Buying and Selling Undeveloped Land: What Both Parties Need to Know First
Buying undeveloped land seems like it presents a world of opportunities where a buyer's dreams can come to fruition. Selling undeveloped land takes it off the owners hands and pads their account or allows for another investment opportunity. While both of these concepts are true to some degree, it's important for both the buyers and sellers to know the in's and out's of the process to avoid problems.
Both Parties Should Work With Land Negotiating Professionals
While real estate agents understand homes, not all of them are privy to the vast landscape of dealing with the finer details involved in the selling and buying of undeveloped property. Working closely with agents with experience in negotiating land deals allows the parties to better understand the process and ensure due diligence.
It's vital to know exactly what can and cannot be done with the land being transacted concerning development. There are incidents in which plots cannot be subdivided legally, leaving buyers who thought they could upset. Sellers could face legal suits for false advertising, should this not be disclosed or if the property is sold as dividable.
Buyers: Consider Home Values vs. Your Dream Construction
Undeveloped land is the ideal place to build a customized home, but does the buyer's vision complement the style and design of other homes in the community if any exist? Buyers seeking construction loans will need to consider neighborhood home values to prevent being denied. Requesting a $2 million construction loan in a community where homes cap out at $1.25 million are likely to be turned down by lenders.
Getting Loans to Buy Undeveloped Land is Challenging
We say it's challenging to get a loan for undeveloped land, but a better wording might actually read ‘next to impossible'—even with excellent credit, other collateral and a strong banking relationship. This is due to the fact that a structure is typically the collateral for a loan, and there is no structure. Hence, lenders aren't eager to shell out dough. Buyers may be able to get financing for a portion of the purchase funds but should be prepared to pay cash for undeveloped land.
Consider Road and Utility Access to the Property
Undeveloped property in rural areas may lack access to electricity, water and sewage—things many take for granted and don't even consider when buying. Buyers and sellers both need to consider how much it will cost to get any essential infrastructures in place, and utilize those figures to come to a meeting point on price.
Make No Assumptions About Rezoning the Property
There are mandates that governing bodies establish that involve zoning, code restrictions and ordinances that set limitations concerning what can and cannot be developed on certain lands. There may be easements or mandates to build fencing or walls in certain zones. Some property cannot be built on or developed at all, and even property that can requires serious time and investments financially.
Environmental Testing and Surveying is a Must
Be sure that a surveyor and soil tester visit the property for expert services. Environmental tests evaluate the land for soil contamination and its integrity overall. If the soil is tainted or if the land isn't solid enough to build on, development may not be possible. A surveyor can confirm boundary lines, as there are many incidents in which neighbors have encroached across into the land in question. Professionals testers will also be able to help you determine if the property is prone to flooding before you buy.
The bottom line is that both Atlantic County buyers and sellers have many points to contend with and consider during land purchases. Avoid costly errors and misunderstandings by contacting a professional agent who specializes in land.