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How to Buy Vacant Land

Buying that vacant parcel and building your dream home isn't exactly as simple as it sounds. But the reward is worth the work! It is important that you stay apprised to certain aspects of buying the land. That way, when you put your dream to reality, you're not getting disappointed in making major changes to the structure that you plan to build based on available funds and/or the lot you choose to build on.


The aspects of how to purchase:

Most people don't have tens of thousands laying around to buy acres of land. However, more often than not, you're going to be purchasing this land with cash. There are a few creative ways to purchase that piece of land you'd like to buy for your dream home.


While a mortgage seems like the ideal route for purchasing land, most banks don't want to take on the liability of placing a loan on vacant land. If they do, the banks that will expect the parcel to be about 5 or more acres and they typically want 20% down.

A lot of homeowners use the equity in their home to purchase the land for their next home. Talk to a mortgage broker about how to cash out on your existing home to purchase the land for your future home.


Some property owners will offer land contract terms, which asks for a higher down payment (15-30%) and a higher interest rate (7-11%) with a shorter loan term than a bank could offer. That being said, since owning the land is only short term (eventually you're going to borrow to build), these terms are sometimes attractive to certain situations.


Some purchasers consider borrowing against retirement funds, such as 501k or IRAs, to purchase, or even place the down payment on, the vacant land they wish to build on; later reimbursing their retirement funds after refinancing their future home's construction loan.


Ultimately, you want to speak with a mortgage officer and/or a financial advisor to see which option best suits your financial situation.


The "site" is important-


You want to make sure that if/when you're ready to move, someone else will want to live there! The average American moves every 5 years, not to say you plan to move away from your dream home, but sometimes it's inevitable.


You also want to know what type of setbacks the municipality assigned to the shape of your property; this is something you and your REALTOR should look into, before you consider writing an offer on a property. Most townships dictate the placement of your driveway. And after you've figured out the driveway placement, you have to place the utilities which sometimes/usually includes a well and septic field. The placement of all these necessary improvements usually leaves your future home with only so much "real estate" to be built on. Some townships even dictate how much of your home can face the road. Looking up the zoning guidelines in the municipality you're thinking of building in will alleviate some stress in the long run.

You want to look for improvements. Though most parcels aren't "improved", it is nice to see when the property has been developed a little. Improvements include, but aren't limited to: driveway, private drive, utilities run, and soil/"perk" test.


Deed restrictions are another thing to look out for. Sometimes a property is located in an area that has been developed into several lots for building. When this happens, typically there is a master deed that has deed restrictions for your property. Some people are okay with deed restrictions, however, most people are buying land outside a development to get away from the limitations living in a small community might provide.

For more great tips on purchasing land, check out The Do's and Don'ts of Buying Vacant Land and reach out to one of us at Webb Realty Pros, we got your back!

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7960 W Grand River #110,

Brighton, MI 48114