10 Mistakes to Avoid When Buying Land
When buying land there are 10 mistakes you definitely want to avoid.
Some of these mistakes are simple and inexpensive to fix, while may result in the loss of your property, or its entire value.
The good news is that these mistakes can be avoided when you work with the right land specialist and a licensed title company.
Let’s get started to avoid these common mistakes!
Title Issues
The ownership records for each piece of land can be traced back throughout history.
These records are carefully analyzed by title companies to ensure there are no issues with the property.
Once everything is verified, you receive title insurance that protects you for as long as you own the property!
However, if you bought the property without a title insurance policy, you could be left with nothing.
Be sure you choose a reputable land seller like Budget Land. We have a network of licensed title company partners so you’re fully protected and insured.
Legal Access
As strange as it sounds, there are properties that can’t be legally accessed since they’re surrounded by private property on all sides. These “landlocked” properties require a neighboring property owner to set aside an easement across their own property in order to provide proper access.
This situation is typically the result of land being subdivided without the appropriate easements being recorded in the deed or plat map.
When you coordinate a transaction through a licensed title company they’ll review the appropriate documentation to ensure your property has legal access. You’ll also receive a title insurance policy that guarantees the access.
Back Taxes
Property taxes are a unique type of tax, because they stick with the property rather than the owner of the property. Additionally, if property taxes go delinquent for a period of time (the number of years depends on the location of the property) the property owner can lose their property altogether.
So if a property owner fails to pay their taxes for several years, and then sells their property, the new owner could lose the property fairly quickly due to delinquent taxes.
Additionally, past due taxes start to accumulate significant fines and fees from the local treasurer, so it’s important to get them paid.
When buying on a property with Budget Land, the title company will complete a full check of property taxes to ensure the property is transferred free and clear.
Delinquent HOA Dues
Similar to property taxes, if a property is located in a Homeowners Association (HOA) or Property Owners Association (POA) there may be annual dues not been paid by previous owners.
In this case, the HOA can place a lien on the property, resulting in large penalties or the loss of the property.
Just like property taxes, a licensed title company will check for the existence of an HOA or POA and determine if there are delinquent dues, so the property is completely up-to-date.
Choose the Right Zoning
Buying raw land opens up a world of possibilities to improve your property in the future.
At the same time, all counties in the United States have planning and zoning departments designed to co-locate properties with similar uses.
These regulations are a good thing, and help avoid situations like sewage plants or landfills being constructed right next to a home. Residentially-zoned properties are located in the same vicinity as other residences, whereas industrial properties are located in their own designated areas.
Therefore it’s important to think about your vision for the property when buying land. These types of properties will typically have different zoning designations:
Single-family residences
Rural properties
Large ranches
Commercial businesses
You can find the zoning for each property by calling our local land specialist. Do a quick internet search for “_______ County Zoning” to see the guidelines.
Flood Zones
There are pros and cons to owning property in a flood zone. The nice part is that you’re close to water. Many high-priced coastal and riverside homes are actually located in flood zones.
On the other hand, once you build a structure you’ll need to pay more for flood insurance.
Regardless of your choice, you’ll want to know ahead of time whether your property is in a flood zone. To find out, look up the property on the FEMA Flood Map Service Center.
Note: Enter GPS coordinates starting with the longitude, and then latitude.
Wetlands
Many waterfront homes are located near wetlands, which are areas saturated with water. However, building directly in wetlands can be a time-intensive and expensive process, so it’s not recommended.
However, properties that have portions of dry land along with wetlands may have the best of both worlds, due to their proximity to the water and the availability of a cost-effective build site.
To find out whether a property you’re considering is affected by wetlands, look up the property on the U.S. Fish & Wildlife Service Wetlands Mapper.
Slope of the Property
If you’re planning to build a structure in the future, you’ll want to ensure that a portion of your land has a relatively level build site (15% incline or less).
If you’re purchasing a large property, then sloping terrain may add a lot to its character. Just be sure a small portion of the property has a moderate slope for your building pad.
To check the slope of a prospective property, just ask our local land specialist for a map of the property.
You simply want to avoid the mistake of purchasing property that has a slope you hadn’t first considered.
Don’t Overpay When Financing
Some unscrupulous land sellers highly inflate their financing prices.
For example, here are the actual sales numbers from one of our competitors:
Cash Price of $16,900
Finance Price of $36,320 ($9,500 down and $447/month for 60 months)
Since you could buy the property outright for $16,900, and there’s a $9,500 down payment requirement, the company is offering financing on the remaining $7,400.
In turn, they’re asking for $447/month for 60 months in order to extend $7,400 in credit.
However, when you enter that into a financial calculator you’ll find the interest rate on that $7,400 loan is over seventy percent (70%)!
Be careful not to get caught up in the financial traps these companies set.
Good companies finance land for fixed rates just a few points higher than home mortgages.
Finance With a Deed of Trust, NOT a Land Contract
When financing a property, a deed of trust provides the buyer with an advantage, whereas a land contract stacks the cards in the seller’s favor.
Buyers prefer using a deed of trust because the property is deeded over to them immediately, which provides much greater protection and control.
With a land contract, the seller holds the deed to a property until the very last payment.
We’ve written a full comparison of a deed of trust vs. a land contract where you can find all the details so you can make the right choice.
Avoid Mistakes When Buying Land
When becoming a landowner, be sure to work with a reputable land sales company like Budget Land. We’ll coordinate your transaction with a licensed title company, provide you with the information you need to make an informed decision, and ensure you have financing that’s right for you.
We look forward to helping you in your land journey!