Buying Land: A 7-Step Guide to Avoid Costly Mistakes in Your Vacant Lot Purchase

Buying vacant land can be a more affordable path to homeownership than purchasing an existing house, but it requires meticulous due diligence to avoid costly errors. The core challenge lies in verifying the land's buildability, which involves investigating zoning regulations, deed restrictions, utility access, and soil composition. Failing to conduct proper research is the most common pitfall for land buyers. This guide provides a seven-step process and critical questions to ask before purchasing a plot of land.

What Are the Zoning Rules and How Do They Impact Your Plans?

Zoning information is critical and legally determines what you can build on a property. Local counties or cities establish zones—typically residential, agricultural, or commercial—with specific rules for each. Beyond the individual parcel, review the area's "general use plan," which outlines development intentions for the next 5 to 15 years. For instance, a quiet rural parcel could be slated for a future landfill or new road. Government planning staff are a valuable resource for deciphering these documents.

Are There Deed Restrictions or HOA Rules to Consider?

A deed is the legal document that transfers property ownership and may include usage restrictions. These are common in areas with a Homeowners’ Association (HOA), a governing body that sets community rules. Before purchasing, request the HOA's Covenants, Conditions, and Restrictions (CC&Rs). These documents can limit vehicles, fences, pets, and even home-based businesses. If no HOA exists or questions remain, a real estate attorney can perform a title search to uncover any deed restrictions.

Is the Land Actually Suitable for Construction?

"Can you build on it?" seems straightforward, but several factors can foil your plans. Contact the local planning department to ask about:

• Environmental Hazards: Is the land in a flood zone or prone to landslides? A flood designation often requires separate flood insurance, which can cost hundreds of dollars annually.
• Topography: Flat parcels are the most cost-effective to build on. Sloped land requires extensive grading, increasing development costs.
• Setbacks: Local governments impose setbacks, which are minimum distances a structure must be from property lines. These determine your usable building space.
• Soil Quality: A geotechnical investigation (soil test) determines if the ground can support a foundation. In rural areas, a percolation test assesses soil drainage for a septic system.

How Will You Access the Property and Connect Utilities?

Legal access is non-negotiable. If the only access is over someone else's land, you need a recorded easement—a right of passage. Without it, your property is landlocked. Check the plat map at the county recorder's office, but consult an attorney for interpretation. For utilities, rural land often lacks connections. Factor in the high cost of drilling a well, installing a septic system, and trenching for power. Internet access is also critical; confirm availability and reliability, especially for remote work.

What Is the Best Way to Finance a Land Purchase?

Financing raw land is different from a standard mortgage. Vacant land loans are less common and often have higher interest rates. Local banks or credit unions may be more flexible than large national lenders. If you plan to build, a construction-to-permanent loan finances both the land purchase and construction. Before seeking financing, get bids for all development work (grading, utility installation) to know the total project cost.

A 7-Step Guide to Buying Land

1. Contact a Lender: Discuss financing options like land loans, USDA loans, or home equity loans to understand your budget.
2. Hire a Specialized Real Estate Agent: Look for an agent with land sales experience or an Accredited Land Consultant designation.
3. Shop for Land: Use your agent, online land-sale websites, and even drive through target areas to find for-sale signs.
4. Research the Parcel Thoroughly: This is the most critical phase. Investigate zoning, setbacks, access, utilities, and HOA rules. Hire professionals like surveyors and attorneys.
5. Submit an Offer with Contingencies: Your offer should include contingencies for financing, a satisfactory title search, and positive soil test results. This protects your earnest money deposit.
6. Apply for the Loan: Once your offer is accepted, formally apply with your chosen lender for underwriting.
7. Close on the Purchase: Finalize the sale and secure at least liability insurance for your new property.

Buying land requires an extra level of diligence compared to purchasing an existing home. Based on our experience assessment, the most successful land buyers are those who invest in professional help early. Always make your offer contingent on satisfactory due diligence findings to ensure the land meets your specific goals before you are legally bound to the purchase.