The Most Common Pitfalls to Avoid When Buying Land for Homebuilding

Building a custom home that meets all of its owner’s wants and needs is a dream for many of us. But before you start planning what your ideal home will look like, you need to buy land – an even bigger task than the design of the house. That’s the one thing you can’t change about your home: its location. So take at least the same amount of time looking for land as you do your design decisions. And, once you’ve found the perfect location, you can also rent storage space in that area – building a house often gets delayed and you’ll most likely need space to store some of your stuff. until the new house is finished. .

Furthermore, when looking for land for your future home, it is essential that you consider all the practicalities and financial and legal implications that may arise. Here are the most important aspects you should pay attention to when buying your land, in order to avoid possible land-related pitfalls:

1. Zoning

Zoning bylaws establish the legal framework for parcels of land within a municipality. Zoning tells you if you can build, what you can build on a particular piece of land, and other details such as the height of the building, how much space the building can take up, etc. In other words, it is vitally important to know all the details regarding zoning before deciding whether or not to buy land.

“Before investing in land, you should review zoning restrictions,” says Kurt Walker, real estate agent at Home buyers in Mill City. “This measure would help prevent your money from going down the drain. You must ensure that the state has authorized the construction of a house on the vacant land you plan to buy. To avoid this pitfall, you can also seek help from the homeowners association and city ordinances,” he added.

2. Utilities

If you are looking for a peaceful environment for your new home, you may be tempted to buy land further away, or at least away from major roads. However, you need to know if you have access to utilities (water, sewer, electricity, gas, internet connection) and if not, how much it would cost to bring them to the field. Don’t count on the fact that the municipality will cover the costs, or that it can’t be that expensive. Contact county or city officials for details of setting up utilities on the vacant lot and also request a cost estimate. There are alternatives to utilities, but they are usually expensive and complicated.

“By focusing where the land is purchased, the provision of public services is different”, Matt Ward tell us. “After buying land to build a house, the owners realize that there is not enough usable water available in the area. Either there are no easy sources like rivers or ponds, or water has to be extracted from deep within the earth, which is costly and another added cost. Many areas do not have a large power grid or enough cables which limit the amount of power supplied,” he advised.

3. Environmental risks

Depending on the location of the parcel of land and its previous use, it may contain environmental hazards. This can happen especially in areas that were previously zoned for industrial activities, and unknowingly buying such a property can put a heavy strain on your budget. Bruce Ailion, an experienced real estate agent, details the risks of buying land without having all the information about it: “An acquaintance found what he thought was a good deal on a foreclosed property that he bought from the bank to build a building for his business. He paid $250,000 for the land. However, when his contractor started moving dirt, he discovered that the property had been used as a tire dump. There were over 3,000 tires buried on the property. The municipal fee to dispose of them was $8.00 each plus labor to remove them, and the cost of backfilling and compacting the soil cost over $175,000 to correct the problem,” says he remark. Calling on an experienced real estate agent is therefore very important when buying land. Also, you should check the land records – you can usually find them online and, if they’re not available that way, by contacting the county clerk or local recorder’s office.

4. Asset liquidity issues

When buying land as a long-term investment or for building a house at some point, you should be fully aware that your money will be tied up in that land. Generally, land values ​​go up over time, but that’s a long-term thing. If your plans change or you need cash unexpectedly, selling land is more difficult than selling stocks, for example. Also, depending on the state of the real estate market at the time you bought the land, sold shortly after acquiring it because you needed cash, or because you changed your plans (you no longer want to build house, moving to another area, etc.) could end up costing you money.

5. Funding difficulties

Loans for the purchase of land are less accessible and generally more complex than your classic mortgage. They are riskier for lenders because there is no house to act as collateral. These types of loans are approved if you have an excellent credit score (over 700), but expect higher rates compared to home loans.

6. Adverse soil conditions

The area in which you want to buy land may be prone to flooding or the ground conditions may not allow the construction of your dream home. It is advisable to hire professionals to carry out a soil study before buying the land, to ensure that it can properly support a foundation. Also, you should be aware that steeply sloping plots can result in higher foundation construction costs.

7. Building codes and homeowner association requirements

Make sure you have all the information about what can be built in the area before buying land. Otherwise, you could find yourself in a situation where you cannot, for example, build a secondary suite on your land or install a swimming pool in your backyard. “Another potential pitfall is building codes,” said Jennifer Spinelli of Watson buys. “Be sure to research the building codes in your area to ensure that your home or other structure will meet all of the necessary requirements. Also check the rules and regulations of the homeowners association. There may be restrictions on the type of house you can build or other requirements you will need to meet.

8. Incurring costs

Buying land to build on in the future can be a good investment, especially if you find one that meets all your requirements. However, you should also consider that owning land incurs costs (property taxes, mortgage payments, improvement costs, and even association fees if there is a homeowners association in the area), not generating any type profit. So, if you are planning to build a house, a good idea would be to start looking for land when you are also ready to start construction. This way you won’t have to pay property taxes for years without getting any benefit from this property.

9. Underdeveloped area

Some people want to find land in quiet, secluded areas – that way they are sure they will have plenty of privacy after building their home. Plots of land further away also tend to be cheaper. However, it is still important to make sure the area has potential. You might change your long-term priorities and you don’t want to be stuck in an area with no services or amenities. “Undeveloped land is the biggest downside to buying,” says Jasen Edwards of AgentAdvice. “So buyers should check the plans of the authorities to determine whether they plan to develop the land or not. This can give a clear idea of ​​what they are getting into. You cannot buy land without looking for the growth potential in the future,” he concluded.

10. Easements and deed restrictions

Finally, you need to know all the legal implications regarding the land you plan to buy, to avoid a scenario where someone else shows up and builds a road through your property. “Another potential pitfall to be aware of when buying land are easements and deed restrictions,” says the estate agent Shaun Martin. “Easements are rights that someone else has to use your property for a specific purpose, such as utility lines or access roads. Deed restrictions are limitations placed on how a property can be used, such as the inability to build a commercial structure on residential land,” he adds, stressing the importance of understanding the legal implications of transactions.

To ensure you move forward fully prepared, you should also consider getting self-storage close to the future construction site. This can be extremely helpful during the moving process, until your new home is ready to move in, and then when everything is in order. It will be much easier if you have storage nearby that you can access at any time. The good thing is that you have plenty of time to decide on the best storage unit for your needs in terms of price, unit size, and location. Here are some options in some of the most popular cities in the United States:

Buying land and building your custom home is a massive undertaking – we hope our suggestions will help you avoid the major pitfalls and get you started on the right foot.