Four Things You Need to Know Before You Buy Land to Build Your Dream Home

originally published by: Main Street America
revised by: Julius F Zatopek, III

Looking to buy land for your dream home? In the excitement it’s easy to overlook some crucial details. But when it comes to buying land for a residential building project: buyer beware. The way you approach a few seemingly small details can mean the difference between a dream and a nightmare.
If you’re getting ready to make your first important decisions about where and when to buy land for homebuilding, be sure you pay special attention to these four areas before you set foot on your new lot.

1. Location

It goes without saying. There’s a lot to consider when choosing a location. Proximity to shopping, schools and medical facilities are key issues. Obviously families with young children pay attention to schools when choosing a location, while for some older home owners, proximity to medical care is important. Everyone’s needs change, so it’s important to keep in mind your long-term life goals. Whether you’re planning your dream retirement home, or the home you’ll raise your family in, don’t just take into account the lifestyle you live now. Be sure to plan for the lifestyle you’ll want to have ten and twenty years into the future.

Another factor you’ll want to take into account when you’re considering location is water supply. Homes located outside of city water systems may need to put in their own water wells if there is not a community well.  You will most likely also need to add a septic system, as well – both adding to construction costs.

Another location factor to consider is the lot elevation.  Some areas are located in the FEMA 100 year flood plain and homes must be built above the flood plain elevation, adding even more to the cost of construction.

2. Legal and Tax Issues

A large number of issues fall into this category. Deed restrictions can prevent homebuilders from including certain types of construction on their property. On the other hand, unrestricted conditions can create even larger problems.  Your property value may take a drastic hit if your neighbors are free to construct anything they choose or are allowed to have a manufactured home moved onto their property.

Property taxes, hospital districts, emergency districts and school districts can all add to a property’s tax bill. For example, in some areas, municipal utility district (MUD district) taxes might be an issue. These MUD district taxes pay for water and sewer for a community via bonds, and represent the highest possible taxes, so a property included in these districts can expect a much larger tax burden. (see water supply comments above)

Lastly, you want to make sure all prior year’s taxes and any applicable association dues have been paid; and there are no delinquencies or liens attached to the property.  Have the local title company run a title search for you and be sure to obtain title insurance.  All liens should be cleared, prior to purchasing.

3. Slope, Soil Conditions and Geological Issues

The quality and soil conditions of a piece of land can add up to big time building costs. And that cost may not be obvious until you start building. For example, a property with a pronounced slope may drain well but will be pricey to build on. And there are other site costs you may need to consider, like the cost of removing trees to make room to build. Trees can also camouflage land issues. Often buyers will buy a piece of wooded property thinking it looks flat, then clear it and realize it has a slope.

If you’re seriously considering a piece of land, you should also test soil conditions on the land’s pad site, called a Geotechnical Report. The pad site is the stabilized foundation area where you’ll pour your home’s concrete foundation, so it’s crucial to know the soil quality of your pad site up front. One of the most common costly mistakes new homebuilders make is to plan construction and then realize that their pad site is not suitable to build on.

4. Other Site Costs

A recorded survey will show you which building lines and easements affect your property. The configuration of these lines can have a significant impact on costs. Factors like where a home is located on the property can also add considerable costs. For example, building far back from a street is generally much more expensive, due to the additional driveway and additional infrastructure (utility lines and pipes).

In addition to the above four factors, you should always be sure to buy property with the guidance of professionals. Land selection should never be a “do it yourself” proposition! A good local realtor should be familiar with the area and all the land issues related to the site you’re considering. If they aren’t, you should strongly consider finding a different realtor.

Paying careful attention to the issues in these four categories – using the guidance of professionals - and making sure you have insight into the local political and future development issues surrounding your property – will help you save a lot of time and money down the road.


For more commentary from Julius, pick up a copy of his book entitled “The Truths and Myths of Real Estate” – available at LuLu.com at:  http://www.lulu.com/shop/julius-zatopek/the-truths-myths-of-real-estate/paperback/product-21118216.html