Buying raw land can be used to build a home or business.Before, during, and after the process of purchasing your property, there are a number of special considerations that need to be addressed.If you take proper precautions, you can greatly reduce the risks and increase the rewards of your land deal.
Step 1: There is a reason for buying the land.
Buying raw land is different from buying a home, and there are many questions a potential buyer needs to ask before starting the process.Why are you buying this land?Do you want to build a home on the land?Are you planning to farm there and build a ranch house?Do you want it to increase in value over time?It is necessary to have specific plans for your land before you begin the process of looking.Farming/ranching is one of the reasons people buy raw land.A house or home is being built.One's portfolio needs to be diversified.The price will increase later.
Step 2: Come up with a budget.
Your budget will need to include money for several steps that most other land and home purchases do not, as well as the common expenses of purchasing land.You should include money for due diligence in your budget.You will need to conduct a lot of research if you want to purchase land that isn't necessary for developed land.It's a down payment.If you want to develop a farm or ranch, you may be able to get a loan from the United States Department of Agriculture Farm Service Agency.Down payments are higher for raw land purchases due to the fact that houses that banks could use as security for the loan do not exist on the land.Depending on the price of the property, your down payment may be between 20% and 50%.Conversion.The costs for converting the land for your intended use include constructing a home, running sewer lines, etc.Carrying costs.The interest on your loan and property taxes are included.You can't take a depreciation tax deduction for raw land because it's not considered to depreciate for federal tax purposes.How much money does this cost in dollars?For the down-payment and other costs, you should try to get at least 25% of the purchase price in cash.Carrying costs should be covered by a steady stream of income.This will help you get the lending you need..
Step 3: Begin your search for land.
Once you have determined what you want to use the land for and what your budget is, you can begin the search for available land in your price range that meets your requirements.There are many ways to begin your search.Farmers, evictions, bank foreclosures, and tax sales can be found in local newspapers.You can go through a real estate agent.This is a good option if your search is far away from your current home.A real estate agent can tell you if there are any future plans that could affect your own plans.
Step 4: Look at neighboring properties.
You will want to know if industrial farming or agricultural practices will affect the value of your land.You should know if the neighboring properties have any rights of way.
Step 5: There should be access to sewage and water.
There are two things that make land useless.When investigating properties, these are the most important things to consider.The sewer systems are important.When purchasing land that can't be connected to a sewer system, plan for a septic system.If you want to install a septic system on your property, make sure you have the space to do so far away from the water source.Does your land have access to water?Most places don't like collecting and trucking water.If you plan on digging a well, make sure you factor in access and rights to water as this can become quite expensive.
Step 6: Consider the roads.
The worth of your land is determined by the soil system and how you reach it.Take transportation and topography very seriously during the searching process.Does your property have access to a road?You should be willing and able to build one if you don't.What is the weather like?The type of road leading to your land is important if you're buying in an area with cold, snowy winters.Again, check for any rights.It is possible that a utility company can use your land if you have an easement on it.How you use your land could be affected by this.Consider the power of electricity.How do you plan on getting electricity to your location if you are far off the grid?You can pay the power company to string a pole in your direction, which can be expensive, or use alternative sources like wind or solar.What is the location of your land?If your land supports infrastructure, take notice of where the water runs.Know the soil types and grade if you see signs of flooding.Knowing your soil type affects your ability to drill and set up a water source like a well, so make sure you factor in the added cost of drilling through something like rock as opposed to a softer soil like sand.
Step 7: You should know your rights and be aware of environmental restrictions.
Legal jargon and restrictions are hard to comprehend.There are certain restrictions that can affect the worth of your land and how you can use it.Protect your rights.There are many rights that go into the purchase of land.Do you have the right to anything found on the land, such as land oil, natural gas, gold, or other valuable materials?It's important to look into this ahead of time to avoid a legal battle and possible loss of money.Consider hunting rights.You have a right to refuse hunting on property you own.Look into this before you make a decision on the issue of game hunting.What is the location of your land?Your ability to build a home on your land depends on how the land is categorized.Before signing any paperwork, it is advisable to check the land'szoning to make sure it isn'tzoned for anything that will depreciate its value over time.Chemicals leave a land's value sinks.If you are buying rural land, check any environmental restrictions.Strict guidelines about use and building are limiting for owner's plans in wetlands and waterfronts.These could include a habitat for an animal that is in danger.If you are planning on farming in any way beyond a simple home garden, you need to make sure your land is approved for agricultural development.
Step 8: Questions should be prepared for the seller.
Before you begin looking into properties and contacting sellers, you should prepare a list of questions to ask based on your needs and make sure the land is worth viewing.Is the lot buildable is one of the questions to ask the seller or seller's agent.Is there any restrictions on the property that I should be aware of?Is there any common facilities, like water systems, that homeowners or developers need to manage?What will my specific responsibilities be?Will there be homeowner association fees?Does the land have wetlands or a floodplain?The site has access to electricity, natural gas, town water, and sewer.Is there any water on the site?What is the flow rate?
Step 9: Take a trip to see the land.
Nothing will make up your mind about what kind of land you want better than looking at some properties.You can weigh the pros and cons of purchasing a particular plot if you know what appeals to you.If there are structures on a neighbor's property that cross the property line, you should check with your city or county records office to see if they are legal.If you're working with an agent, the easiest route to your property is the road you ride on.It may not be accessible year-round or it may be prone to poor upkeep.If it's always available and cared for adequately, ask neighbors or those who live in the route you're taking.You can talk to locals while you're there.Ask them if there is reliable cell phone reception in the area, what the seasons are like, if the roads and highways are safe to drive on, and whether the region is prone to any specific environmental hazard.Stay overnight if possible.If setting up camp is possible, ask your agent if you can pitch a tent for the night.Imagine being there for 24 years if your enthusiasm for the place waned after 24 hours.
Step 10: You should consult a lawyer.
Once you have identified the property you want to buy, it is recommended that you consult with a lawyer.Communication between you and the seller can be simplified with the help of a lawyer.Your lawyer can help you understand how the findings of your due diligence may affect your rights and use of the land.A real estate attorney can help you navigate the purchase process.Ask your lawyer if water and mineral rights are a concern in the area.It can be difficult to understand what your rights are in regards to materials found on your property.Any uncertainty can be cleared up by a third party.Ask how much time you need to address the contingencies in the bid offer.Financing, inspections, and insurance are some of the conditions that must be met before the closing can take place.Ask your lawyer about building requirements and permits, as well as whether there is a warranty deed, before you make a final bid.At this point, you should buy owner's title insurance.The seller cost is usually requested in the offer as part of the contract.
Step 11: Don't make an offer, start low.
A down payment for raw land generally falls between 20% and 50% of the overall price, and many lenders expect you to have made a downpayment before they consider granting you a mortgage loan.Don't be afraid to bargain with the seller.The cost can be reduced with successful bargaining.If your offer includes an option on the land for a small fee, you have the chance to do due diligence before completing the purchase.While you do your inspections, this will put the land on hold for you.The closing date is the date on which the purchase is completed and can be included in your offer.Provisions that allow you to walk away or buy the land for a reduced price should be included in your offer.As land tends to appreciate as it's developed, cheaper properties make more financial sense.There are relatively low-cost options that meet your needs as a buyer.If you plan to leave the land undeveloped for a long time, you should ask about the property tax savings programs in the state you're buying.These plans can save you a lot of money in the long run, as taxes and payments are reduced over time on uncultivated land.
Step 12: You should secure a loan.
It is more difficult to get a loan for raw land than it is for an existing home.If you plan to wait years to build, this is especially true.If the building plans don't come to fruition, banks will walk away from the land.It's possible to minimize the risk of rejection by going in with a very specific plan, and proving you've done adequate research and practiced due diligence to assess the land for your personal needs.If you've contacted the above companies, departments, and professionals you are more likely to get a loan for a down payment.Work with credit unions.You'll know you're making a wise investment when they know the area.Down payments and interest rates will be higher than for a typical home mortgage if your land is undeveloped.As you plan for your loan, keep this in mind.If you want to buy raw land, your credit score may have to be higher.
Step 13: Consider owner financing.
Financing your land purchase through the seller is referred to as owner financing.This can be an attractive option for buyers if they can't get a bank loan or interest rates are too high.If the seller is having difficulty selling the property, it may be attractive.Inquire about owner financing if these conditions apply.Suppose you wanted to buy a plot of land for $1 million.The owner would finance the property and allow you to use it if you paid a down payment.Just like with a bank loan, you would pay the owner back regular payments.Once all payments are made, the deed to the land would be transferred to you.The benefits of owner financing include lower costs for you, a potentially lower interest rate, and fast closing of the sale, since there is no third party involved.There are risks to be aware of.These transactions usually involve a high down-payment.It is important to know if the seller still owes money on the land.If that is the case, you are exposing yourself to the risk of the seller going bankrupt and not being able to make payments.To fully understand the risks and what you can do about them, bring this topic up with the seller and your lawyer.When conducting this type of transaction, always involve a lawyer.A lawyer can help create formal contracts and make sure the transaction is fair to you and the seller.The financial aspects of the deal can be helped by the lawyer.
Step 14: Due diligence is practiced.
It is impossible to identify and assess every type of risk, but a program of due diligence can minimize that risk.This usually involves hiring experts to conduct inspections and inquire on your behalf.Due diligence usually involves an inspection and feasibility study.Make sure that the amount of days needed for the study and inspection is stated in the offer.The details of this period and what rights you have during the process are negotiated between you, the seller, and both of your agents.You may be asked to put down a small financial deposit, known as earnest money, which is typically 1% of the purchase price.
Step 15: The seller should pay some of the costs.
If you no longer wish to purchase the land, you should request that the seller pay at least part of your due diligence costs.The offers are usually presented with these requests.
Step 16: Hire a professional to do the work.
If the seller or real estate agent offers a survey of the land, you should also contract your own civil engineer.Rural plots can be different in size and shape, and buyers or agents might not be aware of certain pitfalls when surveying the land.You should know where and how you can build.Extending title insurance will protect you against boundary issues if you have the property surveyed.
Step 17: Look at the plat.
A plat is a map that shows the size, shape, and location of your land.Public works departments and urban planning organizations draw the plats.They are more binding than the standard survey.
Step 18: Be aware of liens.
If the owner owes money to a creditor, liens are notices attached to the property.You can get a public record from a county records office.You should be aware that a liens on a property can delay your purchase for months or years.
Step 19: You can go to the town or county offices of building and planning.
The departments can address specific questions about the land you're considering buying, and give you insight as to whether your building plans would work for the area.Ask the Building Office if the lot is buildable, if there are any restrictions on the size of buildings, and if roads surrounding the property are paved and maintained.If you want to know if your planned use for the lot complies with any restrictions due to wetlands, or how much lot coverage is allowed, ask the Planning and Zoning Office.
Step 20: The Health Department is in the county.
The health department can alert you to any potential dangers of installing a well or septic system in the area.Ask if tower service is available and what the costs are, what kind of systems are allowed, and when they can be performed.Look for potential problems.Ask if the area you're looking in has problems with high water tables or poor soils, and if there are any known issues with water quality in your area.
Step 21: There are utility companies in the area.
Questions about access to electricity can be answered by utility companies.Check to see if natural gas can be brought to the lot.Cell phones, internet, and television are all options.
Step 22: Talk to the Department of Environmental Protection.
Make sure you know about any environmental restrictions that are in the building plans.The questions can be answered by the DEP.You should ask them about the former use of the land for environmental issues.If you plan to install a well, you should speak to more than one driller to see if there are any issues with the water in your area.Asks about costs, flow rates, depth of neighboring wells, labor and material costs and if there are any well water problems in neighboring areas.
Step 23: The property is close to the road.
Your lawyer will agree that the purchase is a good one if your due diligence does not reveal any major issues.Depending on where you live, your lawyer and real estate agent will walk you through the procedures.You can expect to see a land contract.The address of the property is listed and includes a full legal description, as well as financial information such as purchase price, down payment amount, and number and amounts of monthly payments.The deed was done.The seller's legal title is transferred to you.When you close on the purchase, you will sign this.There is a closing statement.This document shows the credit and debits for you and the seller as agreed in the contract, and can be drafted by your lawyer.It may include an "amortization schedule" that shows how many payments you have to make in order to pay off your land debt.