Buying Land to Build a House: The Ultimate Guide

Are you a person that has always wanted to get away from your annoying neighbors, the noisy and loud city or the limitations of your local homeowners association? If you are, then you’ll want to read this article because building your dream home with your own land space will solve your problems. We’ll be covering everything you need to know and consider when purchasing land to build a home.

Where to Find Land for Sale

Looking for a land for sale isn’t as simply as just strolling through the neighborhood for on sale signs. According to a realtor in San Diego named Kirky Galt, looking on land landisting on big sites such as Zillow or Realtor.com won’t land you the best deals either.

Kirk suggests that you’ll find amazing deals through networking and word of mouth. You’ll need to contact brokers in your area and network with various organizations such as the Rotary Club or Chamber of Commerce. New opportunities are being created, you just have to talk to the agents or the local market who know about the potential zoning changes that might occur.

An attorney and real estate agent named Bruce Ailion recommends looking past the active listings and searching for the expired and withdrawn ones. Many people will actually purchase the lot or land and change their mind because they have a harder time selling it than they thought. Eventually their listing expires and they give up. Ultimately, they are desperate and will let it sit until someone contacts them about purchasing.

Bruce recommends to drive around the desired area and search for vacant properties. When you find potential land, you can identify the owner of the land through tax records and see if the land can be bought out. He sees this as the best option to finding good land for sale options because he has had great personal experience with his clients and builders. You just have to scan through all the possible vacant parcels and reach out to the owners.

Allion also says that you should be careful when buying cheap land and trying to build an expensive home on top of it. This will diminish the overall value due to construction improvements needed. You also don’t want to buy an expensive land and put a small or cheap home on it either. That will damage the value of the land. Overall it’s best to find a lot that is within the same value as the price of the home.

Bruce mentions that there is a good rule of thumb to follow. The land should only be about 20% to 30% of the total finished value of the house. For instance, if the cost for construction is $300,000, then the land cost will be $90,000.

What Questions to Ask When Purchasing Land

You may think finding a plot is enough, but it isn’t. You need to ensure that the plot gives you the ability to build your desired house in a way that is cost-effective. We’ve given you four essential questions to ask the seller.

How is the land zoned?

Zoning is the local planning authority’s way of deciding how a piece of land is to be used. You should always first check the zoning before purchasing any land to build a home. Galt warns against making a binding offer without doing your due diligence. This can trap you with a parcel that might be zoned for things outside of residential use like agricultural or industrial use.

Zoning tells you about the lot use, but be wary of the shape and size of the structure. This must fit within the property’s setback. A setback are limitations on where a house can be built. For instance there may be a required length of distance from a curb or property line that you need to be aware of.

Don’t be tricked into believing you can purchase the property at a steal then have to be rezoned.

Does it Come With Utility?

The land may come with the utilities you need such as natural gas, electricity, water, sewer and others. You will have to check to make sure. For instance, if there is no sewer available, you will have to ask if the land will provide a septic tank for you.

A crucial utility factor is water. Wendi Roudybush, a realtor from Realty Executives in Prescott Arizona says that you need to determine whether or not you need to drill a well. You need to find out if you need to haul water or if there’s some sort of shared well agreement or public or private water company nearby. In addition, she mentions that most lenders restrict builders to build houses in hauled water areas.

If you’re planning to live in forest or rural areas, then you need to double check for reliable internet and cell services as well.

In the case where the utility is not available for the land, you need to figure out what the costs are for having them run smoothly in your property. You have to dig deeper because there are vague statements put out by sellers such as “some state utilities may be nearby.” Those nearby spots can be a few miles away. Make sure there are no surprises because the costs to run lines will vary. This greatly depends on the total distance and potential mucupality and power company fees.

How Much Extra Preparation Is Needed for The Land?

Grading and clearing land can be really expensive. According to homeadvisor, it can range between $1,250 to $4,200 that homeowners spend on clearing the land in preparation to build a home. Expenses vary based on how much wood is in the area along with the location. Typically grading can cost in the range of $.047 and $2.28 per square feet and also will depend on the amount of work needed. There might be existing structures needed to be destroyed or removed. You need to find out what the estimates for debris removal is as well. Knowing all of the prep work will factor into the timeline and building sequence of your home.

How Much Time Is Needed?

Another crucial step is finding out how much time you have. Roudybush notes that building your own custom home that has to be tailor-made for your home site takes much longer than buying a house for sale. The entire process takes two years or more she says. This process can be long and arduous. It entails finishing the permitting process, doing surveys, figuring out the utilities in the property, acquiring bids, landing the necessary construction financing and then having the actual house built on top.