Buying Land to Build vs Buying in a Planned Community
The idea of purchasing land and building a home has been a popular topic among my buyers lately. Have you been considering building a home too? If you have you've probably noticed building a home typically means choosing a lot in a planned community with a pre-established builder. There's another option though, one that I've been asked about a lot recently: buying your own, multi-acre piece land and then building. There can be pros and cons to buying and building on your own land. If you're looking to do so there's a few things you need to know.Buying land seems like a simple concept. You find a piece that looks good and you purchase it with a loan. Easy peasy, right? Unfortunately, it's not as straight forward as that. Purchasing land or standalone acreage comes with extras like reviewing plots, ordering surveys, and having perc tests performed. There are certain things you need to know before you start looking for individual pieces of property to build on.
Build-ability
When you're purchasing a lot in a neighborhood to build on it's already been deemed residential and build-able by the county. When you are looking at individual pieces of property the first thing you'll have to look for is if it is zoned residential and if you can build on it. Sometimes, being able to determine the property's ability for being a homesite will require you to do some additional testing.
Home Size
In planned neighborhoods the size of the home that can be built on each site has already been determined. When you are purchasing individual parcels you will have to be the one to determine what size home can be built there. With that said, it is important to know roughly what you want to build before you put a contract on anything. I don't mean you have to have your plans figured out but just a rough idea how large of a home you want - number of baths, number of bedrooms, etc. Knowing this information will help you better write your contract terms. You'd hate to be held to a contract for a piece of property that can only support one bathroom when you really wanted two and a half.
Tests and Property Info
Buying land is a little like buying a mystery grab bag, at least here in the Commonwealth. By that I mean Virginia is a buyer beware state so the sellers don't have to provide tons of information about the land. That doesn't mean you can't protect yourself during the purchase and get more info though. You need to know exactly what tests need to be done and what information you need to collect. Some sellers will provide what they've done for their property in the listing - plot of previous survey or proffers - but not everyone will have done those things. That said, here are a few items you want to consider when looking into property to purchase for building:
Do you need well and septic? You'll need to order a percolation test.
Is a plot available? You will want to order a survey of the land.
Are you okay with there being easements on the property for neighbors? You'll want to be sure to have a title search done.
Is there water? You'll want to know about waterway rights or flood planes for insurance.
Loans
When you are buying in a planned neighborhood the cost of your lot is rolled into the total cost of the home. The builder is basically holding the land and selling the entire property - physical building and parcel - to you for one price. When you are purchasing land on your own and then building you are making two separate purchases.Land loans are different than home loans. They typically require a higher downpayment and often require two different loans - a land loan and then a construction loan for building. Before you get into a contract for a piece of land it is important you've spoken to a lender and know the financial breakdown between buying the piece of land and then financing the construction of the physical home. Building a home on your own land can be an amazing option. It's just important to understand that the financing and contractual part of buying land then building is different than building in a planned neighborhood. There are more things to think about and it is more important than ever that you have a good guide through the process. If you have questions on buying land or building a home on your own land shoot me an email.
Happy Hunting,
Jess