How To Buy Land: A Step-By-Step Guide

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How To Buy Land: A Step-By-Step Guide

Buying vacant land follows the same process as buying a house, but there are significant differences. For example, finance works a little differently, and finding an empty space suitable for your purposes can be more difficult than finding a home that meets your needs. Buy land in Bhubaneswar find out who provides the best land plots that offer unbeatable value, prime locations, and exceptional development potential. Whether your goal is to build a family home, start a farm, or use it for fun, here are six essential steps you’ll need to follow when you’re thinking about buying land.

1. Analyze your finances

Before you start exploring undeveloped land for sale, take a close look at your finances to ensure you are able to afford it. Lenders consider vacant land to be a riskier investment than an already built house, and as a result they charge more to finance it.

For this reason, paying cash if possible is a good strategy. If you are able to fully pay for the purchase in advance, be sure to budget not only for the land but also for additional expenses such as property tax and utility installation.

If you want to take a loan for purchases, it is important to bring your financial situation into good condition ahead of time. Pay off debts to reduce your debt-to-income ratio, and start saving enough to cover potentially huge upfront payments – lenders typically require 20 to 25 percent for raw land.

2. Compare your loan options

If you are going on the financing route, know that buying land can be a complicated process. Land loans are not the same as traditional mortgages, and their high cost reflects the amount of risk assumed by a financial institution dealing with undeveloped property. Your loan options and terms may vary depending on what type of land you want to buy. There are three main categories:

  • The raw land is completely untouched, it lacks roads, electricity or sewage systems. Because of the inherent risks associated with such properties, raw land loans often require significant upfront payments and have high interest rates.
  • Unincorporated land may have some basic facilities but lacks important utilities such as electricity and gas meters. They are not as risky as raw land for lenders, but can still demand large upfront payments and have high interest rates.
  • Improved land with access to roads, electricity and water has already been partially developed. Loans for this type of land may have more favorable interest rates and lower minimum advance payment requirements than raw or unincorporated land.

3. Consider every expense

Depending on how you plan to use the property, owning the land can incur many hidden costs, such as permit fees or the expense of building a septic system. There are also general costs for maintenance and maintenance.

Don’t forget closing costs. If you are financing your land purchase with a loan, the fees you will pay at closing may include title fees, valuation and recording fees, property taxes, secured insurance coverage, and more.

4. Find land for sale

Make sure you have a concrete idea of how you want to use the land before you start exploring. Think about things like plot size, proximity to neighbors, views, distance from the city, and internet or cell service. And if you do not already own land, consult a real estate agent who specializes in land sales or consult a land planner whose job is to evaluate whether it is possible to build or develop a piece of land. A land planner evaluates the slope of the land, the water level, the type of soil and vegetation, and other factors to determine what structure the land can maintain.

5. Research the property

When you find the right plot of land to buy, do your homework before making an offer. Here are some key issues to investigate:

  • Utilities: are there hook-ups for water, sewer and electricity on the property? If not, you must install them, which can be expensive.
  • Road access: is there access to property from a public road? If not, you may need to get pleasure facility to build road.
  • Zoning and land-use restrictions: is your idyllic native property really zoned for industrial, agricultural or retail use rather than residential? Check your local zoning authority’s website or visit the town hall in person to learn about area regulations and any construction plans affecting your parcel.
  • Property tax: look at the property tax rate on parcels and make sure they are not so high that the purchase becomes economically impractical.
  • Property survey: make sure you know exactly where the property boundaries are, so you know where you can build and where not, or the exact perimeter for fencing. The property survey will also alert you if a neighbor has encroached on the property.

6. Make your offer

Once you have done your homework on the property and know how you plan financing for the purchase, you are ready to present an offer to the owner. This written document contains a description of the property, your contact information, the price you are willing to pay, and other conditions. You will also want to include contingencies in your offer to protect yourself from factors that could force you to move away from the deal. Common contingencies with land purchases include environmental testing, septic system permits, land surveys, and zoning regulations. Templates of sample purchase agreements are available online, but unless you are an experienced buyer, you will want to get a real estate attorney or licensed agent to prepare the offer for you.

Bottom line

Buying land can be more difficult and expensive than buying a home, and there are different requirements for obtaining a land loan than a home purchase mortgage. If you intend to build a house on your land, you must also take construction costs into account. A construction loan could help.

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