Whether for investment, a place to build a new home, or a hobby farm, buying land for sale by owner is different than purchasing a home. You will need to consider many of the same issues you might have when buying a home, but there can be different challenges, especially if buying a large tract of land. Financing is more difficult to get on a lot or acreage than it is to get a loan on a home. This is something you need to be aware of before getting too involved in the pursuit of land.
Why do you want raw land?
Many dream of building their home and buying a land for sale by owner can give you this opportunity. You can often find lots in developments that are being sold by the owner and not the developer. The owner may have bought the land for the same reason you want it, investment or they may have never gotten around to building their dream home. Or you may want a piece of acreage, in which to invest or to build a place away from it all. Whatever the reason, buying land for sale by owner requires the same due diligence as buying a home. You need to know what you are getting before making a full commitment.
Does the land have access to power, water, and sewer? Some properties may have this in place while others do not. Wells, septic systems and power to your property can be expensive and you will need to consider the cost of these items when buying land for sale by owner.
Do you have financing?
If you plan to buy the land for an investment then you need to be ready to put a hefty down payment on it. Lenders are more reluctant to make a loan on land unless the buyer has a development plan and has performed the due diligence necessary to see their plan to fruition. Lenders often are left holding the bag, on land deals, when buyers find that they cannot get the home built in a timely manner.
When buying land for sale by owner you may be required to come up with a down payment of 50 percent. However, if you work with a local bank or a credit union and have good credit you may be able to buy land for sale by owner for as little as 20 percent down. Just be prepared to find an alternative lending source when looking for land. If you are buying in a rural area, you may be able to purchase land for sale by owner on which to build a home if you are qualified.
Do you have a real estate attorney?
Many issues need to be researched with land for sale by owner. An attorney can determine who owns the water and mineral rights of the land, whether there are any liens, judgments, easement issues, or any other problems that can arise when buying land. An attorney can also help you with contingencies to an offer that you make on land for sale by owner.
Two contingencies that should be added to your offer are for financing and the results of the survey. Have you ever seen a property listing with a +/- sign beside the acreage amount? This indicates that the seller is not exactly sure how much land for sale by owner, they have. Only a survey will clear this up and you may want to a price contingency if the land is being sold by the acre.
A real estate attorney will also be able to determine if the land for sale by owner that you are purchasing is restricted by a homeowners association (HOA) or by conditions, covenants and restrictions (CC&R’s). This can be a big deal if you buy acreage, want chickens and later find out that you are not permitted to have them in the community where you purchased your land.
Are you ready to make an offer?
Now that you have found the land for sale by owner that you are interested in it is time to make the offer. Do not offer full price because every dollar you can save on the price of the land will reduce the 20 to 50 percent down payment that you will be required to fork over at closing. Add a contingency for financing and one for a survey that will give you an out if any problems arise.
Do you need a survey?
Of course you do. Whether you are buying a neighborhood or development lot or 100 acres of raw land, you need a survey to determine if there are any issues with your lot lines. This can include unrecorded easements and encroachments, as well as actual property size.
Is the property in a flood zone?
Property in a flood zone will cost you more to insure, when you do build, and more to develop. If you even can. There are horror stories of land for sale by owner that ended up being straight up the side of a hill, down the side of a hill or swampland that is unsuitable for any type of structure, unless it is on stilts. Do not be one of those buyers.
Are you Ready to Close the Deal?
Do your due diligence when buying land and you will sidestep issues that trip others up when buying land for sale by owner. No matter what you want to use your land for, making sure that it has a clear title, clearly identifiable lot lines and knowledge of any restrictions that affect it will help you to make an intelligent choice when buying land for sale by owner.
