It is always said you can change everything about a home except the location, so why not build your dream home in the perfect location? Building a home on a vacant lot may seem like an impossible feat and that a pre-built home would be so much easier for the home buyer, but imagine building a home from the ground up! Every single detail will be handpicked by you and at the end, you will not walk into someone else’s old house, you will walk into your home.
There are things to take into consideration before stepping into this large of a commitment so that the home buyer will walk into this with their eyes wide open and know what to expect. Home buying is a large time and money commitment and building a home adds even more factors to that, so it is best to be prepared.
The most important aspect about purchasing a vacant lot is that oftentimes the buyer will not be able to secure a loan for it. A vacant lot does not work the same way as a home loan. A lot of land can not be leveraged with a bank or mortgage institution in the same way a home can, so it makes receiving a loan for the land more difficult. Many buyers will need to purchase the land with cash so that is something to take into consideration whenever choosing to look at building your own home. According to Larry Link, principal broker and president of Level Group in New York City. “But if you have a piece of land, you might be lucky if [a lender] gives you 40 percent or 50 percent of the value – and that’s typical if you have a good bank relationship or other collateral. You’re more likely to get zero.” Do not get discouraged just yet though, buyers can apply for a construction loan at least, after the purchase of the lot of land, which is more likely to be approved seeing as the home you will build will be the collateral to the loan institution.
Do not skimp on the land surveyor the environmental tests. Just like a home would need an inspection done before a buyer purchases it, so does a piece of property. You would hate to purchase this land only to find out that there is something unsafe there so you cannot build, they cannot sell the property because other buyers decide to test these things. At this point, you have just purchased a vacant lot that all you can do is look at. Not really your money’s worth. Environmental tests are the most important. These test for contamination in the ground from previous use to see if the land is even viable to build on. These also test for the land’s potential of flooding or poor soil which could affect the ability to build on the land. These tests should be done before the purchase of the land so that no surprises happen to the buyer after the land is already purchased. The land survey is also important to the potential buyer. This identifies the boundaries of the land which you are going to purchase. Overtime landlines get a bit blurred, and you may find out after having your potential land surveyed that you would technically own the land that a part of your neighbor’s fence and their outdoor shed sit on! Therefore, it is important to get your land to surveyed to figure out where exactly your property land is.
The next thing a buyer needs to take into consideration is utility and road access. Do not just assume that you will easily have running water, sewers, and electricity. With vacant land, this can cause some issues with infrastructure and will cause more money to be poured into building your home on this land. These are things that no one can live comfortably without, so they are a priority. Not having the basic amenities will not be good for a potential buyer to build their dream home on! Therefore, utilities need to be taken very highly into consideration. According to Michelle Farber Ross, real estate broker and managing partner of MMD Realty, “Depending on how developed the area is around the land, you want to know if it’s going to cost money for infrastructure to be run to that land or if it’s already serviced.” Utilities are key for a happy and healthy life for you and your family, this is something that has to be one of the largest considerations whenever looking at purchasing a piece of property.
Another consideration is the location. Of course, a buyer would not buy a piece of property that they personally are not interested in, but they also need to consider the resale value of the land. When looking at a vacant lot its location, keep in mind what is best for you only is not always the best investment. Buyers need to think about if the land would have a good resale value seeing as the first thing potential homebuyers will look at is the location of the home. This includes looking at the schools in the area, the location to the closest towns and the job availability. These are important to the possibility of future potential home buyers. On the same note of being an investment, the buyer needs to know the possible costs involves. Even if the buyer has no plans to sell the home or the property eventually, buying a property and building a home is an investment in the buyer’s time and money. The buyer may want to consider title insurance. According to Stewart.com, “title insurance protects owners and lenders against any property loss or damage they might experience because of liens, encumbrances or defects in the title to the property.” This insurance protects both parties from situations outside of their control. This is a cost that the buyer may not expect but needs to be aware that it may arise and be in the best benefit of the buyer to pay for this insurance.
The buyer of a vacant lot also needs to keep in mind zoning restrictions. It does no good to drive around looking at empty pieces of land without knowing what the land is zoned for. These laws decide what can and cannot be done with a piece of land. According to Curry.com, “It’s the division of land into subdivisions that will have varying restrictions of what can be built on each piece of property.” These laws are what keep factories out of residential areas etc. Before setting your heart on a piece of property, it is best to seek out your local zoning office, or it can even be as easy as looking online for information about the piece of land you are interested in to see if the zoning is posted. This is not a hard thing to check off your to-do list before moving forward with the purchase of the land, but it is crucial.
One of the final things we will discuss will be something almost everyone dreads in the construction world, permits. Permits are an inconvenience for sure, but a necessary evil. Permits are just stating that you have permission for whatever type of construction you are trying to do on the property. The first permit you will have to deal with has already been discussed and that is government zoning. This is, as stated before, just stating that the land you are building on is zoned for residential buildings. This is something the buyer will have already investigated before purchasing the land if their ultimate goal was to build a residential home. The permits go on from there. Running water requires a permit, digging for a sewage system requires a permit, and the list goes on and on. Permits are not completely bad, even if they are a hassle. Permits help protect the land and keep the buyer and those they have hired to complete the construction up to building codes. These permits legally keep those responsible honest and help protect not only the environment but also the buyer themselves. If the buyer hires someone to complete the construction for them, they take on the responsibility of ensuring the home is up to code for the safety of the buyer and their family. The permits are in place for accountability and while they may be time-consuming, they are a necessity.
Purchasing a vacant lot may seem like the harder choice when comparing options, but it is also the choice that will give you the most options in return! The buyer gets to have their hand in every choice made with the home and gets to plan it from the ground up. Designing the perfect home for your family and complete the construction may seem like a lot of work, but the rewards are worth the effort and the risk. This could be a dream come true, and it all starts with being prepared, doing your research, and taking that risk!
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