12 Things to Consider Before Buying Land
Thinking about buying that beautiful piece of land and building your dream home? Building a home that is customized to you and all the creature comforts you would like can have an amazing end product. But building a home "from scratch" requires a lot of work ahead of time, and there are hurdles you will need to overcome.
When you buy land, rarely does it come packaged up and ready to build on, and if it does, there is usually a cost associated with that (the listing price usually reflects the lot's buildability).
Here are 12 things you need to consider before purchasing land.
1. Utilities. If you are buying raw land, think of the most basic thing you need. You'll need water, sewer and electric.
In a best case scenario, you will have street access to utilities for your lot, and if you don't, then you will need to solve how to get facilities to your property.
Ask a few questions about utilities: Are there public utilities? Is there a common well or water association? Is there access to sewer?
If you say "no" to any of those questions, then you need to make sure you can install what you need BEFORE you buy the land. You may have to drill for a well, and you will need to get the water tested for safety - otherwise - you may be hauling water in. If there is no sewer, you will have to do a perc test (a test to determine the water absorptoin rate of soil in preparation for the leach/drain field). If the perc test passes, you will eventually need to have a specialist put in a septic system and you will need to have a drain field.
Note that when you put in these facilities for your property, there will be permitting requirements for spacing. For example, you may not be able to build anything within 100 feet from the well.
BTW, this doesn't include internet - which many of us "NEED." Make sure the location is supported by the type of internet you require. Not all locations come with high-speed internet.
2. Building Permits. If the land you are purchasing already has approved building permits, that will save you so much time and grief. But, make sure the permits are still valid. If they have expired, you will need to verify with the county and/or city that the plan is still approvable. You may have to have your designer/architect/engineer review and update.
3. Speaking of permitting, let's talk about the municipality that you will be building your property in. The county and the city you are building in can vary in process, time and cost. Some counties/cities are extremely arduous to build in. I'm making a generalization here - but often the more city center it is, the more hoops you have to go through for permitting, infrastructure, etc. The further out you are to a main city or main county, the easier the process.
4. The land itself. You will need to do an assessment of what is actually buildable on any lot you purchase. Easements, protected areas, building envelopes, naturual preserves, wetlands, retention areas and HOA restrictions are a few issues you will need to know BEFORE you purchase. The last thing you want to do is buy a parcel of land and not be able to build what and where you want on it. Also, if you want to purchase land on any sort of water or dock or hillside, you will most certainly have a limited building envelope. If you have a complicated piece of land, you may want to get a formal survey.
5. Infrastructure. You may also have to build a driveway into the property, ingress/egress, landscaping, walkways, retaining walls, etc with attention to how water flows on and off your property. These expenses can add up quickly, particularly if you purchase a large lot.
6. If you buy in a POA or HOA, your design plan for your lot and your house (down to the paint color) may have to be reviewed by the HOA. You may have to go through design interations that will cost you money with your designer/architect. Either the board of directors or a committee known as a Design Review Committee or an Architectural Committee will review the designs. Not all POAs or HOAs have these, but you will want to review the CCRs and the Design Code, if any, before purchase and definitely before you design the home.
6. Your general contractor. Getting a good general contractor specific to the county you want to build is vital in going through the hoops of each county. Permits can range in price and a good contractor will do as much, all in one permitting as possible. You may consider having an attorney review your general contractor's contract so you don't get railroaded with weird fees or overages you didn't anticipate. You need to plan for contingency costs, and that's usually packaged up in the GC contract (it's usually a percentage) and if you are getting a construction loan, contingency overages funding will be a requirement. If you are getting a contruction loan, you can't just choose any GC. Your GC or the GC you choose will have to be approved by the lender. Each lender has their own requirments on who they approve for their general contractor list.
8. Designer/Architect - You'll want one of these handy - even if you purchase a good online floorplan. You may need to have tweaks done to the home to make it specific to the county's permitting requirements.
9. Engineer - You may need one in some form - for water drainage, water or perc testing.
10. Funding - There aren't as many banks out there that fund construction loans as there used to be. But there are loans out there that are "All-in-One" type loans. You buy the lot and have the construction loan rolled up in one. It then converts to a regular loan when the construction is completed. Talk to your lender and do some research. By the way, the down payment for these types of loans usually has a direct correlation to how many utilities are already installed. It can be a 40% down scenario, so do your research.
11. Cost of Goods. Pricing is just getting more expensive both for cost of goods and labor. Year over year, lumber is up by 20% or so from a Canadian Lumber Tariff. I wrote a blog about it in more detail if you are interested here.
12. Time. You are looking at roughly a year out from the time you purchase the land. Sometimes more, sometimes less. Land can be purchased quickly, but I advise you to have a feasibility period to answer all your questions and be 100% sure that what you want to build can be done (and within the budget you want it done in). So, you may be looking at a year and several months before you are able to live in the home.
It's all do-able. But it's a process. It's almost always more expensive than what you planned on. Only you can decide if it's worth the effort.
Kristin Bushnell is Designated Broker of Bushnell Real Estate Solutions and Co-owner of Bushnell Craft Brewing Company in Redmond, WA. Check out my profile here.
If you are ever interested in chatting about real estate, contact me at firstname.lastname@example.org or call me at 425-559-1355. I'll buy you a beer (or non-alcoholic beverage, if you prefer!), and we can chat about real estate until your heart's content.