Whether you’re looking to buy your first home or looking for a new place to call home, you may be wondering if buying land is right for you. For first-time land buyers, there are some important differences to be aware of before starting your land search, from zoning and utilities to financing and site requirements.
This Redfin article provides an overview of what first-time land buyers need to know, from loan options to due diligence. That way, whether you’re looking to buy land outside of Boise, ID, or looking for land for sale in Raleigh, NC, or elsewhere in the United States, you’ll know what to expect in the process.
Important points
If you’re planning to build, learn about the land’s topography, access points, utilities, and water. Understand whether you need a land loan, construction loan, or both. Budget for surveys, environmental testing, and additional upfront due diligence costs.
How do you plan to use the land?
If you are purchasing land for the first time, you will need to decide how you will use the land. Are you buying land to build a house? Or are you planning to turn it into a recreational area? Zoning requirements vary depending on how the land is used. For example, if you are building a house, you need to consider the access and zoning of the property. Some areas have HOA rules or CC&Rs that limit what you can build and how you use the land.
Knowing what to build on the land will also help you decide how much square footage to look for. It is necessary to take into account the condition of the land, whether it is suitable for building and whether there is a risk of flooding. Check out FEMA flood maps and county floodplain data to get a clearer picture.
Loans for first-time land buyers
Taking out a mortgage for land is a little different than buying a traditional home. Lenders often distinguish between raw land, unimproved land, and improved land, and loan terms vary depending on the degree of development of the land. Most land loans require at least a 20% down payment, and some may require up to 50%. Interest rates are typically different than traditional mortgage rates, often 1 to 2 percentage points higher. Repayment terms are often as short as 5 to 15 years. However, you may find items that are 30 years old.
Land loans only finance the purchase of land, not the construction of housing. Therefore, a construction loan may also be required. A construction loan covers the cost of building a home and may convert to a traditional mortgage once construction is complete (construction-to-perm loan). If you plan to build a home on the land you purchase, you may need both types of loans.
Due diligence for first-time land buyers
When purchasing land, there is additional due diligence and factors to consider. Here are some important points that first-time land buyers should keep in mind.
Work with an experienced real estate agent
Choosing an agent who specializes in working with first-time land buyers is important to finding the right area and handling unique situations. Some agents focus specifically on rural, non-electrified or recreational land and may require additional steps or local knowledge. A real estate agent with land knowledge can help you ask the right questions, schedule an inspection, and determine whether you should vacate the property.
Survey and title search
A land survey establishes the legal boundaries of the land. If the property you’re considering purchasing doesn’t already have a land survey, consider getting one done. Some lenders may also require a land survey to confirm exact acreage, easements and encroachments, and determine flood zones. If you are planning to build on your land, you may also need a topographic or elevation survey for drainage plans and permits.
Just like when buying a home, it’s important to do a title search. A title search will uncover title issues, liens, deed issues, or unaddressed title claims. If the property was recently subdivided, make sure the subdivision is legally recorded.
environmental testing
If you plan to build any structures on your land, environmental testing may be required. A soil infiltration test will tell you if your land is suitable for a septic system. Well water can also affect your ability to live on land, so groundwater testing may be necessary. Groundwater testing can reveal chemical, bacterial, and mineral contamination that can affect water quality on your property.
In some regions, you may also need:
Geotechnical or soil stability tests to assess landslide and erosion risk Wetland boundaries if the land may contain protected wetlands Wildlife habitat reviews, which are required in some areas for protected species
access rights
Is there legal access to the property? If you don’t have a private or public road leading to your home, this can affect your property value. If there is no accessible road, you may need to factor in the costs associated with building a road and establishing a title easement. Shared access roads may also require a road maintenance agreement, and some lenders will require one before approving a loan.
Utility availability
No matter how you use your land, utilities are important. Be sure to check to see if the property already has utilities and water. If not, how much will it cost to add it? Providing electricity to your site can be expensive depending on the distance to the nearest power source, and some areas have limited access to high-speed internet or mobile phone service.
Seasonal inspection
It’s important to note that the time of year you test your land can determine what you learn. For example, winter and spring can present flooding risks and potential drainage problems, while summer can present drought problems.
Understand future developments
Although you can’t always know what an area will look like in a few years, it’s important to find out if there are any future development plans for the area. The county planning department likely has information about potential subdivisions, infrastructure projects, commercial developments, and proposed highway and major road expansions. All of these can change the value of the land or lead to increased noise and traffic.
Red flags to consider when buying land
As with buying a home, there are some red flags to consider when buying land. Issues to be aware of include:
Failed infiltration tests that prevent septic tank construction Water contamination that is costly to remediate No established utilities No title deed to the property Unclear title Expensive to develop the land Protected areas that exclude buildable areas Wetland or flooding issues Soil instability, erosion concerns, or landslide zones Easements that limit where you can build Strict use zones that do not permit intended use
Fixed asset tax when buying land
Owning land can make some difference in your property taxes. If you use your land for farming or ranching, you may be eligible for an agricultural tax exemption. A similar tax deduction is available if you use your land for timber production. However, if you plan to purchase land to build a house, you may not be eligible.
Vacant land may have lower taxes than developed land, but tax rates vary widely by state and county. If you think you may qualify for these exemptions, it is best to consult a tax professional.
Final points for first-time land buyers
Buying land for the first time is a big leap and requires special due diligence, whether you plan to build a house on the land or use it for agricultural purposes. Working with an experienced agent, getting the proper inspections and research, and choosing the right loan can help the process go smoothly.
