How to Buy Land: A Step-by-Step Guide

According to the Land Market Survey released by the National Association of Realtors, land sales increased by 6 percent last year, and for good reason. Undeveloped land is still one of the most affordable forms of real estate, making it more financially accessible to first-time buyers.

Unfortunately, buying land can be an intimidating and overwhelming process. Let’s walk through the steps so when you decide to buy land, you can do so with clarity and confidence.

How to Find Land for Sale

Some of the best ways to find land for sale include:

Real Estate Websites

According to Atmos Builders head of operations Trent Hedge, most people start land search by perusing online real estate databases. Sites like Zillow.com, Trulia.com, RedFin.com and Realtor.com have listings for land for sale throughout the country, and some databases specialize in vacant land listings. Some of the largest and most popular specialty databases include:

• LandWatch.com;

• Land.com;

• LandSearch.com;

• LandHub.com;

• LandAndFarm.com.

These sites mostly include selective listings from the Multiple Listing Service (MLS) that licensed real estate agents can access, but may also include for sale by owner (FSBO) listings.

For MLS listings, the contact will usually be a real estate agent representing the seller (also known as a seller’s agent). Seller’s agents are financially incentivized and ethically obligated to represent the seller’s interest. Consequently, it’s often recommended to hire your own agent (a buyer’s agent) to represent your interest.

Real Estate Agents

Real estate agents can be an invaluable resource for finding land. They have access to every listing on the MLS (“on market” properties), along with properties not listed on the MLS (“off market” properties) through their network of industry professionals like land developers and contractors.

While most real-estate agents can facilitate land purchases, the best agents are those who specialize in raw land. Christopher McGuire, a real estate broker, investor and founder of Real Estate Exam Ninja, recommends working with “…agents with a lengthy history of land sales or experience in soil science, geology or forestry.”

McGuire also suggests using agents with the Accredited Land Consultant (ALC) designation through the Realtors Land Institute (RLI), if you can find one in your area. These agents are trained to guide you through the necessary due diligence steps and legal procedures pertaining to land purchases.

Local Resources

Some FSBO properties can be found in classified ads in local newspapers or online directories like Craiglist and Facebook Marketplace. EasySellFL.com founder and CEO Greg Bond also recommends contacting land owners directly. “We have mailed neighborhoods with cheap, buildable lots and found many times the owners are happy to part with their land for a huge discount,” Bond says.

Bond suggests finding land owners’ contact information on the Geographic Information Systems (GIS) map from the County Assessor’s Office website. Bond also advises checking county tax deed auctions, where land is auctioned off at a substantial discount when the owner fails to pay property taxes.

Factors to Consider When Looking for Land

Certain factors can determine whether a piece of land will satisfy your specific needs and influence the difficulty and expense of developing on it. As you search for land, keep the following considerations in mind.

Utility Access

• Water. If a municipal water supply isn’t available on the property, you may have to install a well or other off-grid water system. Trucking in water is another option that can be costly and inconvenient.

• Sewer. If a municipal sewer connection isn’t available, a septic tank will need to be installed before any construction is done.

• Electricity. If one isn’t already there, the local utility company will need to run an electric line to the building site. Another option is to install a solar-generated system.

• Internet service. Investigate whether cellular coverage and an internet connection are available on the property. You may need to switch cellular service providers, or run a fiber-optic internet cable to the building site.

Road Access

Some remote house builds lack road access. If there is no public or private road going to the property, you may need to create one. This is often costly. It will likely involve hiring an excavation contractor, and possibly an arborist or logging company to remove trees. McGuire says you may need to apply for a right-of-way easement to gain use rights to neighboring properties if the lot is landlocked by adjoining parcels.

Restrictions When Buying Land

Before signing on any dotted lines, you’ll need to check on zoning and any potential restrictions on the land you’re thinking about buying. To start, be aware of the zoning rules for the land. All land is zoned for a specific use: residential, commercial and agricultural. With each classification there are different sets of rules established by zoning commissions for individual counties or cities. This will determine what you are and aren’t allowed to build on the land. Reach out to the local planning or zoning commission, and start with a look at their website to see if zoning maps are online.

Are there any restrictions on the land? These are most typically laid out by a homeowners association, though there can be other groups that have established covenants, conditions and restrictions on land that’s part of the association. Restrictions can include everything from using your home as a business to where you can and can’t put a fence.

There are other considerations you’ll want to look into as well. Check with local authorities about any environmental restrictions on land or nearby that could impact your plans. Are there rules about how close you can build to the property line? What about other hazards, like flooding or fires? These are all things you’ll want to be aware of before solidifying your plans to buy and build.

Financing Options for Land

Obtaining financing for vacant land is often trickier than developed properties.

Premier Property Buyers owner Eric Nerhood says that most lenders view undeveloped land as a riskier investment, and are more likely to offer financing when you have immediate plans to build a home. When that’s the case, you should expect to pay 15 to 25 percent for a down payment, or up to 50 percent down without building plans.

Here are some options for financing a land purchase:

• Construction-to-permanent (CP) loan. Also called a “combined construction loan,” a CP loan allows the buyer to finance the land purchase and home construction simultaneously. It is the most common financing option because it often requires a smaller down payment, has a lower interest rate and is offered by most lenders. Before applying for a CP loan, you will usually have to hire a licensed contractor and have building plans drafted. The lender often stipulates the maximum amount of time you can wait to begin construction.

• Lot loan. Lot loans allow you to finance a land purchase without immediate plans to build on the property. According to Hedge, lot loans aren’t offered by most lenders, who see them as riskier than construction loans. Lot loans also require larger down payments and come with higher interest rates.

• Owner financing. On some FSBO properties, the seller may offer to finance the purchase directly. The required down payment will depend on the seller, but they’re typically (though not always) lower than conventional financing. The interest rates are usually higher, however.

And, of course, there is the no-financing option — pay cash. This also makes it easier to obtain construction financing when you do build, Hedge says, because the equity you have in the land can act as your down payment.

Submit an Offer

After you find a desirable property, you need to submit a written offer to the seller. If you’re working with a real-estate agent, they will handle drafting and submitting the necessary paperwork, including a Bid Offer form. If you’re not using a real-estate agent, McGuire recommends consulting with a real estate attorney to advise you on establishing contractual terms and drafting the necessary documents.

An agent or attorney can also advise you about the conditions that need to be met (contingencies) before the sale is finalized. A contingency that specifies the time-frame allowed to complete due diligence is often included. A period between 30 and 90 days is common.

Due Diligence

Performing a comprehensive inspection of a property is necessary for ensuring the land is suitable for your specific needs. Hedge and Bond suggest the following:

• Request documents from the seller. You should request documents pertaining to any covenants, conditions and restrictions (CC&Rs) on the property. CC&Rs dictate what you’re allowed to do on the property, and are typically imposed by Homeowners Associations (HOAs). Specific CC&Rs can vary. They may restrict certain paint colors, house types and sizes, or your ability to raise chickens or livestock in your yard.

• Run a title search. A title search will analyze the history of public records — deeds, tax records and other financial transactions. Essentially, a title search verifies that the seller can legally transfer the property to you without any problems. Potential problems a title search can uncover include liens and easements (the right for a third-party to use the land).

• Check zoning. A parcel’s zoning designation will dictate what the land can be used for, and the type of structures that can be built. It’s important to check with the local Zoning and Planning Office to verify the property is zoned for residential; you may not be able to construct a primary residence if the land has a commercial zoning designation. “I see many people buying land and figuring out they cannot build what they want to, due to zoning restrictions,” Bond says.

• Perform a soil test. If a municipal sewer hookup isn’t available, you will need to perform a percolation test to determine the rate of water drainage through the soil before installing a septic system. Other soil tests determine if the soil can support a foundation, and if it contains lead and arsenic.

After due diligence is completed, if no issues are discovered, you can finalize the sale. Congratulations!