Evaluating Land for Building
It’s important to carefully evaluate land before making an offer for purchase to build your dream home. You don’t want to end up with an asset that is a hassle, doesn’t meet your building requirements or that causes you unforeseen expenses. As a home builder, I have a checklist that I go through prior to purchasing any property for building. Let’s go through some of these as they can save you serious money and help minimize hassles.
Check Zoning: The zoning basically tells you what can be built on the property and what can be built around it. Obviously you want to make sure you can build a house on the property so it should be zoned residential. You will also want to check what the zoning is for neighboring properties as you don’t want a big industrial building being built next to your beautiful new home. Your real estate broker can typically give you this information. If your real estate pro can’t help, the information is readily available at the local zoning or building department. The zoning will also tell you the distance required between your future home and the lot lines (a.k.a. setback requirements) and any height restrictions for the home. Once you have the zoning setback requirements, you can start to get an idea of what size and type of home you can build.
Review HOA (homeowner’s association) Requirements: You will also want to check with the homeowner’s association (if there is one) to find out if there are any restrictions on the height of homes or if they limit the distance to the body of water. Some municipalities have instituted setback requirements from the ocean or lake to preserve the natural beauty. The homeowner’s association will also be able to give you any architectural restrictions including maximum and minimum size of home, material requirements (siding, roof,…etc.), and architectural style requirements.
If you decide not to buy the lot directly on the water, you will want to consider the height requirements (if any) of the properties in front of you. It would be very disappointing to have your view taken away in the future by your neighbor’s new third floor addition! Also ask your real estate broker if there are any easements on the property. Easements give the right to enter the property for a given reason…maybe to run utilities or repair utilities in the future or maybe to provide access for the neighboring property. You won’t be able to build in these areas so it’s good to know where they are located.
Review Utilities: You will also want to know what utilities are run to the site. This includes electric, phone, cable, gas, sewer and water. If some of these are not available, you will most likely have additional building costs. Sometimes the utility companies will bring service to your site in order to get your business but it really depends on how much effort/expense is involved. If you don’t have city sewer or water available, you will need a septic system and well. Check with the current owner to see if a perk test has been done. This test determines the capacity of the soil for the septic system and will give you an idea of the type of system required.
Determine Fees to Build: Before purchasing your dream lot, you will want to make a trip down to the local building and public works department to get a list of fees for building your new home. Be sure to ask if they know of any other fees from their municipality. These would include permit fees, driveway connection fees, impact fees, tree clearing fees, and water and sewer connection fees (if available). Some community impact fees run into the tens of thousands of dollars and can impact your budget in a big way so be sure to check on them.
Tally Holding Costs: If you don’t plan on building your dream home right away, you may want to check out what I call “holding costs”. These are the costs associated with owning the lot before you actually build. These include real estate taxes, insurance, sewer and water availability fees, homeowner’s association (HOA) fees, maintenance requirements, club dues…etc. As far as maintenance goes, you may need to have the property mowed periodically…see if this is required by the HOA and if so, does the fee cover it? Sometimes a community is part of a resort that may require monthly club dues for use of the facilities including golf, pool,…etc. These can be quite expensive so be sure to ask about them. From an insurance standpoint, you may want coverage for liability and if you have trees, you may want coverage in case one decides to fall on the neighbors house!
Contract Review: As with any real estate transaction, you will want your attorney to review the contract. She will most likely recommend you have a title search done (if you are paying in cash…if you are getting a loan the bank will require it) to make sure there are no liens or encumbrances on the property. In today’s world of real estate this is a must. You may also want to have a clause added to the contract to protect you from any abnormal subsurface items. Since you cannot see under the ground, you may want to protect yourself in case the soil is unsuitable to support the home or an environmental hazard is found (for example, an old underground fuel tank must be disposed of).
Visit Property at Different Times: One last item to think about when evaluating potential properties…visit them at different times of day and different days of the week. You will want to look for any nuisances or annoyances that may not be there all the time. For example, airport traffic patterns change with wind conditions. The first time you visit, they may be using a runway that puts your lot out of the flight path. Or, maybe the train rolls through only at night.
For more details on how to evaluate future building lots or land, check out the Armchair Builder Lot Purchase Guide at our e-Store. This guide provides details on potential hidden building costs, shares keys to preventing foundation problems, and reviews important utility access considerations to avoid extra cost and hassles. Also included in the Lot Purchase Guide is the important lot purchase cost worksheet which helps owner builders list all of the potential costs so the budget is accurate.