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Buying vacant land follows a similar process as buying a home, but there are key differences. The finances work a little differently, for example, and finding a vacant lot suitable for your purposes can be trickier than finding a home that meets your needs. Whether your goal is to build a family home, start a farm or use it for recreation, here are six essential steps to follow when you’re thinking about buying land.
Before you begin your search for undeveloped land for sale, give your finances a hard look to make sure you’re able to afford it. Lenders consider vacant land a riskier investment than a house that’s already built, and they charge more to finance it as a result.
For this reason, paying cash if you can is a good strategy. If you are able to pay for the purchase entirely upfront, be sure to budget not just for the land itself but also for additional expenses like property taxes and utility installation.
If you’re looking to finance the purchase with a loan instead, it’s important to get your finances in good shape well ahead of time. Pay down debts to lower your debt-to-income ratio, and start saving enough to cover a potentially hefty down payment — lenders typically require 20 to 25 percent down for raw land.
If you’re going the financing route, know that buying land can be a complex process. Land loans aren’t the same as conventional mortgages, and their higher costs tend to reflect the amount of risk assumed by the financial institution dealing with an undeveloped property.
Your loan options and terms might differ depending on what type of land you’re looking to buy. There are three main categories:
Your financing options for buying land might include the following:
Depending on how you plan to use the property, owning land can come with many hidden costs, such as permit fees or the expense of building a septic system. There are also the usual costs for maintenance and upkeep.
Don’t forget closing costs. If you’re financing your land purchase with a loan, the fees you’ll pay at closing can include title fees, appraisal and recording fees, property taxes, securing insurance coverage and more.
Be sure you have a solid idea of how you intend to use the land before you start looking. Think about things like plot size, proximity to neighbors, views, distance to town and internet or cell service. And if you haven’t owned land before, consult with a real estate agent who specializes in land sales or a land planner whose job is to evaluate whether it’s feasible to build or develop a piece of land. A land planner evaluates the slope of the land, the water table, type of soil and vegetation and other factors to determine what structures the land can sustain.
Depending on where you live, there could be a real estate agent (or several) in the area who specialize in land sales, or at least have an ear to the ground about unlisted plots of vacant land. Look particularly for agents acknowledged as Accredited Land Consultants (ALCs): Their specialized skills and knowledge enable them to identify and compare vacant land plots that cater to a buyer’s specific needs. By understanding the property type, location and zoning regulations, ACL agents can guide buyers toward the perfect piece of land for their desired use.
There are several ways to find land for sale:
Search online for parcels offered via auction or properties up for sale. A few websites to try include:
You can also try searching for land for sale on general real estate listing sites, such as Zillow or Realtor.com.
The classifieds section in your local newspaper could advertise listings from landowners selling parcels independently, and you might be able to save money by connecting with the owner directly.
Another way to find land for sale is to simply drive around your desired area and look for for-sale signs, or drive over to a local real estate office to check the listings in the window. You might be able to uncover land that isn’t listed online this way.
Sometimes the government offers land up for grabs, such as repossessed parcels. Try searching for what’s available on Disposal.gsa.gov or RealEstateSales.gov, both official websites of the U.S. General Services Administration.
Land sold by the government usually gets offloaded through an auction, so if this is your strategy, be prepared to go through the auction bidding process.
When you find the right plot of land to purchase, do your homework before making an offer. Here are some key issues to investigate:
Once you’ve done your homework on the property and know how you plan to finance the purchase, you’re ready to present the owner with an offer. This written document contains the details of the property, your contact information, the price you’re willing to pay and other terms.
You’ll also want to include contingencies in your offer to protect yourself from factors that might make you want to walk away from the deal. Common contingencies with land purchases include environmental tests, septic system permits, land surveys and zoning regulations.
There are templates available online of sample purchase agreements, but unless you’re an experienced buyer, you’ll want to get a real estate lawyer or licensed agent to prepare the offer for you.
Buying land can be trickier and more costly than buying a home, and there are different requirements for getting a land loan compared to a home purchase mortgage. If you intend to build a house on your land, you’ll also need to factor in construction costs. A construction loan can help.
