10 Things You Need to Be Aware of Before Purchasing an Empty Lot

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Real Estate

Buying a piece of land comes with a set of challenges that you don’t typically face while buying a house. CHRISsadowski/Getty Images

In the comedy film “The Money Pit” released in 1986, a young Tom Hanks struggles to fix a dilapidated mansion that is falling apart around him. Initially, the gigantic house seemed like a good deal, but the staircase started collapsing, and chimneys began caving in. The lesson learned was to never buy a house without doing your homework. Buying an empty lot may not be the same as buying a house, but the same principle applies. Before making any purchase, you should always know what you’re getting into and how much it will cost to build a house.

Purchasing an empty lot is a crucial and complicated decision, much like any real estate acquisition. First and foremost, there are numerous reasons to buy a piece of land. When you buy a house, you probably intend to live in it. However, with land, you can choose to build your own house, use the property as a long-term investment, or even start a business. Purchasing a piece of land also introduces a set of challenges that you don’t typically face while buying a house. There are many restrictions that may apply to an empty lot, and you may not be able to build a house on it at all.

There is a lot to learn before investing in land. Here are ten things to be aware of, including the fundamental expenses, city ordinances, land surveys, and easements.

10: Location


As they say in real estate: Location, location, location. That applies to purchasing a piece of property too. Jordi C/Shutterstock

As the old real estate saying goes, location, location, location. Our first and most basic concern when buying land is location. Regardless of why you’re purchasing a piece of land, nothing is more important than location. If you’re making an investment, don’t buy a piece of land with no resale value. If you’re planning to start a business, don’t buy land that is entirely isolated from potential customers. And if you’re building a house, buy land where you can enjoy spending time.

Prior to shopping for land, you should have a general idea of where you’d like to purchase. You can take an exploratory drive and use online resources to assist you. For instance, if you’re buying a few acres of land to construct a house, you’ll likely want to consider accessibility to schools, your job, grocery shopping, and restaurants (later we’ll delve into specific land concerns).

In other words, you should be shopping for the community at the same time as you shop for your land. When you’ve found a win in both categories — community and land — you’ll know you’ve made a good choice.

If the land is for business use, choosing won’t be as straightforward; you’ll have to carefully evaluate a potential location’s business value. However, if you’re already planning a business, you should have that in mind already. Regardless of the type of land you’re looking for, the costs can add up quickly even before you start construction. Next, we’ll discuss some of the basics to prepare for.

9: Familiarize Yourself with the Expenses Involved

Investing in real estate requires both time and money, and the more you prepare, the better equipped you’ll be to spend your money wisely. Before purchasing a vacant lot, it’s important to understand the expenses you might incur. One such expense to consider is title insurance, which protects against potential property loss or damage resulting from title defects, encumbrances, or liens. While it’s not always required, financial institutions may recommend purchasing it to safeguard their investment and your own.

Another cost to keep in mind is a land survey. It’s possible that the land you’re interested in may have been recently surveyed, but if not, you may need to hire a professional surveyor to chart out the property boundaries, although the cost will depend on location and other factors. Additionally, utilities and building costs can be expensive, and you may need to pay for services like electricity and water to be run to your house or install a well or septic system before beginning construction.

It’s important to be aware of these expenses and plan accordingly, whether you’re buying a property as an investment or for personal use.

8: Understand Zoning Restrictions

Zoning laws dictate what can and cannot be done with land, regulating how property can be used in specific areas. It’s essential to ensure that building a house on a vacant lot is permitted before purchasing the property. You can find useful records for any parcel of land by checking with the local zoning office or looking it up online. Additionally, it’s crucial to pay attention to the county’s long-term land use plans and scheduled road additions, which could impact future construction and affect the property’s value.

Understanding zoning restrictions is just the first step; there are also limitations to consider, such as homeowner’s associations and city ordinances. Being aware of these factors will help you make informed decisions and avoid costly mistakes down the road.

7: Rules and Agreements

When considering buying a piece of land, it’s important to be aware of any restrictions that may be in place. Land is often divided into smaller subdivisions that have their own covenants and restrictions, which can include membership fees to a homeowner’s association. These restrictions can dictate everything from lawn maintenance to pet ownership. Additionally, there may be city ordinances that apply to the property, such as regulations for garbage removal. While these restrictions can be frustrating, they can also provide a sense of community and consistency.

6: Utilities

If you’re planning to build on a vacant lot, it’s important to consider utility access. Electricity, gas, internet, and phone lines will all need to be installed if they aren’t already present. This can be a costly process that involves working with utility companies and obtaining permits for drilling wells and installing septic systems if necessary. However, purchasing land that already has utilities installed can alleviate some of these concerns. Road access is also an important factor to consider.

5: Access to Roads

When buying a vacant lot, access to roads is a crucial factor to consider. Urban areas typically have easy access to public roads, but rural land may only be accessible through private roads. This can result in the absence of city water or sewage, requiring additional costs for a well and septic system. Private roads also pose access issues. If your lot is landlocked, you may need to arrange for an easement with a neighbor to guarantee access through their property.

4: Easements

An easement is a real estate law term that refers to the right to use a portion of someone else’s property for a specific purpose. If you find a perfect piece of land without direct public road access, you may need to negotiate an easement with your neighbor to use their private road. It’s wise to involve a real estate lawyer to establish official documentation and protect your liability.

3: Surveying

A survey is necessary to clearly define property lines. A plat may not show the exact boundaries of the land, making surveying an essential step in the lot-buying process.

Professional surveyors use a plat to research and mark the exact property boundaries of a vacant lot. Evidence of a recent survey can be seen on the property with markers identifying corner boundaries. A survey may also appear in the paperwork of a vacant lot. However, it is important to note that an old and outdated survey may not accurately define property lines, especially when dealing with legal matters such as easements. Surveys can also serve other purposes, such as construction surveys which can determine precise elevations and dimensions of a house, and floodplain surveys which provide critical information about the chance of flooding on a lot.

The cost of a survey depends on several factors, such as the size of the property, the amount of time it takes to complete the survey, and the type of survey needed. Floodplain surveys may cost more, but it is important to know if a property is in a flood zone to prevent any future damage.

Flooding can be a destructive force that can cause significant damage to buildings and properties. Before purchasing a vacant lot, it is important to determine if it falls within a floodplain. A survey can help determine potential flood areas and FEMA flood zones are clearly defined with letter designations. Areas in Flood Zone A have a 1 percent chance of annual flooding and require flood insurance for building. Zones X or C are ideal ratings with less than .2 percent chance of annual flooding. Once a floodplain has been determined, the only remaining hurdle is bureaucracy before owning a new piece of property.

1: Obtaining Building Permits


Get ready for a lengthy process of obtaining building permits as almost every construction activity on your property requires one. tattywelshie/Getty Images

It’s a reality of real estate that almost every construction activity requires a building permit. Before beginning construction, you’ll have to navigate through government zoning and obtain permits for various activities like burning or building. Although it may seem like a hassle, permits are not necessarily bad news. Restrictive covenants may limit your actions, but they also protect you from the disruptive behavior of your neighbors. Building permits protect the land and ensure that you adhere to the building codes, preventing you from constructing a structure that may collapse easily.

As construction progresses, be prepared to apply for multiple permits for drilling a well for water, installing a septic system for sewage maintenance, and complying with permit requirements for plumbing and electrical work. While the paperwork can be overwhelming, it guarantees that your investment is legal and secure once the work is complete. However, first, you need to find the perfect plot of land. It’s time to start exploring.

Originally Published: Feb 23, 2011

FAQ on Buying a Vacant Lot

What does due diligence mean when buying land?

Due diligence refers to doing your research and taking necessary precautions before purchasing a piece of land. It is advisable to engage the services of a reliable real estate agent to ensure due diligence.

What factors should I consider before buying land?

There are several things that you should check before making an offer, such as ensuring that the land’s title is clear, verifying whether you can carry out your plans legally, and checking whether it is connected to municipal utilities. You may need the assistance of a real estate lawyer to carry out some of these checks.

Is purchasing vacant land a wise investment?

Land ownership can be a great investment, but you must do your homework ahead of time to avoid falling into some of the pitfalls. Key factors to consider when determining value are soil quality, location, drainage, zoning restrictions, and road access.

Is it better to buy land first and build later?

Buying land first and then building on it later gives you more freedom to do what you want with the property, but it may not save you money. You must ensure that government zoning restrictions won’t prevent you from building your dream home on the land you’re buying.

Alternatively, a house and land package may help you save costs, but it may limit the amount of customization you can do. This option is typically available when a big developer purchases a large plot of land and sub-divides it into lots for a neighborhood. You may also face restrictions on what you can do on your property, such as building a fence or putting in a pool or hot tub.

Is building a house cheaper than buying one?

The median sales price of an existing single-family home in the US was $485,128 in 2019, the highest in the survey’s history, according to the National Association of Home Builders 2019 Construction Cost survey. The average construction cost of a typical single-family home in the same year was $296,652. However, keep in mind that construction, labor costs, land, and materials prices will vary from city to city.

More Information Available

Related Articles

  • How House Construction Works
  • How Mortgages Work
  • How Real Estate Property Taxes Work
  • How Much Does It Cost to Build a House?

Sources

  • Beam, J. “What is a subdivision?” (Feb 7, 2011). http://www.wisegeek.com/what-is-a-subdivision.htm
  • Christensen, Tricia. “What is a Homeowner’s Association?” (Feb. 6, 2011). http://www.wisegeek.com/what-is-a-homeowners-association.htm
  • Curry, Pat. “How to buy a vacant lot.” March 15, 2001. (Feb. 4, 2011).http://www.bankrate.com/brm/news/mtg/20010315a.asp
  • dnr.wa.gov. “Public Land Survey Office Overview.” (Feb. 7, 2011). http://www.dnr.wa.gov/BusinessPermits/Topics/Surveys/Pages/eng_plso_overview.aspx
  • Delich, Christy. “What is a City Ordinance?” (Feb. 8, 2011). http://www.wisegeek.com/what-is-a-city-ordinance.htm
  • FEMA. “Flood Zones.” (July 8, 2020). (Nov. 12, 2021) https://www.fema.gov/glossary/flood-zones
  • GAassessors.com. “Georgia Tax Assessors.” (Feb. 10, 2011). http://gaassessors.com/c
  • GSCCCA.org. “Plat Index.” (Feb. 8, 2011). http://www.gsccca.org/Search/plat/platindex.asp
  • Hayes, Adam. “Title Insurance. Sept. 10, 2021. (Nov. 12, 2021) https://www.investopedia.com/terms/t/title_insurance.asp
  • HomeClosing101.org. “Why You Need Title Insurance.”

A list of resources about land surveying, zoning, easements, title insurance, and buying land with existing utilities can be found on various websites such as HomeClosing101.org, LandSurveyor.us, LeslieAssociates.com, Lex-Co.com, Investopedia.com, Merriam-Webster, MTGProfessor.com, Squidoo.com, RealEstateLawyers.com, and Stewart.com. These resources provide valuable information about the costs of surveys, types of land surveys, subdivision covenants and deed restrictions, easements, title insurance, and the advantages of buying land with existing utilities.

FAQ

1. What is the zoning of the property?

Before buying a vacant lot, it is important to check the property’s zoning. Zoning regulations determine how the land can be used and what type of construction is allowed. Make sure the zoning is appropriate for your intended use of the property. If the zoning is not suitable, you may need to apply for a variance or seek a rezoning, which can be a complicated and time-consuming process.

2. What are the property taxes?

Property taxes can vary widely depending on the location and size of the vacant lot. Be sure to research the property taxes before making a purchase. High property taxes can significantly affect the cost of owning the property and may make it less affordable in the long run.

3. Are there any liens or assessments on the property?

It is important to conduct a title search to determine if there are any liens or assessments on the property. Liens and assessments can affect the value of the property and potentially prevent you from using it as you intended. If there are any outstanding liens or assessments, you will want to resolve them before purchasing the property.

4. What utilities are available?

Before purchasing a vacant lot, it is important to determine what utilities are available. This includes access to water, sewer, electricity, and gas. If the property is in a remote location, it may not have access to all utilities, and you may need to install a septic system or well. Adding utilities can be expensive, so be sure to factor in these costs when considering the purchase.

5. What are the building restrictions?

Building restrictions can vary depending on the location and zoning of the property. It is important to research any building restrictions before making a purchase. Some common restrictions include setback requirements, building height limits, and minimum square footage requirements. Be sure to understand these restrictions before making a purchase to ensure that you can build what you want on the property.

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