by Laura Mueller
It’s always important to ask the right questions when you’re buying a piece of real estate, and that’s as true for land as it is for anything else.
More information is always a good thing, especially when it comes to a big investment like a land purchase. And while your agent will be able to guide you through a lot of the ins-and-outs of what you’ll need to know, it never hurts to be as informed as possible regarding the various factors that will help you determine if a property is worth your time (and your money) or not.
With that in mind, here are eleven essential questions to ask when buying land—including some that might not be very obvious.
1. How is the property zoned? You’ll want to be well aware of what you can and can’t do on the property, especially if it’s raw or otherwise undeveloped land.
2. Are there any building restrictions? Similar to above, this tells you whether you’ll be restricted in what you can do on the land, particularly in terms of structural improvements.
3. What are the access rights? Make sure you know whether there’s an existing access road, as well as whether it’s publicly maintained and if anybody else has rights to it.
4. Are there any utilities and/or utility hook-ups? Figure out exactly what’s already available in terms of water, electricity, sewage, and other key utility systems—or if you’ll need to pay to put them in.
5. Are there any planned developments surrounding or near to the property? Find out in advance if there are any nearby updates that will affect your land use, your views, or your privacy.
6. Who are the neighbors? If possible, find out who owns the properties adjoining the piece of land and, most importantly, whether there are any ongoing issues with them over things like boundary lines or access rights.
7. Are there any easements on the land? You’ll want to know sooner rather than later if you’re going to have to share a portion of the land with neighbors, the public, a conservation group, or anyone else.
8. How much are the property taxes? Even vacant land is subject to property taxes. Get an estimate in advance of what the annual taxes are so that you can double check they fit in your budget.
9. Are there any tax exemptions on the land? Speaking of taxes, you should also ask about any possible tax exemptions, such as those for making certain agricultural or energy improvements on the land.
10. Is the seller offering financing? Land mortgages aren’t always as clear-cut as conventional real estate mortgages, and some sellers opt to provide their own financing instead in order to ensure a smoother deal. Ask if that’s the case, or if there are any other sort of seller finance expectations or concessions.
11. Is the title free and clear? A title check will tell you if the seller has the necessary title rights, but you can also ask in advance to save yourself some time later on.
Asking the right questions when you’re buying land isn’t just about convenience. While sellers do have mandatory disclosures that they have to make, knowing what questions to ask gives you more agency to advocate for yourself—and it’s also integral to protecting your rights and your resources as a land buyer.
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By Laura Mueller
We’re in the midst of a serious seller’s market, and if you’ve been thinking of listing your land, right now just might be the best time to do it.
All real estate markets ebb and flow between buyer’s markets and seller’s markets. In the former case, an influx of inventory puts buyers in the driver’s seat, providing them with more control over prices and contract terms. In a seller’s market, however, there are more buyers looking for properties than there are properties to sell—and that creates steep competition that savvy sellers can put to use to increase sale prices and close more lucrative deals.
The land market saw a surge of increase in 2020, with many buyers opting to ditch their small urban homes for private and expansive rural properties—a trend that’s been burgeoned by a sharp uptick in remote work opportunities. Combine that with record low interest rates on loans and it’s easy to see how the land market has quickly become the place to be if you’ve got property to sell.
So how can sellers take advantage? Here are three big ways that a land seller can benefit from today’s high demand, low inventory market.
1. They can sell for more
Low inventory helps sellers make more money in two ways. One, they can list properties for more, and two, they can often drive up the sale price even higher through competitive bidding.
Bidding wars are common in a seller’s market. And because the right piece of land can be even harder to come by than the right residential home, competition is even fiercer among new land buyers than it might be otherwise. That offers huge potential for sellers to make an impressive return on their initial investment, and is an opportunity that likely won’t stick around when the market eventually shifts.
2. They have less need to make improvements
The steeper the competition the less that buyers are willing to risk complicating a potential sale in post-offer negotiations. For sellers, this means a heightened ability to sell their land “as is,” without the need to make hefty (and often expensive) improvements in order to lure in more buyers.
Some improvements might make sense if you’re a seller trying to attract residential buyers—such as putting in utility lines and an access road, if you haven’t already. But they’re not necessarily going to make or break a deal, and you might even be able to skip them entirely if demand is high enough in your area.
3. They have more control over sale terms
Whoever runs the market holds more power over contract terms and conditions. This is good news for sellers, who in addition to raking in more cash on their investment also have a chance to create more attractive deals on their behalf. This could be financially based—such as putting the full burden of closing costs on the buyer—but it can also be more personal, for example, choosing to only sell to a buyer who promises to continue with native planting or conservation efforts or who won’t hunt on the land.
Such a great seller’s market won’t stick around forever. If you’re thinking of listing, now is the time to get on board—and fast. Call your local agent to learn more about selling potential in your area, and use our easy online listing platform to get more eyes—and more offers—on your property.
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by Laura Mueller
When it comes to financing your land purchase, getting the funds isn’t always quite as simple and straightforward as it would be if you were buying a property with a conventional mortgage. Traditional mortgage options are hard to come by for land loans, and lenders who do offer them tend to tack on higher interest rates and shorter pay-back periods—both of which could be tricky to manage, especially if you’re buying on a budget.
So, what are your next best options? Many borrowers use government or private loans to finance their purchases, which offer a bit more flexibility when the big banks aren’t a good fit. Which one is right for you will depend on your eligibility, where you’re buying, and what your current financial situation looks like, but here’s a quick look at what some of your available land loan options might be.
FSA loans– Individuals who are buying land for farming or ranching purposes may be eligible to receive a low-interest FSA loan through the USDA Farm Service Agency’s Farm Loan Program. These include both farm ownership loans for expanding existing properties and microloans for small and beginning farmers, plus targeted loans for minority and women farmers and ranchers.
USDA construction loans – If you’re buying land to live on in a rural area, then check to see if you qualify for a USDA Construction Loan, which will help you pay for both the land itself and the structure that you intend to build there. You’ll only be on the hook for interest payments while your residential property is being built, after which the loan will switch over to a more traditional home loan with both principal and interest payments due each month.
Federal and state grants – While not loans per se, it’s worth checking to see if you qualify for any federal or state grants for your land purchase. There are lots to go around, covering things like land conservation, improvements, and agriculture, and you may be able to find grants through private organizations as well.
Home equity loan – If you have equity through an existing conventional mortgage then you may be able to get favorable rates on a home equity line of credit—also known as a HELOC. From there, you can use the credit as you see fit, including for the purchase of land.
Seller financing – There’s a chance that your seller is open to working with you directly on financing by extending credit for your purchase. Keep in mind that this route usually demands the seller own the property outright, and you’ll definitely want a lawyer to look over the contract before you sign to ensure it’s air-tight.
What About Bank Loans?
Bank loans for land might not be as favorable as they are for traditional housing, but they are available. Types include:
• Raw land loans for completely undeveloped properties.
• Unimproved land loans for mostly undeveloped properties—i.e. those that are primarily raw but may have some utilities ready to go.
• Improved land loans for land that is good to go with utilities and access points.
In general, the more unimproved the land you want to buy, the riskier the loan and the higher the interest rates are going to be. Make sure to shop around, and extend your search to small banks, which may be more open to financing your land investment.
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by Laura Mueller
It can be tough out there for a land buyer, especially when inventory is low.
The real estate industry has been stuck in a stark seller’s market for months on end, and that applies to land as well. This past year saw many people ditching big cities and investing in rural land, a trend that was further intensified by the growing popularity of remote work. And with inventory down but plenty of buyers looking to make a purchase, that can mean a lot more competition than normal for buyers—plus a lot more urgency when you do find something that you like.
If you’re looking to buy and you’re feeling discouraged by the lack of properties for sale, you’re not alone, nor are you totally out of luck. Here are some quick tips for buying land in a seller’s market, with key takeaways that can help you manage the market without losing your mind.
1. Hire a great agent
To really compete in a low-inventory market, you need the right agent. This includes making sure that you’re not only working with an agent who has their fingers on the pulse of your local market and the ability to act fast on your behalf, but who you also communicate well with and can trust to be constantly on the lookout for properties that meet your needs.
If you’ve been on the hunt for a while, it could mean that it’s time for a change. Check in with your agent and ask them how it’s going from their perspective. You may want to consider switching to someone else if it means having an agent by your side who can really go to bat for you.
2. Get in on the search
Having the right agent is essential, but as the buyer you still have an important role to play too. Because inventory is so scarce, you want to have feelers out in as many direction as possible, which includes not just the traditional search channels that your agent is using but also within your own network. Do plenty of your own searching in addition to relying on your agent, and get involved in local social media groups so you can be the first to know when new properties become available.
3. Work out your financing in advance
With fierce competition comes the need to move as quickly as possible when you do find a property that you like. That leaves less time for working out the kinks in your financing. Ensure that you know exactly what you have to spend—including how much cash you have on hand and how you intend to finance the remainder—so that you have all of the information you need to put forward attractive and sound offers.
4. Make it personal
In real estate, buyers and sellers often get reduced to their on-paper presence, which takes the emotion out of the deal. Sometimes a personal connection can work in your favor though, especially when you’re trying to stand out from the pack. Consider writing a note along with your offer that speaks to what drew you to the property and why you love it so much. If it’s a private seller, that may be enough to sway them to your side.
All hope isn’t lost. Your perfect piece of land is out there, so get to work and make sure you snag it.
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The wonderful thing about purchasing empty land is that it serves a fresh start for anything you desire to do. Empty land is vacant space that is loaded with potential, and whether you’re searching for land in the mountains or on the sea shore or some place in the middle, you can find affordable land all across the country if you just know where to look.
The secret is to find cheap land in undeveloped areas that may see a building boom in the near future. While choosing the right spot can be tricky, you could sell your land to a commercial real estate company or developer in the future for a major return—provided you play your cards right.
Thinking about placing your bets on a vacant lot? Here are five U.S. states where you can buy cheap land and where your investment may just pay off in the long run.
Areas to be considered
Arkansas, Tennessee, West Virginia are three of the cheapest places where you can buy cheap land.
New Mexico and Arizona are popular places for retirees.
If you are going to buy land make water and other utilities are available nearby.
Land is the most illiquid form of real estate.
Known as the Natural State, Arkansas borders the Mississippi River and is well known for its abundance of outdoor recreation opportunities from fishing, hunting, and hiking to mountain biking, golfing, and boating. The state has diverse geography which includes mountains, dense forests, lowlands, lakes, rivers, reservoirs, and streams.
Arkansas also has a low cost of living, a growing economy, and a mounting population. The cheapest land in the Natural State can be found in Clay County, nestled in the northeast corner of Arkansas, where land sells for around $0.07 per square foot, with the average sale price of just $43,083 for an 830,617 square foot lot.
This landlocked southern state is known for its centrally located capital, Nashville. The heart of the country music scene is the home of the Grand Ole Opry, the Country Music Hall of Fame along with a legendary stretch of honky-tonks and dance halls. Memphis, located in southwest Tennessee, is another hot spot, where tourists flock to see Elvis Presley’s Graceland. The Great Smoky Mountains in eastern Tennessee, located along the North Carolina border, offer a peaceful area to fish, hike, and take in majestic mountain views. The biggest advantage Tennessee offers —no state income tax.
Despite having variety of attractions, land in Tennessee is relatively cheap. Let’s suppose, in Unicoi County, located in the state’s mountainous northeast, the average sales amount for a 251,911 square foot lot is $59,408. That’s only $0.37 per square foot. As Tennessee continues to grow, you could potentially profit from a land purchase in the Volunteer State.
Situated entirely in the Appalachian region, it’s no supervising, West Virginia is known as the Mountain State—the terrain is almost entirely mountainous. Harpers Ferry, located in the northeast part of the state where the Shenandoah River meets the Potomac, is a popular tourist destination. Site of the famous pre-Civil War raid by John Brown, the town is surrounded by a national historic park, with many of the buildings open to the public as living-history museums.
West Virginia’s economy has had significant strides and is still growing. The biggest industry in the Mountain State is still coal mining, which contributes 98% of West Virginia’s growth. You can still find cheapest land in West Virginia. In Morgan County, just an hour outside of Harpers Ferry, a square foot of vacant land will cost you around $0.44. With an average lot size of 277,623 square feet, that comes out to $29,450.
Renowned as the Land of Enchantment, New Mexico boasts an array of striking landscapes, from the Chihuahuan Desert to the Sangre de Cristo Mountains. The southwestern state’s capital, Santa Fe, is a popular tourist destination well known for its upscale spas, magnificent Spanish colonial architecture, and vibrant cultural scene. This flourishing city is home to the Georgia O’Keeffe Museum and the open-air Santa Fe Opera.
To top it off, New Mexico’s population and economy are on the rise. In other words, the Land of Enchantment could also be the land of opportunity for retirees looking to buy valuable vacant land. In Quay County, land hovered in the range of $1.96 per square foot, and the average land sale amount is $55,918.
Best known for its perpetually sunny weather and, of course, the Grand Canyon, Arizona has long been a hot spot for tourists craving a taste of the southwest. It’s also the sixth largest state in the U.S. with a rapidly rising population. Arizona’s job market is quite healthy as compared to many other states.
Even with those numbers, you can still find cheap land in the Grand Canyon State. In Santa Cruz County, located in southern Arizona along the Mexico border, the average price of land is $1.77, with an average sales amount of $45,420 for 91,088 square feet.
The Bottom Line
Even if you manage to find land in above mentioned five states, keep in mind that any land purchased is an exceedingly high-risk investment—especially for less experienced, short-term investors. Because raw land is the most illiquid type of real estate investment, it can take many years to sell some land parcels. Before buying a plot of land, conduct thorough research on the area’s growth expectancy as well as all zoning requirements, topography, and tax obligations associated with owning the land. The other most important thing to do is to make sure it has water and access to utilities if you hope to develop it.
by Laura Mueller
Buying land, like buying any piece of real estate, rarely comes cheap. What separates it from a conventional real estate purchase however is your available financing options. Land loans operate quite differently than traditional mortgages, and being aware of these differences is important—especially as you set your budget and determine what you can afford.
The Main Differences Between Land Loans and Mortgages
While it’s true that financing a house can come with plenty of hurdles, land investors often find that there’s a whole different set of hoops that have to be jumped through in order to secure funding for their purchase.
There are a couple of reasons for this:
1. Land loans are considered riskier for lenders
Land—and vacant land in particular—doesn’t always have a lot of financial appeal for banks. Aside from the fact that there’s no physical structure to act as collateral, there’s also a pre-conception that because the borrower isn’t living on the land they won’t consider it a top priority if finances get tight.
2. Land loans usually come with higher interest rates
As you might expect, higher risk means higher interest rates. And while an added 1% or 2% in interest might not seem like much when you’re borrowing, it can add up fast over the course of your loan.
3. Land loans usually have less favorable terms
Speaking of the course of your land loan, expect a shorter payback period than you’d get with a traditional mortgage. Some lenders do offer 30-year loans for land just as you can get for a house, but it’s not uncommon to come across lenders that cap their land loans at a five- or ten-year payback period.
Land Loan Financing Options
It’s likely going to take a bit of research to figure out what your best option is for financing a land purchase, but you’re not totally on your own if big banks aren’t interested.
Here are some other options:
If you’re buying land for agricultural purposes, you may be able to score a subsidized loan through the USDA Farm Service Agency’s Farm Loan Program. Known as FSA loans, these offer favorable rates and minimal requirements for those who qualify.
Some sellers are willing to work with buyers directly on financing. If you go this route, make sure to get an attorney involved so you can ensure the contract is favorable (and air tight).
Home equity loan
Land buyers with existing properties can use equity from current lines of credit to purchase land, and often with pretty favorable rates.
Your local bank might be more interested in taking on a land loan than the bigger guys. Just be ready to pitch your plans much like you would for a business, with a clear outline of how you intend to use the land and how it will enable you to pay back what you borrow.
Your best option for a land loan might not always be the most direct one. Work with a financial advisor to navigate what’s available, and consider that you’ll probably want to have more cash on hand for buying land than you would for buying a house.
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