Whether you want land for investment, a place to build a new home or enough acreage for a hobby farm, buying vacant land is different from purchasing an existing house.
You still need to consider price, financing and title, but land comes with additional questions about zoning, road access, utilities, surveys, soil conditions and whether you can legally use the property the way you intend.
Those questions should be answered before you make an unconditional commitment to buy. A cheap parcel can become an expensive mistake if you later discover you cannot build on it or connect it to the services you need.
Key Takeaways
- Confirm what you can legally do with the land before making a final commitment.
- Vacant-land financing can be harder to obtain than a mortgage on an existing home.
- Check access, utilities, survey boundaries, title and development costs before deciding what the land is worth to you.
1. Decide Why You Want to Buy Land
Start with what you actually intend to do with the property.
You might be buying land to:
- Build a primary residence
- Build a vacation home
- Hold it as a long-term investment
- Farm or raise animals
- Build multiple structures
- Use it for recreation
- Combine it with neighboring property
Your intended use affects almost every step that follows.
A two-acre residential lot with public water and sewer presents a very different purchase than 40 acres of undeveloped rural land without legal road access.
Do not assume that owning land gives you the right to build whatever you want on it. Local zoning, subdivision rules, environmental restrictions and private covenants can limit how the property is used.
2. Check the Zoning and Land-Use Rules
Before you focus on financing or negotiate a final price, determine whether your plans are actually permitted.
Start with the local zoning or planning department and confirm:
- The property’s current zoning classification
- Permitted residential, agricultural or commercial uses
- Minimum lot-size requirements
- Building setbacks
- Maximum building size or density
- Rules for accessory structures
- Whether livestock is permitted
- Whether the parcel can be subdivided
You should also determine whether the property is subject to private restrictions, such as homeowners association rules or recorded covenants, conditions and restrictions.
Zoning tells you what local government allows. Private restrictions can impose additional limits even when zoning permits your proposed use.
3. Make Sure the Property Has Legal Access
A parcel on a map is not necessarily accessible from a public road.
Some rural or undeveloped properties are landlocked and depend on an easement across neighboring property for access.
If there is no direct frontage on a public road, determine whether a recorded easement legally gives you the right to reach the property.
Also consider whether the access is practical. A legal easement may exist, but building and maintaining a long driveway, bridge or private road can add substantially to development costs.
4. Find Out Which Utilities Are Available
Utility access can dramatically change the true cost of buying land.
Check whether the property has access to:
- Electricity
- Public water
- Public sewer
- Natural gas
- Internet service
- Telephone or cellular service
If public water or sewer is unavailable, you may need a private well and septic system.
That usually means additional site testing, permits and construction costs. A property that looks affordable can become much more expensive once you account for bringing power to the site, drilling a well and installing septic.
Get estimates rather than assuming nearby utilities can easily be extended to your parcel.
5. Determine Whether the Land Is Buildable
Owning a legally recognized parcel does not necessarily mean you can build a house on it.
Depending on the site and local rules, you may need to investigate:
- Soil and drainage conditions
- Septic suitability
- Slope
- Wetlands
- Flood risk
- Driveway access
- Minimum building elevations
- Well requirements
- Environmental restrictions
If the property will need a septic system, ask the local health department or other permitting authority what testing is required. A failed soil or percolation test can seriously affect whether and where a home can be built.
You should also check the property through FEMA’s flood maps if flooding could affect the parcel. A flood zone does not automatically make land unusable, but it can affect where you build, construction requirements and future insurance costs.
6. Figure Out How You Will Finance the Land
Financing vacant land can be more difficult than financing a completed home.
A traditional mortgage is secured by a habitable property with an established market value. Raw land can be harder for a lender to value and resell if the borrower defaults.
As a result, land loans can have different down payment, credit, interest-rate and repayment requirements than ordinary home mortgages.
The financing options can include:
- A land or lot loan from a bank or credit union
- Seller financing
- A construction loan when building will begin relatively soon
- A construction-to-permanent loan
- Cash
Local banks and credit unions can be particularly worth checking because they may be familiar with land values and development patterns in the area.
If you’re buying an eligible rural site as part of plans to build or purchase a primary residence, some USDA Rural Development programs can also finance qualifying site acquisition and preparation. Eligibility and use restrictions apply, so this should not be confused with a general investment-land loan.
Talk to lenders before you make an offer so you know what type of property they will finance and what documentation they will require.
7. Research the Property’s Title
Land can carry legal issues that are easy to overlook when you’re standing on an empty parcel.
A title search can identify recorded issues such as:
- Mortgages and liens
- Easements
- Deed restrictions
- Ownership disputes
- Rights granted to utilities or neighboring properties
Depending on the location and property, buyers may also need to investigate mineral, timber or water rights.
These rights can be separate from ownership of the surface land. Do not assume the deed automatically gives you every possible right associated with the property.
A real estate attorney or title professional can help you understand what is recorded against the parcel and whether anything conflicts with your intended use.
8. Get a Survey
A survey can confirm what you are actually buying.
This can be especially important with acreage, irregular parcels or properties where old fences, driveways and other improvements may not follow the legal boundaries.
A survey can help identify:
- Property boundaries
- Actual acreage
- Encroachments
- Recorded easements
- Buildings or improvements near property lines
- Access points
If the seller describes the property as approximately 20 acres, for example, do not assume that figure is precise enough for your plans.
The purchase contract can make the transaction contingent on an acceptable survey if acreage and boundaries are important to the deal.
9. Calculate the Cost Beyond the Purchase Price
The price of the dirt itself is only one part of the budget.
Depending on your plans, additional expenses can include:
- Survey costs
- Title and legal fees
- Loan closing costs
- Property taxes
- Clearing trees or vegetation
- Grading
- Driveway construction
- Utility extensions
- Well drilling
- Septic installation
- Soil testing
- Permits
- Engineering
Get estimates for major development work before deciding what the property is worth to you.
A $75,000 parcel requiring $60,000 in site work may be less attractive than a $110,000 parcel where utilities and road access are already in place.
10. Make an Offer With the Right Contingencies
Once you’ve done enough research to understand the property, you can make an offer.
Do not assume you should automatically offer below asking price simply because you’re buying vacant land. Base the offer on comparable land sales, development costs, the property’s limitations and local market conditions.
Depending on the transaction, contingencies may address:
- Financing
- Survey results
- Clear title
- Zoning or land-use approval
- Soil or septic testing
- Utility availability
- Environmental review
The right contingencies depend on the property and your intended use. A real estate attorney can help draft or review provisions that protect you during the due-diligence period.
11. Complete Your Final Due Diligence Before Closing
Before you close, make sure the assumptions behind your purchase have been verified rather than simply discussed with the seller.
You should know:
- Who legally owns the property
- Where the boundaries are
- How you will access it
- What you are allowed to build or do there
- Which utilities are available
- Whether the site can support your development plans
- What easements or restrictions affect it
- What the major site-development costs are likely to be
The land-buying process is different from purchasing an existing home, but the same basic principle applies: understand the property before you commit your money.
If you’re comparing land with other unconventional ways to enter the real estate market, buying a foreclosed home or exploring a rent-to-own condo creates a different set of risks and financing considerations.
For buyers who ultimately plan to build a primary residence, Movoto’s homebuyer checklist also covers the financial preparation, financing and closing steps that overlap with a traditional home purchase.
Should You Buy Land for Sale by Owner?
Buying directly from the owner can work well, but it does not eliminate the need for professional due diligence.
A seller may know the property extremely well, but statements about boundaries, permitted uses, utilities or acreage should still be independently verified.
This becomes especially important when there is no listing agent organizing the transaction.
A title company, surveyor, attorney, lender and local planning officials can each answer different questions the seller may not be able to resolve for you.
Bottom Line
Buying land can give you flexibility that an existing home cannot, but that flexibility comes with more homework.
Before buying, verify zoning, legal access, utilities, buildability, title and boundaries. Then compare the purchase price with the money you may need to spend preparing the site for its intended use.
The best land purchase is not necessarily the parcel with the lowest asking price. It is the one that can actually support what you plan to do with it at a total cost you can afford.
FAQ
Is buying land different from buying a house?
Yes. In addition to financing and title, land buyers often need to investigate zoning, access, utilities, surveys, soil conditions and whether the property can legally and physically support the intended use.
Is it harder to get a loan to buy land?
It can be. Vacant and unimproved land does not fit the same lending model as an existing home, so lender availability, down payment requirements, rates and loan terms can differ considerably.
Do you need a survey before buying land?
A survey can be especially useful because it establishes boundaries and can identify easements, encroachments and other issues. Whether one is required depends on the transaction, lender and local circumstances.
How do you know if land is buildable?
Check zoning and building rules, road access, utility availability, soil and septic requirements, flood risk, setbacks and any private deed restrictions. Approval to build depends on the parcel and local regulations.
Can USDA financing be used to buy land?
Some USDA Rural Development housing programs can include the purchase and preparation of an eligible site when the transaction is tied to building or purchasing a qualifying primary residence. They are not general-purpose loans for buying raw land as an investment.
What should you check before buying land from an owner?
Verify legal ownership, title, boundaries, access, zoning, utilities, building restrictions and any liens or easements. Information supplied by the seller should be independently confirmed when it materially affects your plans.
