This Land Could Be Your Land
BUYING LAND MAY BE A SOLID INVESTMENT. HERE'S HOW TO GET STARTED.
ILLUSTRATION BY JANICE KUN
Gone With the Wind might be set in the Civil War-era, but Gerald O'Hara (Scarlett's father) makes a valid point. Despite doom-and-gloom headlines, brokers are reporting some good real estate news: Raw land deals haven't dropped off nearly as precipitously as home sales have.
"This is just the sort of economy that turns my mind to land," says Alvis Dunn, a college professor in Chapel Hill, NC, who is considering picking up a parcel with his wife. "Truth is, we would be thinking of it as security, as an investment."
Sound appealing? Here are some tips for buying your own piece of property.
DO YOUR HOMEWORK
Before you buy, look at the market. How much land is available in the area? If there are many acres for sale, it may indicate that the area is undesirable or has environmental problems. Also research sales and values, recent sale prices of similar property, average rates and vacancy levels for rental properties, and the experiences of recent buyers and sellers in the market. Local real estate agents often post this information on their websites and can provide more in-depth research to prospective buyers.
An agent can also help you research setbacks (required distance between a structure and property line) and easements (interests in land owned by another that entitle its holder to a specific limited recorded on the title. "Easements may cause an obstruction to development, and not just above the ground," says Chris Runyen, senior managing director of the Charles Dunn Company in Los Angeles. "Cable and telecom companies, as well as public utilities have recorded easements underground which are difficult to relocate." And if the setback is large, it can dramatically reduce the amount of space you can actually use.
VISIT THE PROPERTY
When Greg Becker and his wife decided to buy land for a home to live in after they retire, they started looking a few years early. The Lake Butler, FL-based couple considered locations, amenities and lifestyle issues before searching the internet for parcels that met those requirements. With some promising sites in mind, they headed for the hills to visit prospective properties.
"We made two visits to the North Carolina mountains to see a parcel near Morganton, NC," Becker says. "We wanted to walk the property, see the area and meet the seller. That is absolutely important."
And yet, many buyers skip this essential step. "One of the biggest things we tell customers is to visit the property," says Todd Black, president of Fall Creek Land Company. "If there are a lot of 'For Sale' signs, nothing is being built, infrastructure is not in place, there is no timeline and nothing seems to be happening, that is a sign there may be trouble."
The Beckers liked what they saw and purchased a 4-acre homesite for around $80,000 from Fall Creek Land Company.
TEST THE LAND
Soil testing is like kicking the tires if you're buying a car. A Phase-1 Environmental Site Assessment tests for soil contamination, groundwater quality, chemical residue, mold and more. This test is important "especially if there is any chance the land may have had a prior use that may have exposed it to some form of contamination," says Andy Louis-Charles, managing director of Landist Capital Management, LLC, in Chapel Hill, NC. "This is a serious concern because buyers can possibly be held liable for contamination by prior owners even after they subsequently sell the subject property."
Another type of soil test can determine if the land will support the structure without a lot of grading or foundation work, which can be expensive, says Kraig Kast, managing trustee for Atherton Trust Co. in Redwood Shores, CA.
"Get a few preliminary bids for the build-out to see whether you can afford the development cost and time to work through the permitting process. Especially in this economy, get a preliminary funding commitment from a bank for the construction and permanent financing."
"I think people sometimes buy prematurely because they're making an emotional decision," says Kurt Wilkinson, a Dewey, AZ, resident who's bought several pieces of land in the last 20 years.
They recently closed on a 39-acre site near Prescott, AZ, for $355,000. "By being patient, we ended up with what I consider a perfect parcel and did not end up settling for something less," he says. And Gerald O'Hara would have done the same.
Going Once, Going Twice….
In 2007, $26 billion of land was sold at auction in the US. Auctions can be an affordable way to purchase raw land, especially if you know what you're doing. Here are some useful tips from Chris Longly, director of public affairs and communications for the National Auctioneers Association:
1. Attend a land auction before you are ready to buy. This will help you get a feel for the process and the environment.
2. Know in advance the most you will pay, and set your high bid before you get there.
3. Understand the rules and format of the auction, and find out what documents (including checks) are required in order to bid.
LOOKING FOR LAND?
HERE ARE SOME USEFUL SITES:
• Farmland, timberland and rural property: www.landandfarm.com
• Ranch land sold by experienced brokers: www.ranchland.com
• Investment or recreation property, gameland, farms, ranches and waterfront properties: www.landwatch.com
• Property for sale by the US government: www.usa.gov/shopping/realestate/realestate.shtml