Buying Land: A 7-Step Guide to Zoning, Financing, and Avoiding Costly Pitfalls

Buying vacant land can be a more affordable path to homeownership than purchasing an existing house, but it requires significant due diligence to avoid costly mistakes. The core challenge is verifying that you can actually use the land for your intended purpose, which involves investigating zoning, deed restrictions, buildability, and utility access. This guide provides a structured, seven-step process to help you navigate the complexities of a land purchase, from initial research to closing, ensuring you make an informed investment.

What Are the Critical Zoning and Planning Questions to Ask?

Zoning rules, set by local counties or cities, are the most critical factor in determining what you can build. Every parcel of land is zoned for a specific use, such as residential, agricultural, or commercial.

• Review Zoning Classifications: Check the local government’s website or contact the planning department to understand the specific rules for your parcel. These regulations dictate everything from the type of structure allowed to its size and placement.
• Examine the General Use Plan: Look beyond your parcel to the area's long-term plan. This document outlines development intentions for the next 5 to 15 years. A quiet rural lot could be slated for a future highway or commercial zone, significantly impacting your enjoyment and the property's future value.

Based on our experience assessment, proactively contacting local planning staff is highly recommended. They are experts in these documents and can clarify complex regulations.

How Do Deed Restrictions and HOA Rules Limit Your Plans?

A deed is the legal document that transfers property ownership. It may contain deed restrictions, which are private rules that govern land use, often found in areas with a Homeowners’ Association (HOA). These restrictions apply in addition to zoning laws.

Common HOA restrictions can include:

• Limits on parking recreational vehicles (RVs).
• Regulations on fence styles and heights.
• Restrictions on certain pet breeds or home-based businesses.

If an HOA exists, request its Covenants, Conditions, and Restrictions (CC&Rs). If anything is unclear, or if there is no HOA to provide documents, consult a real estate attorney who can perform a title search to uncover any existing liens or easements.

Is the Land Actually Buildable?

A parcel may look perfect, but hidden issues can foil construction plans. Key considerations include:

• Environmental Hazards: Determine if the land is in a flood zone, which may require expensive flood insurance, or is prone to landslides. A simple review of FEMA flood maps can provide this data.
• Topography and Setbacks: Topography refers to the land's slope and features. Flat parcels are cheapest to build on. You must also account for setbacks, which are local government rules that mandate a minimum distance between your structure and property lines, curbs, or other structures.
• Soil and Septic Viability: A geotechnical investigation (soil test) determines if the ground can support a foundation. For rural properties without sewer access, a percolation test (“perc test”) assesses the soil’s drainage for a septic system.

When making an offer, include contingencies based on these investigations. This allows you to back out and retain your earnest money deposit if the land is unsuitable.

How Do You Ensure Legal Access and Utility Connections?

Access and utilities are often the most overlooked and expensive aspects of buying land.

• Legal Access (Easements): If the only access is across another property, you must have a legally recorded easement—a right of passage. A plat map, available from the county clerk’s office, shows property boundaries and recorded easements. A landlocked property without an easement has little value.
• Utility Connections: In rural areas, you may need to drill a well and install a septic system, which are significant costs. For internet, check if reliable service is available, especially if you work from home. Obtain bids for all necessary work before finalizing your purchase.

What Are Your Financing Options for Vacant Land?

Financing land is different from financing a home. Not all lenders offer vacant land loans.

• Raw Land: This is land without utilities or improvements. Financing is challenging, and lenders may require a larger down payment with a higher interest rate. Seller financing or local credit unions are common sources.
• Construction-to-Permanent Loan: If you plan to build immediately, this loan combines the land purchase and construction costs into a single mortgage.
• Cash Purchase: Paying cash simplifies the land purchase. You can often use the land’s equity as a down payment for a future construction loan.

Before seeking financing, get estimates for all development costs—grading, utility installation, and building—so you know exactly how much to borrow.

A 7-Step Guide to Buying Land

1. Get Pre-Qualified: Contact a lender to discuss loan options for land, such as a land loan, USDA loan, or home equity loan, to understand your budget.
2. Hire a Specialized Agent: Work with a real estate agent experienced in land sales, such as an Accredited Land Consultant.
3. Search for Parcels: Use your agent, online land-sale websites, and local classifieds to find potential properties.
4. Conduct Due Diligence: This is the most critical phase. Investigate zoning, setbacks, easements, HOA rules, and environmental conditions. 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 results from soil and environmental tests.
6. Formally Apply for a Loan: Once your offer is accepted, complete the loan application with your chosen lender.
7. Close on the Purchase: Finalize the sale at closing. Secure title insurance to protect against ownership disputes and obtain liability insurance for the vacant land.

The most important step is thorough due diligence. Investing in professional inspections and legal reviews upfront can prevent immense financial loss and frustration, ensuring the land you buy truly meets your goals.