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Pros and Cons of Buying a Lot Prior to Working With a Builder

October 12, 2021

Pros and Cons of Buying a Lot Prior to Working With a Builder

The process of buying land and building your dream home can be very overwhelming when first starting. There are a few major choices to make initially. Do you want to buy a lot first? Or are you interested in working with a builder from the very beginning? No matter which one you choose, you still have the task of deciding on the perfect plot and finding the right builder for you. 

You may not know where to start, and that is okay! There is no right answer for how you should get started, but working with a skilled home builder can be a great help every step of the way. 

Keep reading to learn more about both the pros and cons of buying a lot before working with a builder.

Should I buy land first, then find a builder? 

When it comes to building a new home or investment property, there are a few reasons why someone might consider buying a lot to build on later. Most of these reasons revolve around the location. Oftentimes, the right location is the top priority for a prospective buyer. 

Ultimately, location affects every aspect of the building process. Some homeowners are interested in finding the perfect piece of land to work with as soon as possible. In some instances, like that of volume builders, a buyer may purchase land first because they want to secure their spot in a new neighborhood or development. 

Buyers sometimes want a specific location so much, they will buy the land without planning the next steps regarding the building process. Likewise, buyers may not be ready to start the building process, but want a certain lot secured for later down the road. In addition to location, homebuyers may decide to buy a lot first for financial reasons. For some, it makes more sense to purchase land and work on rebuilding their savings before jumping into building a house through a builder. 

Buyers may also be interested in finding the perfect location first, then seeking out different builders to see which one would be best for their lot and their wallet. Buying land first, then building a house that is tailored especially for their piece of land and views may be appealing to potential buyers as well.

Pros and Cons of Buying Land and Building a House

Whether you find yourself dead set on securing a lot first or you know that you want to find a builder first to help out with the process, there are pros and cons to consider regarding both decisions.

Pros and Cons of Buying Land First

Pro: Buying a lot to build on later allows you to find and secure a location that you absolutely love.

Pro: The buyer is totally in charge of the building process. You own the land and can decide exactly how you want to move forward with construction as well as what builder you want to do the work with. 

Pro: Having a lot acquired can help you secure a more encompassing bank loan for construction. Some banks will cover the entirety of your building expenses with a construction loan. 

Con: Buying land first then building means more upfront equity. You are going to be paying more when you purchase a lot and seek out a builder later.

Con: Most home buyers do not have the knowledge or background to evaluate the land and accurately estimate the costs of hooking up utilities and land development. 

Con: Building efforts must coincide with what your land's topography allows. Your house has to be tailored to the land. This can be limiting regarding the building process and keep you from designing exactly what you want as part of your home. 

Con: You will have to find the lot instead of choosing one from the home builder. 

Pros and Cons of Hiring a Builder First 

Pro: Buyers and builders can draw up the plans for the perfect estate and then find a piece of land that works with those plans. They can also alter plans as needed.

Pro: Your builder can help with evaluating lots before you make a purchase. They can help with understanding zoning, permits and deeds. This can give you insight as to possible construction hurdles in the future.

Pro: Builders can help you find a lot that meets subdivision requirements as well as has the proper setup for drainage and utilities. 

Pro: Working with a builder can save you money on materials as they have more insight into the fluctuating prices and best quality items.

Pro: A builder can walk you through the entire process, from beginning to end.

Con: There are slightly more restrictions on construction options and lot choices. 

There are pros and cons to both buying land or hiring a builder first. In the latter case, the process of finding a lot and creating a dream home that coincides with a dream location is streamlined and less complex. Builders can provide invaluable insights on materials as well as building restrictions and laws about construction. 

How to Choose Land for a House 

When it is time to seek out a lot for building a new custom home, there are a few things to keep in mind and get in order. Consider the following when choosing land: 

Decide on Your Budget

Decide on Your Budget

Before researching how to find a home builder or making any decisions about buying land, there is one major step that needs to be taken care of, and that is deciding on your budget. You have to take into account a wide variety of expenses when drafting a budget. Include the following and their expenses when creating a budget for building your dream home:

  • Cost of land 
  • Permit fees
  • Contingency fees
  • Preparation and construction costs
  • Builder fees
  • Land adjustments
  • Running utilities to the house
  • Hardscaping
  • Landscaping

Your budget will affect every other aspect of the buying process, so it is important to have this sorted at the very beginning of your hunt for a plot. 

Find a Real Estate Agent or Search for Land on Your Own

The next step in finding the perfect land is deciding on whether you want to hire a real estate agent or if you are more apt to search for land on your own. A real estate agent can offer great assistance in your search. They may be more informed on the local land for sale than you and can streamline the hunt. 

If you do not want to hire a real estate agent but you want some help dealing with legal concerns regarding finding a lot, you can hire a real estate attorney. These attorneys can prep and review all documents regarding a deal. They also have in-depth knowledge of local and state regulations and can help you if you are interested in lots being sold independently. 

If you wish to find land on your own or with a real estate attorney, you can find a property being sold by the government at realestatesales.gov or you can search websites such as LandCentury,Land and Farm, and LandWatch that showcase empty lots for sale. 

Note that you can seek out land that is not active on the market as well. Landowners are sometimes willing to sell plots that they had not put up for sale if they are offered a high enough price. Consider hiring a real estate agent if the land you want is currently owned by someone else and not actively up for sale.

Consider Zoning Laws

Municipalities regulate land use and development by zoning laws. Before buying land, you have to understand what is and is not allowed in these areas such as building heights and placement. 

Different regions have specific districts meant to contain residential and commercial areas. The purpose of zoning is to maintain healthy and safe communities. You should be extra cognizant of these regulations when picking your plot. 

Note the Land's Composition

With a precise understanding of the zoning laws in the areas you are interested in buying land, you then need to consider the land itself. The composition of land will affect both the prices and the timeline of construction. Soil quality will affect the stability of the building process as well as the amount of work required to get the land prepped. 

You should also anticipate possible hazards depending on the land's properties. Consider possible flooding or landslide risks. Note the elevation and any other factors that may impede the building process. 

Have the Land Surveyed

Before signing any papers, it is extremely important to have the property surveyed by a knowledgeable professional and have questions to ask regarding buying land to build a house. Surveying will help determine boundaries for the land and identify possible restrictive conditions. There are several types of land surveys including:

  • Boundary survey
  • Construction survey
  • Location survey
  • Subdivision survey
  • Site planning survey
  • Topography survey
  • ALTA/ACSM survey

You will want to have the land examined to avoid unnecessary complications in the buying and building processes. Surveys are also necessary for obtaining title insurance and meeting mortgage requirements.

Get a Land Mortgage

Get a Land Mortgage 

Land mortgages obtained by banks and lenders are essential if you do not have the money saved to pay for the land upfront. There are different types of land loans depending on the plot you have your sights set on. Raw land or improved land, for example, will require different loans types. Raw land mortgages are often difficult to obtain and are paired with a high interest rate.

Oftentimes, homebuyers will need to seek out a construction loan in addition to a land loan. Getting loans is one giant step closer to building your dream home. 

Make an Offer

The final step after you have chosen your land is to put in an offer. This requires submitting a written offer to the seller with all the details and terms of the deal. 

Before completing the land purchase agreement, however, you will likely negotiate the price of the land with the seller. With a real estate attorney, you will be able to add protective clauses to the agreement before signing off. 

What to Look for When Buying Land for a House

What to Look for When Buying Land for a House 

The process of buying land and building a house on it is a little trickier than just finding the perfect lot. Before you complete your paperwork, consider the following:

Home owner's associations

HOAs set rules and regulations for a neighborhood. This means you may have to consult with the HOA board members before picking paint colors or adopting a new dog. They often have hefty monthly fees as well. 

City building permits

Before the construction process begins, buyers will need to obtain building permits. You can get permits by completing applications and getting an appointment for plan approval. The city will then complete inspections as the construction process proceeds. 

Neighbors

While finding the perfect piece of land is exciting, it is important to remember that you will have neighbors. If you have an HOA for your neighborhood, this means that your neighbors have the same restrictions as you. 

If you do not have an HOA, remember that your neighbors have the freedom to do with their property nearly whatever they want. Learn about the neighboring residents as you search for land to ensure you find a place in a great environment for you. Neighboring properties can also negatively impact the value of your property. This is something to consider. 

Easements

Easements refer to permission granted to someone interested in using another's property in one way or another. While most buyers can avoid easement trouble by choosing a lot that is ready to build on and has access to a public road, building in some areas may require you to get permission from a neighbor to run electricity lines or connect driveways to private roads. 

Sometimes you will need a lawyer involved in this process as this can become complicated with disagreeable neighbors and satisfying the statute of frauds

Connecting utilities and accessing roads

When buying a lot, consider both the cost and time of connecting utilities to your property. Build-ready lots are easier to work with than unimproved lots, but builders can make both work. Typical utilities include:

  • Gas
  • Electricity
  • Internet
  • Water and sewage
  • Electricity
  • Phone
  • Cable

Also, note that properties away from public roads can require the installation of a well and septic tank. In remote or rural areas, you may not have direct access to a public road. A proper easement may be needed if this is the case for your lot.

Build Your Dream Home with SK Builders

Build Your Dream Home with SK Builders

Whether you already have a lot or need some assistance finding the perfect land for your custom home, SK Builders can support you through the entire process from start to finish. If you are looking to build your dream home in upstate South Carolina, we are here for you. We have over 25 years of experience and a commitment to quality craftsmanship.

When you build with us, you will experience the perks of both custom building and volume building. Get great prices and quick build times while enjoying flexibility and customization without trading in one for the other.

Let SK Builders build your dream home. Contact us today via our online form or call us at (864) 292-0400

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