Urban dwellers often idealize what it's like to live on an acreage outside city limits, and there are indeed some advantages. Land costs drop in the country. The further away from the city, you get, the cheaper the acreage becomes. Add to that cleaner air, more space, and building a custom home to your specifications.
But the realities of buying your piece of the countryside can cost you big time after closing. Obtaining a mortgage for your dream home might be more challenging than you think, and several pitfalls can wait on the horizon for the unwary.
Whether you're considering buying an existing home or purchasing a tract of land on which to build a new home, both options require considerable research. Both options also have some crucial differences you should be aware of so that you can make an informed decision.
The Major Difference Between Buying Land For Building A Home and Buying a House
One of the differences between the two is how the loans are structured. Mortgages come in a range of options to suit your needs and budget, but there are much fewer purchasing land options. Many land loans must be fully paid within three to five years.
Interest rates and down payments are also usually higher on land loans than on mortgages. A typical down payment can range from 20-50%. However, some banks will allow a lower down payment if you have an excellent credit score. Securing a lower interest rate is a lot tougher, though, as land only loans are riskier for the lender since there isn't any collateral, such as a home. Therefore, lenders are less inclined to offer lower interest rates. At Home Builders, we have the best dual occupancy selection to make your house a dream come true.
One of the benefits of purchasing land with cash is that the amount you pay for the land can be used as a down payment towards your construction loan when you're ready to start building your home. Lenders can also include your land purchase within your construction loan in some cases.
Most experts recommend purchasing the land with cash if you have it. A land specialist can advise you on your options, and a financial advisor can assist you in liquidating assets or arranging finance options.
Reasons To Consider Buying Land
In many areas, today's housing market is a somewhat competitive one. New homes are being snatched up before they're even finished being built. Older homes can come with older home problems. If the current housing market isn't offering what you need, then purchasing land and having your own home built according to your specifications may be a much more viable option.
Buying rural land also affords you more freedom and less intrusion from nearby neighbours, and costly HOAs. If you like the idea of doing more of what you want on your land without neighbourhood covenants and restrictions, then once again, buying your private land is probably a good choice for you.
Things To Consider Before Buying Land To Build On
The absolute most crucial factor to consider before buying land is its location. In the world of real estate, location trumps everything else and should always be the first thing to think about before buying. And not only should the municipality be considered, so should the overall community's precise lot location. For instance, a lot situated at the end of a quiet culdesac and backs onto greenspace would be worth more than land in the same neighbourhood adjacent to a busy roadway.
Depending on your exact needs, you'll want to assess the lot's location and its proximity to amenities like public transit, highways, schools, parks, and so forth. You'll also want to factor in the proximity of the land to your place of work to ensure the commute isn't going to be much longer than you'd like it to be.
The setbacks of the land – which are the rules that stipulate how far the structure can be set back from the lot's border – need to be considered before purchasing a plot of land. Where you're allowed to build the house on the lot will dictate the property's setbacks. And if you have a desire or need to build a home of a specific size, you'll want to be sure that the lot can accommodate that size, and the setbacks play a significant role in this.
Jurisdictions may have land that's zoned for residential or commercial use or both. You'll need to find out if the land that you buy is allowed to have a residential structure built on it, mainly if the surrounding area is used primarily for commercial purposes. Besides, you probably wouldn't want to make a home in a place where a bunch of industrial buildings will be erected.
Further, you will need to determine whether or not the area is zoned for additional structures – such as sheds or detached garages – if you intend to build them. Also, there may be zoning restrictions that dictate the minimum-size home built on the lots in the area. If you don't want or cannot afford to build or operate a large house, make sure the minimum structure size fits within your means.
Ideally, the parcel of land that you purchase will not be vulnerable to specific natural hazards. Depending on exactly where the land is located, it could be at risk for fires, a massive problem in parts of California as of late. Determine whether or not the land is situated in a fire zone before buying.
Also, you'll want to have the soil assessed on the land to check for its quality and composition, which will affect how your new home is built, the cost of the home's foundation, and any landscaping you may want to do.
If there's an easement on the title of the property, you'll want to know about it before you commit to buying. An easement gives another person or entity the legal right to use another person's property for a specific purpose, regardless of who owns it. If, for instance, there's an easement on your property that allows others to cross over it to gain access to another lot, it could have an impact on your level of privacy.
Once your home is built, how will it be powered? Where will your water source come from? You'll want to find out how your home will gain access to water, electricity, gas, waste, and even phone or cable. This is especially important in remote locations where the cost to hook up to municipal utilities can be extremely expensive. You'll want to get in touch with the water and utility companies before putting in an offer on the land to find out the costs to connect water, power, waste, and other connections.
Is a Structure Already There?
You'll probably want to get rid of any existing structure if there's one already on the property but proceed carefully. Depending on the construction or building size, you might need a professional demolition contractor to reduce it to rubble and haul the debris off. This can be a considerable added expense.
You might also need local permits for this type of work, and you'll want to make sure utilities are turned off ahead of time if they're available to your location. The contractor will most likely take care of this for you, but double-check to be sure.
Consider the Services of a Land Planner
A land planner is like a home inspector, but for raw land. You wouldn't buy an existing home without a home inspection, and it might not be wise to purchase land, either, without having an expert size it for potential problems.
A land planner will look for all these issues and advise you as to whether any of them will affect the possibility of you building your dream home there—or even resale somewhere down the road. They may also be able to help you determine if the size of the structure you want to build will comply with current zoning land to building ratios.
The Drawbacks Of Building And Living In The Country
Finding skilled craftsmen who are willing to travel to your location might be difficult. Those who are eager will probably charge more to compensate for driving the distance. Transporting building materials and paying for delivery will also likely cost more than building a home in the city.
Modern conveniences are usually available, but they aren't always reliable in the middle of nowhere.
Going into town for groceries and other needs generally require planning and long trips. And you could be stuck at home for days if it snows and rural roads aren't promptly and adequately ploughed.
Should You Rent Before Buying?
It might be a good idea to rent a home first before buying land and beginning construction, particularly if you're unfamiliar with the area or if you've never lived out in the boondocks before.
You can get to know the community and hear stories from local owners that you might not otherwise be privy to. At least try to spend a few weekends there, if possible.
Be aware of the pitfalls of this approach, however. All your neighbours might not be overjoyed to hear that you're planning to buy up that land behind their homes and erect your palace there, obstructing their pristine views. You might meet up with some resistance—even organized resistance involving municipal and county authorities.
Resale value is often softer in the country than in the city because the potential buyers' pool is smaller. Home prices tend to be more negotiable when demand is low, and supply is high. As a tenant, you can try to time the real estate market and be ready to buy that parcel of land as soon as it becomes available.
Essential Considerations When Buying Land
You'll need to figure out if your budget allows the purchase of land and building a home. Besides construction costs, you'll also have to consider additional charges including, but not limited to, permits, fees, land adjustments – if needed, and the cost of running water, sewer, and utility lines to the home. The guidance of a land professional is vital to this process.
How To Find Land To Buy For Building A Home
When seeking land to purchase, you'll want to retain the services of a qualified rural land agent as opposed to a residential real estate agent. A real estate agent without the education or experience handling land transactions can end up either wasting your time, costing you a lot of money, or both. Start searching for a qualified agent near you, or browse properties listed by qualified agents to get started. Be sure to interview the agents you're considering to confirm they've got the experience necessary to help you reach your goals.
Issues To Consider Before Making An Offer
First, check that you are allowed to build a house on the lot in question. Don't rely solely on the seller or agent's word; confirm this with the local municipality. While ensuring that it is buildable, be sure you can build the size of house you want by asking about any minimum or maximum size restrictions and request height restrictions. Looking for dual occupancy? Look no further! Home Builders has you covered.
It may seem an odd thing, but just because someone is selling a lot doesn't mean they have the right to do so. The lot may have changed hands in the past without all the appropriate paperwork being completed. Consider having a notary check the ownership history.
Some soils don't have the compressive strength to handle traditional buildings. Some conditions that could impede a build include soil with a high water table, high content of clay; natural peatlands; building lots that have had fill added.
A geotechnical engineer can confirm what type of load a specific soil type can handle. Individual structural engineers may not require a soil test before approving a project, but a municipality might.
If a building lot is not suitable for a traditional basement, it may still be possible to build with alternatives, such as slab-on-grade, raft-slabs or screw piles. If a lot can only handle alternative building types, that should be reflected in the asking price, and if it isn't, it should be reflected in your offer. Contacting a local geotechnical engineer would be wise as they might have knowledge and experience with regional issues.
Streams through a building lot can hamstring a construction project entirely or lead to additional landscaping and excavation work. If there is any standing or moving water on a site, it would be wise to employ a geotechnical engineer to ensure a building wouldn't violate any environmental laws.
Septic system and well
The best-case scenario is having access to municipal water and sewage; short of that, you will need a well and septic system. Both will have minimum required setbacks from lot lines and neighbouring systems. You may be able to do some rough calculations yourself by learning from the municipality what restrictions you face and measuring the distance from adjacent systems. This might save you the cost of a septic engineer by instantly discounting a lot where systems at neighbouring homes make it impossible to locate both septic and well on a lot.
This recommendation is intended to help you scratch potential lots off a list, not to confirm them as feasible. Unless you're a pro, don't rely on your conclusions to declare a lot buildable.
Some building lots may already have a well; if so, find out the depth, the flow rate and quality. Ask neighbours about the depth and consistency of their wells and if they ever have shortages. This isn't a failsafe way to come to any conclusions as two adjacent wells can tap into entirely separate aquifers, but it can still be valuable knowledge to have.
Well-water may be quite hard or have a strong sulphur smell; both of these issues can be dealt with, but it would be helpful to know this early if you need to enlarge a mechanical room to accommodate treatment tanks. At Home Builders, we offer a wide range of duplex build.
Site topography (elevations)
Assuming all the above issues work out, assess the elevations of a building site to ensure you won't have drainage issues and help position the house. Building on high ground will help reduce the chance of flooding; it is also best to place the house and septic system so that wastewater can be gravity-drained instead of being pumped to the septic bed.
There's no better way to ensure the home you buy is fully customized to your liking than to build it yourself. But your first step is to buy some land to build on, and that doesn't come without its own set of tasks. Do your research on the lot you plan to buy to make sure it's exactly what you want without restrictions. Team up with a real estate professional who is well-versed in buying vacant land to help you find a lot that meets all your needs without compromising how you'll be able to use and enjoy it.