinum Real Estate Professionals in Las Vegas, suggests putting 30 percent down when seeking financing for a lot. “If you also plan to build on the land, prepare for a 30 percent down payment of both the land cost and building plans combined,” she says. “You will be able to take money out of your loan as you build.”
Now that you know the considerations involved in buying a lot, are you ready to begin the process of buying a lot and building your dream home? Visit NewHomeSource today to check out custom builders and beautiful new homes in your area.
For the last 16 years, Rachel Kinbar has been a writer of articles, blog posts, white papers, essays, infographics, web copy, sales copy, scripts, poetry, lyrics, and more. She has keen research skills that she applies to a wide variety of topics, and she especially loves topics related to design, history, and sustainable living.