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What to Know Before You Decide to Buy Land and Build Your Dream Home

Friday, July 24, 2020   /   by Anne Rose

What to Know Before You Decide to Buy Land and Build Your Dream Home

Suddenly it hits you: To get your dream home, you are going to have to build it.

Buying land and working with a home builder to construct the home that matches all of your personal specifications is an exciting endeavor. It is also a longer process than buying a ready-built home, and one that requires a vastly different timeline and resources.

"The old adage of “location, location, location” absolutely applies when choosing the right homesite for your new dream home," advises Rick Binford, Broker/Realtor with KBT Realty Group. "You cannot change the neighbors, you cannot move the woods, or the pond, and except for doing some landscaping, you cannot change your views – make sure all of those things are considered as you look at your options."

Finding the Right Piece of Property

Before you beginning looking at homesites, think about how you will use your home. 

"I suggest that people have a clear idea of how they want to live in their new home, and that's both the inside and outdoor spaces," says Rick. 

North, south, east or west is a huge consideration, so the orientation of the lot to both the street and other homes - already built or future construction - matters.

"Generally speaking, with tree shade aside, the south facing and west facing sides of your home are going to offer more sunlight and more warmth," notes Rick. "If you are imagining relaxing on unshaded patio or deck on a late summer afternoon, and the rear of your planned home will be facing the west, without tree shade, an awning, or a covered porch, you may find it quite warm and uncomfortable in the summer. At the same time, if you home is south facing, your front porch may be the perfect spot to enjoy a cup of coffee on cooler winter mornings when the sun will be shining brightly there."

Walk the land, and imagine where your doors, patios, and window views will be. An experienced Realtor can be a huge help in this part of assessing property for your future home.

The Real Nitty Gritty: Questions to Ask before Buying Land

Fred Teachey, Realtor/Broker with KBT Realty, also works with many clients who have decided that buying land and building is a better option for them than purchasing an existing home.

"I work with a checklist that gets down to the practical elements of evaluating land as a potential homesite," notes Fred.

Fred's bullet list of homesite considerations include:

    • Does it have public water/sewer?
    • If there is no sewer, then it has to "perk." Perk means that it has to have the ability to install a septic system.
    • If you are going to install a septic system, what type will you need to accommodate your planned construction? Septics can run anywhere from 5K-25K.
    • Is there water? If not, then you will have to install a well, which will require a permit.
    • Is the homesite wooded or cleared? Depending on the size of trees, clearing the land/lot can be a considerable expense.
    • Does the lot have adequate drainage, and if not, can the issue be resolved?
    • Has any portion of the land been designated "wetlands"? This may impact both drainage and future development freedom.
    • Does the lot/land have legal access?
    • Are there any restrictions on either improving the lot or home construction?

"If the land around you is also undeveloped, make sure you are thoughtful about how that land will be used in the future," adds Fred. Your real estate agent can do research to help you make an educated consideration of what will be the likely site lines and privacy impacts of future development.

6 E Rolling Meadows Road Hampstead.JPG
6 E Rolling Meadows Road Hampstead North Carolina

"You don't want to be surprised when your new neighbors finally break ground," Fred emphasizes.

Fred also suggests that prospective buyers make more than one visit to evaluate land for purchase. "It is also good to look at any homesite both on a bright sunny and dry day," he advises, "as well as right after heavy rains to review any potential drainage concerns."

The Final Step: Financing Your Land

Lending institutions usually consider loans for land purchases to be a greater risk than approving a home mortgage. If you aren't a cash buyer, you will find that you have a few more hurdles to overcome than financing a home purchase. If your plans to build on the land have a short timeline, though, it will be easier to secure financing. 

Talk with a local bank or credit union, which may be more amenable to offer a loan for the purchase of land. Talk with a traditional lender for a referral and advice in the process of financing your land loan. If you have already selected a builder, discuss financing and what credits are available, suggests Tara Joans, with Guaranteed Rate.

"Often builders will partner with a trusted lender and offer incentives for using the preferred choice. It’s a great way to save extra money!" say Tara. "The builder will carry the loan until completion. Although Guaranteed Rate doesn't do land loans, we then come in and complete the purchase as a finished home after the certificate of occupancy is issued. The client will typically pay a builder deposit to secure the home until it’s ready to close."

3820 Bancroft Place Southport.JPG
3820 Bancroft Place, Southport North Carolina

Selecting a Home Builder

Touring model homes in new developments is an excellent way to start exploring your options in builders. The Realtor working with you to find the right land for your new home will also be a good source for information on builders who specialize in the style, size, and price range of homes that meet your specifications.

Check references, license status, and be certain that you are comfortable - both financially and aesthetically - putting your future in a builder's hands. The expertise of a Realtor will help safeguard you as you make decisions in every phase purchasing land and building your dream home.

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