Auction Properties

The real estate market has been known to rise and fall dramatically. When prices are low, investors and home buyers alike have turned their attention to purchasing parcels of land. Whether land buyers are looking for a parcel of land to develop as a home or as a commercial site, or whether they are strictly interested in an investment, they will discover an abundance of land parcels available for sale.

When searching for land, buyers should be aware of all available options before making a purchase. Find out about the different types of land, zoning regulations, the various costs associated with purchasing land, and places to find and buy land, such as local real estate offices or even online auction sites like eBay.

Evaluate Land Parcels Objectively

Buying a parcel of land is a serious investment, and it’s always a good idea to consult a financial advisor or accountant prior to making any investment decision. Land buyers should determine what their goals are for purchasing land, including buying land for building a home, business, or other venture. The following are factors to consider when evaluating a parcels of land for sale.

Location

Many buyers prefer to be close to schools, shops, cinemas, and easy highway access. So, obviously, land that is close to amenities will command a premium. Moreover, builders may charge property owners more to build on remote parcels of land. A septic tank, for example, can be quite expensive. Also consider access to electricity and telephone utilities. Find out about home owner’s fees. Do mandatory fees apply to a land property owner’s plot of land? If so, the land owner will have to pay them. If the land owner does not, the homeowners’ association could put a lien on their property or even foreclose on it.

Building Challenges and Obstructions

For most people, the most critical question to answer before purchasing land is can the land owner build on it? If the land cannot support a foundation, or has no access to a sewage system, it may not have development potential. Research the soil quality and topography. Damp, moist soil can add significantly to a property owner’s building costs, and building on hills or steep slopes can be much more expensive. Finally, research road access. If the land is not accessible via a public road, property owners and their neighbors will have to maintain it. Consider the likelihood of floods, heavy rain, or snow, which could limit road access in the future.

Zoning and Environmental Considerations

Once a property owner has determined that they can build on the land, research zoning and environmental considerations. If the local zoning ordinances dictate that owners cannot build on the land or their land borders water and is subject to environmental regulations, a property owner’s building plans maybe be hindered. Also research the county’s long-range plans. Find out where the new businesses, parks, roads, or schools will be. For example, if the county is planning a six-lane highway next to the owner’s property, the property’s resale value could decrease. Conversely, easy access to a new shopping center could improve a property’s resale value.

Soil Testing

The first thing any potential property buyer should do is have the soil of any property they are looking at tested for its load-bearing capability. A soil test also has the side benefit of revealing if there are any areas on the property that might require blasting. Soil testing might be something the seller is willing to pay for since it is not expensive.

The downside of not getting a soil test done is that the buyer could end up paying thousands of extra dollars in work to the foundation and drainage of the property. Buyers might want to include this as a contingency on the contract, even going so far as to include it as a provision toward a refund in case nonload-bearing soils are discovered after the purchase is settled.

If buyers are handling the purchasing of the property themselves, specialists in test boring for load bearing can be found in the phone book or online by searching “consulting engineers” or “foundation engineers.” If a buyer is using a real estate broker, they can ask the broker to get the necessary tests done. Buyers should be sure that such tasks should be clearly defined in the contract they sign with the real estate agent.

Environmental Regulations

Before purchasing a property, buyers should determine if there are any environmental regulations in their state and local area that would prohibit building on the property they are interested in buying. Most states have regulations dealing with the development of lands that contain streams and other waterways. Also, be sure to research whether the property is not the habitat, or part of a habitat, for any protected species. This could prohibit building on the property as well.

Secure Land Parcel Financing

Once a buyer finds the property of their dreams, it’s likely that they will need to secure financing. While financing for land can be more difficult to locate compared to financing for an existing home, there may be other options, including community banks and traditional seller loans.

  • Local, savings, and community banks: Loan officers at these locations know the area and possibly even a property owner’s specific parcel of land. Note that potential buyers have a better chance of securing a loan from these banks if there are other improved properties or brand new properties in the same area.
  • Traditional seller loans: Typical seller loans generally require a 20% down payment, with the seller holding a note for the balance. The interest rate and terms of the loan, however, are negotiable.

Other factors that impact the final terms of the loan include the location, size, zoning, and intended use of the parcel. Choose a loan package that adequately covers both the cost of the land and the cost and complexity of building and construction. Be sure to factor in the cost of liability and home owner’s insurance when opting for a financing package. Of course, real estate investments can be a complicated matter, so land buyers should be sure to also consult a tax professional.