If you have a vision of buying a parcel of land, designing and building your dream home, and moving into it with your family, this article is for you. The article was developed to help your vision become a reality; without falling into the many pitfalls we have seen others fall into.
Buying land can be the single most important decision that will affect the outcome of your vision. It can be more complicated than buying a new home. A parcel of land may look perfect, but it could come with many surprises such as bad soils, no water, severe encroachments, or proximity to suppliers to name a few. So how do you avoid the pitfalls?
Although your builder or Realtor should have an understanding of pitfalls mentioned in this article, it is recommended you speak to competent tax and legal counsel prior to purchasing a parcel of land.
1 . Understand Your Overall Investment (Budget) Your overall investment in the project will include the land, architecture & design, surveys & inspections, engineering, site work, utilities and construction. Prior to purchasing a home site, you should not only consult with your tax and legal professionals, but also with a reputable builder to help you gauge the overall cost of your vision.
2. Location Not location, location, location as we know it. The further your home site is "off the beaten path," the less expensive the land will tend to be. However, the further away the home site is from suppliers, the more expensive the construction cost and materials will tend to be. The more expensive construction costs and materials could eliminate any cost savings received by purchasing your lot "off the beaten path."
This could pose a problem when you try to resell your home. The further your home is "off the beaten path," the less likely you will receive premium pricing.
3. ZONING & MUNICPAL RECORDING It is important to understand the zoning and use of your property. Is it zoned agricultural, residential, residential multi-family, or for business purposes to name a few. Was the subdivision recorded properly with the governing municipal authority? Is the property in a flood zone? Are there environmental regulations?
Recently, many unqualified developers have subdivided larger parcels of land into smaller home sites. Many errors can be found in the municipal recordings, easements and actual zoning of these properties. Again, we recommend hiring tax and legal professionals.
3. SURVEYS & ENCROACHMENTS Have your Broker negotiate for a survey in purchase agreement. If the Seller refuses to pay for the survey, you should. There are several types of surveys, but get one that will include at least the following:
- Correct property description
- Site Topography (On larger parcels, survey the topography around the building envelope)
- Utility location including cable, telephone, electric, well & septic
- Property Corners
- Encroachments
- Easements
- Fencing
- Driveways
- Streets & Roads bordering the property
- Soil Test hole locations
- Proposed Building Envelope
The survey will answer many questions and might raise others. Most importantly, it will help determine if you are receiving what you expect to receive. Also, provide a copy of the survey to your legal counsel and reputable home builder for review.
4. UTILITIES Utilities are locations on the property that you will hook to for your electrical, telephone, cable, gas, water and sewer. Some home sites might require a well, septic and propane tank.
There are many parcels of land that might not offer the convenience of public water and sewer or might not have electrical or phone to the property. If you require a private well, understand your states regulations on drilling a well. In some areas, wells are not permitted and/or the property might not have access to water. The same goes with public sewer systems. If you do not have access to public sewage, you will need to hire a geotechnical engineer to determine if the soil quality will allow for a septic system.
There are several costs to factor into your budget regarding utilities. We recommend speaking with a reputable builder to help you gauge the availability of utilities and the overall cost associated with them.
5. SOILS Depending on where you're building, it is quite possible that you will require a soil test from a geotechnical engineer. A soil test will determine the type of foundation and sub-floor your new home will require. If the soils test comes back that a home will require caissons with a structural sub-floor, you might want to think twice about purchasing the lot. In many instances, soils can have a major impact on the overall cost of the home. Once you receive your soils analysis, we recommend speaking to a reputable builder to help gauge the impact your soils will have on the construction of your home.
6. TOPOGRAPHY Topography is the natural contours of the land. The topography of your home site will determine the height of the foundation walls. Slight variations in topography can impact the overall cost of your home and vision. In general, the steeper the topography, the more expensive construction will be. However, a flat lot might not allow for a walk-out basement that is part of your vision.
7. ACCESS
Once you receive the topography, make sure you have access to your property. If your home site does not have either an easement (shared driveway) for access to your property, a private road that grants access, or a public road, you might not have access to the property.
Also, if the access is not maintained by a public municipality, you might have shared costs for upkeep of the road. You will also want to check if access to your property has adequate drainage. If not, you might require a culvert or additional site work.
8. Water & Mineral Rights Water and Mineral rights are complicated and need to be analyzed by legal counsel. You should know that upwards of 70% of all mineral rights, at least in Colorado, are not transferred with the property. What does this mean? - In laymens terms, you will own all rights to the surface of your property, but not the minerals below it.
If you purchase a property that requires a well, you will want to have legal counsel or a water right professional analyze the rights you have to the water on the property including but not limited to surface water and aquifer water.
9. The Bottom Line There is much more to know and understand prior to purchasing a parcel of land then can be found in this article. These are a just a few of the surprises to look out for. Hire professionals, including, but not limited to a competent Real Estate Broker, a reputable Home Builder, Legal counsel and Tax counsel to help uncover any more surprises.
