While this website has properties for sale in the Anderson SC area, this article is about buying land or lots in any location! So if you want to understand more about the process to buy land or lots, read on!
Why Should You Buy Land or Lots
Buy Land, They’re not making it anymore – Mark Twain
I am not sure if Mark Twain actually said that. But it is true…
Have you thought about the benefits of buying land as a long range investment?
Or are you looking to buy land to build your dream home on?
Because what your plans are is an important consideration.
As is how you will pay for the land!
The American dream is still alive. For many, the American dream is to buy some land or a lot and then building a home.
To pursue this dream, the first step is to select and purchase the land. Buying land is not the same as buying an existing home.
You should consider many more factors to ensure the best possible outcome. Making an informed purchase decision will eliminate many headaches and expensive problems.
How to Finance a Land Purchase
The first thing you must research and decide is how you are going to pay for the land or lot that you are buying. I know you do not want to look into financing before the fun of visiting the property, BUT IT IS A MUST!
Financing the purchase of land is different from financing a home. There is no such thing as a 30-year fixed-rate mortgage for land. You MUST determine how you are going to pay for the property first by talking to some lenders.
I suggest speaking with your bank or credit union to start. Then see what some of the local banks can do for you.
Land loans are riskier for lenders. This is because the loan’s collateral, the land, isn’t currently being used. That makes it easier for the owner to walk away and leave the lender with the land.
The down payments and interest rates are higher for land loans than they are for mortgage loans. What type of loan depends on the property, your plans, and when you plan to have the work completed.
Give your loan officer a call and let them know what type of property you are looking to buy. Ask them to give you a pre-approval letter.
Sellers today demand to see a pre-approval letter with offers. If you have proof that you can secure a loan, sellers are more likely to negotiate.
There are rare occasions where a seller will finance a tract of land or a lot. Most will require 30% to 50% down. Most agents will mention owner financing in the property description since it will make the property more attractive.
If a real estate agent asks you how much you have to put down, it is best that you be 100% honest. Answer this question without any beating around the bush. It will let the real estate agent know that you are a legitimate buyer.
For those who qualify, there are construction loans that can be used to buy land or a lot. The lender will make a payment for each phase of construction. For example, they fund for the foundation, inspect the completed work and then fund for the framing. Inspections are made after each phase before funding the next.
When construction is complete, the loan converts to a normal mortgage. In almost all cases, construction must be completed within 12 months. If you are using a construction loan, talk to your lender to see what your total “construction and land” goal should be BEFORE you start looking.
Get these questions answered, and you’ll be better able to find something that fits your lifestyle:
What monthly payment is best?
What total amount do I qualify for?
What will happen if interest rates increase?
What Questions to Ask When Buying Land
Even though there are many choices on the market, you still need to do your homework to make sure your money is well spent!
Land is unique. No two pieces of land are the same. Land comes in all sizes and shapes. All lots and land will be some combination of location, size, amenities, cost, and buildability.
As you narrow down your choices, you may decide that some factors are more important than others. Sit down with a pad and paper and think through the reasons you are buying the land.
Is it an investment for retirement?
Is it for recreation or hunting?
Do you intend to build on the land?
What features are non-negotiable?
Make sure you know what your plans are before purchasing it. This will help you imagine where you will put the house, barn, driveway, etc.
Inspect The Land in Person! I know that everyone thinks the internet makes everything easier. But when it comes to buying land, you MUST actually visit and inspect it.
Do not accept what the seller tells you. Do not rely only on pictures, videos or virtual tours to make your decision. And please do not think you can tell everything you need to know by looking at Google Maps! You are going to need to walk the entire property.
The Make or Break List for Buying Land or Lots
When you start thinking about purchasing land, you need to consider all of these:
Price: It’s tempting to shop by price tag, and, often, price is a good place to start. However, there are other factors to consider.
Desired Qualities: These are usually the obvious. Size, location, wooded vs. open, stream/pond, great views are just some of them. Although many of us want everything… the view, large acreage, water oriented, etc. You must prioritize unless you have unlimited money.
Lot Size: When comparing prices, be sure to compare price per acre, not price per lot. You want to make sure you’re comparing “apples to apples”. Start by narrowing down some factors, like what size, your new property will be.
If you’re looking for low maintenance, a smaller lot makes more sense. A lot that is a quarter acre or smaller probably won’t accommodate a large house with a three car garage.
A quarter to half acre lot provides enough space for many homeowners. Homes aren’t too close together and yards are large enough for a variety of uses. Often there is plenty of room for a pool or a larger garage.
Lots and land over one acre are great for extra privacy, gardens or just plenty of land to call their own.
One factor to consider is if there is a property tax reduction for an agriculture exemption if the lot meets the local requirements. If you want horses or other livestock, you must check the local laws to see what is required.
Covenants, Codes, and Restrictions (CCRs): Carefully review the CCRs to make sure they aren’t going to hinder your expectations in any way.
Not all properties have covenants but some have covenants or title restrictions. Make sure you research what is allowed. Make sure you can use the property as you intend.
Check the architectural guidelines before purchasing a lot or tract of land. If an architectural review committee must approve your home plans, the offer should be contingent on obtaining approval.
Some neighborhoods require that every home is brick. Others do not allow homes smaller than a certain size.
You must know the guidelines and what’s required. This can affect your total cost, and your floor plan may need to be approved before you begin building.
Water, Sewer and Utilities: If you plan on building a home, knowing where the utilities come from is important. If public sewer isn’t available, you must make sure it will pass a percolation test for a septic system. A percolation test is sometimes called a “perk” test.
Has the land been approved for a septic system? Has the lot been perked before? Will the seller accept a contingency for a perk test? What types of systems are required for the area?
The cost varies by the type of system that is required. Offers for land without sewer hookups should be contingent on your ability to obtain permits for a septic system.
Is there electric service close? The cost to bring power to a property can be prohibitive in many areas. Come rural properties are “off the grid” so don’t assume that power is available.
Is there potable water available? Is it public water or is there a well? How deep is the well? Is the water in the well safe for human consumption?
Many loans require that the well has produces a minimum amount of gallons per minute. Do you know what your lender requires?
Some properties on the market have wells and some do not. Putting in a well can be a speculative process. When you start drilling, you never know for sure if you’re going to hit water.
There is also the cost of drilling a well. The deeper you drill the more expensive it gets!
You also need to research if there is high speed internet or cable available. While you can get by without cable by using a satellite dish, finding out there is not any internet providers can be heartbreaking.
Community: Do some soul searching – is being a part of a complete “community” important to you or do you prefer to live outside a subdivision?
Check to see what the neighboring properties are like. As you drive to the land be sure you look at all the surrounding properties. Note their condition.
Are they well maintained?
Do the surrounding homes display a “pride of ownership”?
How are the roads you will be driving on every day. Are they paved?
Are the roads super busy during rush hour?
How far is it to the nearest city or town?
How far is the land from emergency services?
And last but not least, how far is it to stores such as the grocery and Wal-Mart?
Flood Plain: Is the property in a flood plain, even a 100-year flood plain?
Many riverfront properties are categorized as being in a flood plain, even if they are on a mountain. Find out for sure if the land is categorized this way.
Properties on a flood plain may have a higher insurance premium and may have difficulty getting septic approval. Know, for your own sake and in the interest of resale value, what flood zone the property is within.
Subsequently, be sure to check to see what type of flood insurance coverage may or may not be required.
Wetlands: Depending on where you are looking to buy land, it is possible there are laws regarding wetlands. You must know if any of the land is considered to be wetlands.
Zoning: How is the land zoned? Different tracts of land will have different zoning which affects the possible uses for that land.
Zoning classifications can vary greatly between states, cities, and counties. It is important you have a knowledgeable agent and/or check with local planning and zoning offices to get the information you need. If you’re looking to build on it, be sure it is zoned for single family residential use.
I suggest looking at the zoning of the adjacent land. Just because one tract of land is zoned for a particular purpose, doesn’t mean the adjacent land is as well. The zoning can affect everything from what type of home you can put on the property to what activities you can legally do on it.
So make sure the property fits your needs. If you are hiring a builder, the builder should look at the lot before you even write an offer or start your due diligence. Home builders are familiar with the local permits and zoning requirements. Getting your builder involved ensures that nothing gets missed in the land evaluation process.
Contact the local government agency who issues Building Permits to determine what is required.
Square Footage: What is the minimum and maximum square footage allowed? Does this meet your requirements?
Neighborhood Amenities: Some communities provide amenities such as a common area, walking trails, community pool, golf or tennis and more. If these features are important to you, make sure you consider them!
Taxes: In this market especially, it is easy to get enticed by the price. However, remember that you will incur additional fees on your land as you own it – including insurance and taxes. Determine if you pay county taxes or city taxes or both. Find out how much it will cost you each year. Property taxes outside city limits will always be lower than taxes inside city limits.
Required Build Out Time: Just because it’s vacant land now, doesn’t mean that it’s meant to stay that way. Does the land you’re considering have a required build out time? Or is there a date for when building must start by? If so, make sure these work for you!
HOA Dues: Find out if there is an HOA (Home Owners Association). Is membership in the homeowner’s association and the HOA fees voluntary or mandatory? If it’s mandatory and you don’t pay the fees or dues, the association can put a lien on your property and even foreclose on it.
Just like you must consider insurance and property tax expenses, you’ll also need to figure in HOA dues. Know how much they are, and how they’re collected (annually, monthly, quarterly, etc.)
Access and Easements: Many buyers may not be aware of the fact that some land parcels on the market today are land locked. Access to them is available only by traveling over a neighbor’s property.
If the access goes across another property you want to make sure you have a legal easement or you could have problems. If you get an easement, you will have to pay for putting in a road and meeting that property owner’s requirements, whatever they may be.
Although it may be possible to get an easement, that neighbor is likely to charge for the privilege. Many neighbors don’t want to grant an easement.
What type of access do you have to the land? You may have a preference over paved/non-paved roads; city, county or private roads. Making sure you have access to the property is important.
Also, does anyone else have the right to go across or use the property?
Drainage and Storm Water Management: You may want to review the drainage system that’s been designed for the land. How is the area set up to handle large amounts of storm water versus normal rainfall?
A smart drainage plan will reduce erosion, wash outs, standing water, etc.
Surveys: Making sure a recent survey has been done is very important to make sure you know what you are buying. I have seen properties that county records say is one size but actually have less (or more) acreage according to the survey.
Are the property boundaries already marked? While this is helpful, you need to pay for your own survey. This is so you know exactly what you are buying and where the boundaries are.
I understand that paying for a survey is not something a buyer wants to do but it really is a must to prevent making any expensive mistakes!
Water, Timber & Mineral Rights: Do all of the water, timber or crop and mineral rights transfer with the property? If there is a creek running through the land, are you able to use that water? All of this should be written out in the contract.
Location: And last but not least, remember location, location, location…
Think about location from your perspective and from a potential future buyer.
The Future: Find out if there are any plans for the surrounding properties that could hurt the value of the property. Doing the research before you buy could save you a headache down the road. It is amazing what you can find out by talking to the neighbors!
Disclosure: Depending on where you are buying land, the seller may not be required to disclose everything that you need to know. This means you need to ask and you must get the answers in writing.
The Exit Plan: Always shop with an “exit strategy” in mind. Buy a lot or land that you can re-sell if you need to in the future. Find a tract with features that others will find desirable. Hope for the best but plan for the worst!
Summary Of How to Buy Land
These are general tips about how to buy land. Exactly what is possible or advised in your area may be different. I suggest you find a REALTOR with the expertise and experience to help you when buying land or a lot!
If you have questions about buying land in the Anderson SC area, please contact me!