Buying home site land presents special challenges compared to buying an existing home. A lot of work is required to confirm the land is suitable for the type and size of home desired and that local regulations can be complied with at an acceptable cost. Here are basic site analyses to consider.

Neighborhood Analysis

Apply the usual considerations: location, proximity to shopping and services, work commute, schools and property value trends. Then look further if the neighborhood contains a lot of undeveloped land. Check current zoning to determine if parcels in the neighborhood could be used for purposes that detract from the value of your home, impact traffic patterns or in any way influence your desire to buy the land in consideration.

Site Analysis

The biggest difference between buying an existing home and buying home site land is that, in most cases, the home site seller has not evaluated the land to determine its suitability for building the type of home you have in mind. Developers typically do not close escrow on land purchases until they conduct a complete site analysis that confirms their ability to make the improvements they want. An individual buying home site land should do the same. Here are basic items to consider.

• Boundaries, Easements and Covenants. A full survey of the land needs to be conducted, which includes marking boundaries and identifying recorded easements and covenants that could effect your building plans. Land parcels not located within a subdivision can still have covenant restrictions – land use requirements that might give neighbors some say in the architecture of your home. A typical example would be a large tract of land that is subdivided by the owner with the intent to sell off individual lots. If the owner lives in a nice Tuscan villa on a lot they intend to keep, they can require that only homes with Tuscan-type architecture may be built on the lots around it they intend to sell. They establish a land use covenant that legally binds buyers of the lots and establish a covenant board that evaluates and approves/denies building plans and future remodels.
• Zoning and Land Use Regulations. Confirm the property is zoned for single family homes and then look into restrictions that apply specifically to the neighborhood and lot under consideration. Restrictions that often cause problems include building height, minimum or maximum square footage, minimum set back (how close any structure can be built to property boundaries) and the number of structures that may be built on the lot. For example, if you’re buying a large lot and intend to build a guest cottage, make sure the second structure is allowed.
• Services and Utilities. Connecting to utilities can be a major expense, even if the land is near existing power lines, sewer lines and other services and utilities. If sewer lines can’t be connected, understand requirements for perculation testing and septic system design, installation and maintenance. Budget for all these expenses.

Construction Cost Analysis

The cost of construction can vary by location. Have plans drafted that competing builders can prepare cost estimates against. Even if you are using a design/build contractor, check the cost of local labor and materials for the specific lot under consideration.

Financing Analysis

There are many financing options available for buying home site land and making improvements (building the home). Some lenders require the land to be owned free and clear (no mortgage against it) before they will finance construction, while others offer a land purchase loan that is combined with a construction loan when you’re ready to build. Talk to several lenders who finance land purchase and construction loans.

Have a great week! Have questions about buying home site land or real estate in general? Many Real Living posts are answers to reader questions. Drop me a line: Contact Us.