How to Buy Land

Land investments are obviously huge decisions, which makes a quality evaluation the cornerstone of any savvy purchase. The first thing you should know about purchasing land is that local laws will dictate much of the buying process, so it’s important to have a firm grasp on what your local government requires before purchasing land. One of the requirements is that the lot falls under the government’s definition of “buildable”, which can vary from one city to the next. A buildable designation means that all government entities have given permission to build on the desired site. It’s important to note that just because a lot has been deemed “buildable”, doesn’t mean it’s an ideal, or even good, place to build. That can only be verified through your own research and by measuring your land to make sure it’s the right size for your project.

A lot of research will be required to properly navigate all that is related to zoning. Zoning refers to government ordinances that regulate the use of land as determined by a local board. The board or “building committee” hopes to establish a set of goals that make sense and ultimately benefit everyone in the community.

The board establishes specific zoning districts, which are then divided into smaller sub-districts. You can find out which zoning district your desired land sits in by looking at city websites, but we recommend going to city hall in person, where you can pick up a map and speak to city employees and officials. They may have greater insight into the property and future of the community. Each zoning district comes with its own set of guidelines and restrictions. Here are a few you should be familiar with before purchasing land.

After agreeing to purchase a parcel of land, the land owner will agree to a due diligence period. During the due diligence period you can determine whether or not your project is possible on the parcel. If the project is not feasible based upon one of the previously agreed upon contingencies, you can choose not to buy the land without penalty.

Once you’ve finished all of your research, and you’ve decided on a piece of land, it’s time to make a bid. All of the information that you’ve gathered has helped you make this decision, but it has also equipped you to make a knowledgeable and respectable offer. If you’re comfortable writing the official bid yourself, you are free to do so. But due to the complexity of land investments, we recommend hiring a lawyer to assist with the paperwork and official bid process.

One way to get the attention of a seller is by putting forward earnest money during the bid process. Earnest money is a relatively small amount of money put into an escrow account, usually 2-5 percent of the total value of the property. Earnest money indicates your level of interest in the property and can be a valuable bargaining chip for a highly contested piece of land. However, if for some reason you don’t successfully close on the deal, the seller has the right to keep the earnest money.

As you can see, a couple of the most important factors in purchasing land are doing your homework and being prepared to offer your vision for the property. These signal to the sellers, real estate agents, lawyers and lenders that you’re serious about buying land and ensures you receive the best deal possible.