How to Buy Land and What You Need to Know

If your dream home is one without any nearby neighbors, you may end up needing to buy land, on which you’ll build a house. The first step in this process is finding the perfect patch of land, after which you’ll need to work on securing it. Many experts recommend paying cash if you can, though financing is also possible.

A financial advisor can help you determine which assets to liquidate for your land purchase, or otherwise arrange your financing.

What to Do Before You Purchase Land

Buying land can be fruitful if you’re wanting to build a house in a particular area, but it can also be a good investment for the future, depending on where you buy. If you’ve decided to buy land, keep in mind that it’s not going to be a short-term project. Buying land is a major undertaking, and to begin the process, you’ll need to figure out how much breathing room you’ll have in your budget for a new house.

Some of the costs to consider when determining how much house you can afford include fees, permits, the purchase price of the land you’re buying, the cost of building a house and expenses related to any necessary adjustments to the land, such as securing access to running water and other utilities.

How to Buy Land

There are different reasons for buying land.. For instance, you may buy land in a neighborhood you want to live in, or perhaps you’re purchasing land as an investment. This will shape what you need to look for when buying the land and what approach you take.

However, when it comes to actually buying the land, there are a set number of steps you’ll need to follow. Buying land always entails:

Finding land
Choosing the right land
Financing the land purchase
Making an offer
Completing a land purchase agreement

How to Find Land for Sale

A real estate agent can be a big help in facilitating your land search. However, you can also do it yourself. Checking the classified ads in newspapers, you can often find landowners attempting to sell their land independently. A specialty magazine or publication might highlight select pieces of land for individuals interested in buying farmland or hunting land.

There are also a great many online platforms where you can access commercial real estate listings. Specialty sites for finding land include Land and Farm, LandWatch and LandCentury. You can even find listings on general sites like Craigslist.

If you’ve exhausted the above options and you still haven’t found your perfect plot, you could also look into whether the government is selling any land near you. This can occur if the government itself has excess land it wants to sell, or if the government has repossessed land from someone else and is selling it off. You can check out realestatesales.gov to see your options.

Those are just the on-market options, though. It’s often possible to buy plots of land that aren’t listed for sale. Even if a plot of land isn’t “on the market,” the owner of the land may still be interested in finding a buyer if the price is right. Keep your ears open for situations like these. You may end up with land you didn’t even know was available.

Choosing the Right Land to Buy

Confused about what to look for when buying land to build on? For starters, you’ll need to find an area where zoning laws won’t keep you from buying land for the investment property or home you want to build. Zoning rules set restrictions concerning things like the size of buildings and the kinds of businesses or residences that can be built.

It’s also a good idea to make sure the land’s soil doesn’t prevent you from building, digging a well or getting electricity and natural gas. Will the land’s elevation be an obstacle? Are there any liens on the land or environmental problems that need solving? These are some of the questions you’ll need to answer before you can prepare to buy land.

While it’s possible to buy a house or a plot of land without the help of a real estate agent or broker, it can help to have someone on your side who specializes in working with vacant lots. A real estate professional can assist throughout the process and minimize any hiccups. If you’re opposed to using an agent, it’s still smart to find a real estate attorney who can address your legal concerns.

One other important step to take before finding a lender is to have the land surveyed by a professional. This involves hiring someone to look at how accessible the land is, figure out its dimensions and find out whether anyone already has the right to use the property.

Getting a Land Mortgage

As mentioned earlier, experts often recommend purchasing land with cash. But if you don’t have enough savings to purchase the piece of land outright, you can get what’s called a land loan. The kind of land loan you’ll need will depend on the type of land you’re interested in buying. There’s financing available for raw land as well as for improved land that has already seen some development (by installing sewage lines, for example).

Raw land loans can be challenging to obtain. Developing raw land is expensive and difficult, so raw land loans are considered riskier than loans for improved land. You’ll often find these loans classified as commercial property loans.

Anyone who needs a raw land mortgage should be prepared to pay a high-interest rate. In addition to looking at your credit and your background, your lender might want to see details about what you intend to do with the land. Your chances of getting approved for an improved property loan are significantly higher.

If you can’t obtain a land loan from a bank or other lender, you can see whether the owner of the land will offer you financial assistance. Another option is to apply for a Section 502 direct loan, which is part of a program administered by the Department of Agriculture that gives low-income individuals the option of buying land in a rural area and using it to build a house.

Note that a land loan isn’t the only form of financing you’ll need. You’ll also likely need a construction loan in order to build your home or another project.

How Much Do You Need to Put Down on Land?

When you’re getting a mortgage for just land, you’ll have to put much more down as a deposit than you may be used to doing for a home. This is because there aren’t any assets that the mortgage company can use to protect their investment in lending you the money. The typical down payment or deposit on land ranges from 20% to 50% down. It’s important to calculate all of the costs of a potential mortgage and make sure it aligns with your finances and plans for the land before moving forward.

Making an Offer on a Plot of Land

Making an offer on land isn’t that different from making an offer on a home. When you’re ready to purchase a piece of land, you’ll have to make a written offer. You’ll approach the seller with the terms you’re willing to abide by. You should also include all of the details related to the transaction.

After you make your initial offer, don’t forget that you can negotiate the land price down. It’s best to come prepared with research and data to back up whatever price you’re willing to pay. You can even ask the seller to pay some of your closing costs and include contingencies, such as a clause that states you can walk away from the deal if the land fails to pass inspection, for instance.

Completing Your Land Purchase Agreement

To claim a portion of land as your own, you’ll need to officially close on the land purchase. To do so, you’ll have to sign a land purchase agreement. This agreement will specify how much you’re paying for the land and how much money you’re putting down. The seller will have to sign the agreement, as well.

The land contract you’ll sign will include everything that you and the seller agree to regarding the land purchase. Other documents you’ll have to review include state-based real estate forms, a closing statement that highlights all of the costs that stem from the sale and a deed that transfers the land’s title from the current owner to you.

Risks and Limitations to Consider Before Buying Land

Buying land differs from purchasing an existing home in ways that can affect both cost and flexibility. Zoning and land-use rules determine what can be built, how large a structure can be and whether the land can be used for residential, agricultural or commercial purposes. These restrictions are set at the local level and can limit future plans if they are not reviewed carefully before purchase.

Access is another factor that matters when buying land. Some parcels do not have direct road access or may rely on easements across neighboring properties. Limited access can affect financing, construction timelines and resale value. Utilities also vary widely, as undeveloped land may require wells, septic systems or costly extensions for electricity and gas.

Environmental conditions can also influence how usable a piece of land is. Soil quality, flood zones, wetlands and topography all affect whether construction is feasible or cost-effective. In some cases, environmental remediation or additional permits may be required, adding time and expense to the project.

Land can also be less liquid than other real estate. Vacant parcels often take longer to sell than homes, and market demand can fluctuate based on development trends and interest rates. Buyers should plan for longer holding periods and recognize that land value appreciation may depend on factors beyond their control.

Bottom Line

A buyer shaking hands, closing a deal on buying land.

Buying a piece of land isn’t simple. It’s important to do your due diligence and check with specialists and experts prior to making your purchase. This is to ensure you’re complying with local zoning regulations and real estate laws. But going through all of the necessary steps may be worth it if it means you can buy the land you need for the home you’ve always wanted.

Real Estate Tips

You may want to consult a financial advisor before making a major real estate investment. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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