Several times every year, we talk with clients who are considering purchasing land and building a home. Is this your dream? To get out of the hustle and bustle of the city or suburbs and spread out on your own little piece of heaven? A few end up taking the plunge, but amazingly, most people end up purchasing an existing property or never making the move. Why? Because it’s more complicated, and usually more expensive than they thought. Here is a list we put together for our clients to consider when looking at land. We hope it’s helpful for you too!
The Overall Project Plan
This is a rough plan designed to help you get started. Not every new home will follow this exact order. Some people prefer to buy a piece of land and hold it for years before actually building, others move through the process as quickly as possible.
- Select a Realtor who is experienced in land purchases. They will be invaluable in helping you navigate your options.
- Discuss type of land and building alternatives
- Probable project location
- Establish financial plan and secure adequate financing for the entire project
- Your Realtor can recommend lenders who offer Construction Loans (if financing the build)
- Start Interviewing Builders
- Your Realtor can also recommend several great builders if you haven’t already selected one.
- Begin evaluating Floor plans / Finishes / Details
- Establish the approximate building schedule
- Define the approximate total project cost
- Select Builder
- Find a suitable lot
- complete due diligence to ensure you can build what you want on the land you’ve selected (builder and realtor will help with this)
- make offer and reach agreement to purchase
- Finalize construction plans – Floor plans / Finishes / Details / Schedule
- Builder files plans with county/city Planning & Zoning Departement for approval
- Close on the lot
- Begin construction
- Make construction loan draws for contractor payments throughout the build (if financing)
- Complete construction
- Close on mortgage loan (if financing)
What Type of Land?
- Shape – square, rectangle, irregular
- Contour – flat, rolling, hilly
- Water – pond, creek, river
- Surface – wooded, partly wooded, farmland, rocky, sandy, lowland
- Surroundings – neighborhoods, parks, homes, farmland, open
- Access to highways – important? Not important?
- Fenced – important? Not important?
- Area – building codes? Zoning requirements?
- Size – ss than an acre – 1 to 3 acres – 3 to 5 acres – 5 to 10 acres – 10 acres+
- Location –
- In an existing development / neighborhood?
- On a busy road – On a country road?
- In a specific county or township?
- How do you plan to use the property? Out buildings? Barns? Horses? Farming? “Yard”?
- How far away are schools, shopping, restaurants, entertainment?
- Commute to work?
Other Property Considerations
- Is the property in a flood plain?
- Will flood insurance be required?
- Will retention ponds be required?
- Is the property accessible by a public road?
- Private road?
- Easement? What are the rules for use? (Needs written into the deed!)
- Is the Property Buildable?
- Does the property have adequate road frontage and acreage to meet county rules to build a house?
- Other county or municiple restrictions?
- Other land restrictions? (ex: no water available)
- Has the property had a staked survey?
- Is the property currently it’s own tax parcel or is it part of a larger parcel which will need to be divided? If so, has that process been started?
- Does the property have rules/covenants regarding construction standards?
- Does the property have construction set back requirements?
- If applicable – is the ground suitable for a basement?
- How much driveway will be required? Paved? Concrete? Rock? Other?
What about Utilities?
Sometimes utilities are already available on the land and the only cost is connecting. Other times certain utilities may be nearby, requiring additional expense to run them to the property, or they may not be available at all, requiring septic, well water or propane, etc.
- Municipal / Well / Pond / Other
- Does the property have municipal water service? Cost to connect?
- If not – can a well be dug? Is the water safe for drinking?
- Sewers / Septic
- Does the property have municipal sewer connection capability? Cost to connect?
- Does the property require a septic system?
- Has the property had a successful loam test?
- Does the property have electric service nearby? Cost to connect?
- Does the property have natural gas connection capability? Cost to connect?
- Is propane the only option?
- Cable TV / Internet / Cellular
- Does the property have existing service? If not, how does the property acquire service?
Selecting Your Builder
There are several different types of contractors who specialize in building homes on your property. Keep in mind they don’t build in all locations and if you’re property requires quite a bit of travel, then that will make it more expensive to build.
- “Build on Your Lot” construction companies specialize in doing this and there are also several production builders who have jumped on board. They usually have their own floor plans you can choose from and some are willing to make plan modifications. They may also be willing to finance the construction, which means you won’t need to get a construction loan.
- Custom Builders will allow you to bring your own floor plans, or they can help you custom design exactly what you want. “Barn Homes” are also becoming popular as they tend to be less expensive per square foot and open up new contractor possibilities, but be prepared to do a lot of research on these as they come in all different sizes, prices and workmanship. Also, custom builders normally require you to get a construction loan to finance the project.
- Building it yourself is also an option if you have the skills and time needed. Another option is to be your own general contractor and hire sub-contractors to actually do some or all of the work.
Setting the Budget
- Acreage Cost
- Property Improvements
- Building permits
- Property Survey
- Well – Drilling / Water Testing
- Septic – Loam Test / Construction
- Tree Removal
- Land preparation & development
- Home Construction Estimate
- Other Construction Estimate
- Fences / Outbuilding / Barns / Pool
- Construction Loan and Mortgage Costs
- Other lender fees/closing costs
- Approximate Total Cost of Project $
This is by no means a comprehensive list, but a great place to start.
Unless you plan to pay for the house with cash, you will need to get a Construction Loan, which is not the same as a mortgage loan. Here is a great explanation on how they work:
Consider Existing Homes
Finding the perfect piece of land and getting everything you want while staying on budget can be two of the biggest challenges. Sometimes it makes sense to look at existing houses on property. They may already have out buildings, fences, ponds, barns or pools which would be very expensive to build from scratch. Plus the utilites are in place and the land has been developed. Yes, it may require a little remodeling, or possibly an addition to the existing home, but this is often a more budget friendly way to get exactly what you want. Either way, the end result is amazing if you’re looking for a unique home away from the crowds.
Homes for Sale on Acreage
Land for Sale