Advice on how to approach making a offer to purchase a vacant lot to build a home on

[compounder]

I don't really know the best way to phrase this question(s), as there are many variables that could affect the answers but know that I am trying to solicit broad brush, generic style answers here regarding the process and your experiences.

Considering buying a lot and building a home on that land.
This is not something I have done before. So still much to learn about that whole process and in the infant stages of planning.

For people with experience buying lots:
1) How do you go about vetting the price/value of said lot?

Went through a development for example that has acre plus lots, they are priced in 90-115k range.

No idea how much % wise would be considered reasonable offer vs a "lowball" offer. I realize that in some cases of course, due to high demand, people may pay more than asking etc. Based on property tax records showing several years of builder ownership, these lots don't appear to have that strong of a demand. The valuations from a property tax perspective show the land value at ~40k, though with lots that have sold and been developed the assessed value of the land does appear to jump of course.

2) When making the offer, have you any advice/experience/recommendations with the following? (I don't currently have a realtor or attorney)

• Deal direct with the builder?
• Communicate offer via real estate attorney?
• Use a realtor to communicate offer?

[njhowie]

Quote:

Originally Posted by compounder Considering buying a lot and building a home on that land. This is not something I have done before. So still much to learn about that whole process and in the infant stages of planning.

I would recommend reconsidering, unless you want to put yourself through a lot of work, time, effort, and cost.

Is there not any new/existing home in the area you are considering with the bulk of the attributes you are looking for?

I will tell you that if you custom build, be prepared for lots of headaches, delays, and cost overruns. We have friends who did it. They already owned the land and had a house built on it.

If you are set on buying land and building on it, you should investigate working with one of the pre-fab companies. Pre-fab today is not like pre-fab decades ago. You would be amazed at the kinds of houses you can get. The advantage to pre-fab is that it is usually a quick and pain free process. Your cost is also more or less fixed, where there's no real guarantee of exactly how much your custom-built home will ultimately cost upon completion.

About 15 years ago, down the street from us, some folks had a pre-fab constructed on their lot. Start to finish was under two weeks and that included laying the foundation, along with all electrical and plumbing. Contractor came, did the foundation and started plumbing and electrical. A few big rigs came with the pre-fab modules. Contractor slapped it all together then completed electrical, plumbing and other finishing touches. When it was done, there was a beautiful two-story colonial. If you hadn't seen it constructed 15 years ago, you'd never know.

Maybe not the kind of answer you were looking for. However, you did say you were soliciting a broad brush.

Just something to consider.

[davebarnes]

"The valuations from a property tax perspective show the land value at ~40k," is completely irrelevant to the market price.
Wipe it from your brain.

[Sunset]

Issues that affect the price:

Is this land serviced already , meaning does it have sewer & other Utilities ?

Or are we talking some raw land like an old farm or forest ?

How many acres are you thinking of buying ?

Who owns the land, a private person or developer (will sell with big profit and possibly demand to build house).

[street]

As for the land value and a price to offer. I would check with a local building contractor in your area to see what prices lots are going for. You also may just call and see if a local real estate office agent would give you some advise.

Also lots and land etc. can vary in price from location of that property. It really comes down to what you want to pay for that desired piece of ground.

As far as building a home with a contractor a contract is needed with time limits with consequences. If building it yourself it can be a rewarding experience, with a well built home and a lot of money saved.

[OldShooter]

Look for similar nearby properties, both houses and bare lots.

County recorder will almost certainly have $ history for lots that have sold. In our state this information is available on line, though a little bit of a hassle to find.

In our state the assessors' estimated market value has a breakdown of land value and building value. Also available on line.

Definitely hire a real estate specialist attorney (in the state where the property is located) to make the offer and to help with negotiations. If you worry about getting skinned by a car dealer, you'll love dealing with developers and builders. They are experts at negotiating with amateurs. And the bucks are much bigger. Also have the attorney do a full search on the seller, looking for liens, judgments, and other stinky things. Old rule of thumb: "You can't make a good contract with a bad man."

Do not use a realtor except possibly as a "buyer's agent" paid a fixed fee by you and having fiduciary duty to you. A realtor paid by the seller automatically has a fiduciary duty to the seller.

Never fall in love with any deal. If you're not willing to leave the table you're not negotiating. You're begging. There is always another deal.

[compounder]

Thanks everyone for your input!

Quote:

Originally Posted by njhowie I would recommend reconsidering, unless you want to put yourself through a lot of work, time, effort, and cost. Is there not any new/existing home in the area you are considering with the bulk of the attributes you are looking for? I will tell you that if you custom build, be prepared for lots of headaches, delays, and cost overruns. We have friends who did it. They already owned the land and had a house built on it. .

I have a few brothers that have gone this route, but one had the lot and the other is close friends with the builder he chose.

Quote:

Originally Posted by Sunset Issues that affect the price: Is this land serviced already , meaning does it have sewer & other Utilities ? Or are we talking some raw land like an old farm or forest ? How many acres are you thinking of buying ? Who owns the land, a private person or developer (will sell with big profit and possibly demand to build house).

It is serviced, with sewer and utilities, and the lots available are all approx 1 acre. The developer owns the land but will sell to others, allow other builders it seems.


I am still weighing whether I am going to build. In this particular case the lots I would be bidding on have stunning views. However I am still considering just trying to find one that is already has most of the attributes as "easy" is desirable. Thanks for your input!

Quote:

Originally Posted by davebarnes "The valuations from a property tax perspective show the land value at ~40k," is completely irrelevant to the market price. Wipe it from your brain.

This is what I suspected. I imagined it was really just an arbitrarily low number to keep taxes at bay.

Quote:

Originally Posted by street As for the land value and a price to offer. I would check with a local building contractor in your area to see what prices lots are going for. You also may just call and see if a local real estate office agent would give you some advise. Also lots and land etc. can vary in price from location of that property. It really comes down to what you want to pay for that desired piece of ground. As far as building a home with a contractor a contract is needed with time limits with consequences. If building it yourself it can be a rewarding experience, with a well built home and a lot of money saved.

I have seen that some of the lots in this particular area within the same development have gone for ~65k but I think the draw for these is that they do offer a much more dramatic view, the question I need to answer is if that view is worth an extra 30-45k

Quote:

Originally Posted by OldShooter Look for similar nearby properties, both houses and bare lots. County recorder will almost certainly have $ history for lots that have sold. In our state this information is available on line, though a little bit of a hassle to find. In our state the assessors' estimated market value has a breakdown of land value and building value. Also available on line. Definitely hire a real estate specialist attorney (in the state where the property is located) to make the offer and to help with negotiations. If you worry about getting skinned by a car dealer, you'll love dealing with developers and builders. They are experts at negotiating with amateurs. And the bucks are much bigger. Also have the attorney do a full search on the seller, looking for liens, judgments, and other stinky things. Old rule of thumb: "You can't make a good contract with a bad man." Do not use a realtor except possibly as a "buyer's agent" paid a fixed fee by you and having fiduciary duty to you. A realtor paid by the seller automatically has a fiduciary duty to the seller. Never fall in love with any deal. If you're not willing to leave the table you're not negotiating. You're begging. There is always another deal.

Thanks for the tip on the "background check" of the builder. Great tip. The recorder did yield some useful info. This development is weird because some of the lots have much better "views" and thus are more desirable, probably demanding a better price(or at least this is how the builder will justify). The homes currently in the development, which is still being built out, vary in values ranging from 500k-1mil. I can see that some lots went for 65-95k. The lots are all basically the same size but only have sales info on like 3-4 of them.

[bolt]

Contemporaneous insights can be formed from one in the business of reviewing records@the "Registry of Deeds". A search by someone advising you whom does it for a living would be minimal imo.

A bad water table, contaminated 'X', no building x*, etc.-etc.
I'm sure a focused & compensated R.E. Atty.s that contract their LLCs reputation would be minimal.

Good Luck & Best wishes.....

[ponyboy]

Quote:

Originally Posted by njhowie I would recommend reconsidering, unless you want to put yourself through a lot of work, time, effort, and cost.

This. We are going through the process now. Approached a neighbor to purchase land that butted up against our property, around 5 acres. He said yes, he would sell it, but he wasnt lifting a finger and we would have to do all the leg work. That was in March...and its still ongoing.

Is there a mortgage or loan against the property? If so, the bank will need to be contacted from which the loan exists and you'll need verification that they will release the land. The bank owns it, they need to agree to it first.

Surveyors/subdivision is expensive. Ours cost $4500. Township was a nightmare to deal with...they were the big hold up. They meet once a month. So if something needs done, surveyor is told at meeting, has to do the work, then wait a month to meet again...rinse and repeat.

We based our price per acre on other things that sold. Most were from years ago, so its hard to put a number on it. You just gotta throw out a number and see if the other party agrees. We made ours high enough that there were no negotiations, they just agreed.

THen you'll need a lawyer. We talked to our lawyer first, and he told us some things we need to do. Wish he would have looked up if there were any liens against the property. Low and behold, there was. Inheritance tax lien....which means, we cannot/will not buy the piece of land until the inheritance tax is paid...which may never happen....which means we're out around $5500 after survey expense and lawyer. This should have been done first by lawyer. Big mistake. We're sort of optimistic that the land owner will pay the inheritance tax, which isnt a ton, much less than what he'll get for the land. If not, all for nothing.

So yeah...we would never go through this process again. Its easier to find land for sale that the other party already prepped. You'll still need a lawyer and to check liens, but can skip the surveyor.

Ill also add...the land we're trying to purchase is wooded, will never have anything built on it either. OP, if you're looking to build a home, I cant imagine how much of a PITA that would be.

[compounder]

Quote:

Originally Posted by ponyboy This. We are going through the process now. Approached a neighbor to purchase land that butted up against our property, around 5 acres. He said yes, he would sell it, but he wasnt lifting a finger and we would have to do all the leg work. That was in March...and its still ongoing. Is there a mortgage or loan against the property? If so, the bank will need to be contacted from which the loan exists and you'll need verification that they will release the land. The bank owns it, they need to agree to it first. Surveyors/subdivision is expensive. Ours cost $4500. Township was a nightmare to deal with...they were the big hold up. They meet once a month. So if something needs done, surveyor is told at meeting, has to do the work, then wait a month to meet again...rinse and repeat. We based our price per acre on other things that sold. Most were from years ago, so its hard to put a number on it. You just gotta throw out a number and see if the other party agrees. We made ours high enough that there were no negotiations, they just agreed. THen you'll need a lawyer. We talked to our lawyer first, and he told us some things we need to do. Wish he would have looked up if there were any liens against the property. Low and behold, there was. Inheritance tax lien....which means, we cannot/will not buy the piece of land until the inheritance tax is paid...which may never happen....which means we're out around $5500 after survey expense and lawyer. This should have been done first by lawyer. Big mistake. We're sort of optimistic that the land owner will pay the inheritance tax, which isnt a ton, much less than what he'll get for the land. If not, all for nothing. So yeah...we would never go through this process again. Its easier to find land for sale that the other party already prepped. You'll still need a lawyer and to check liens, but can skip the surveyor. Ill also add...the land we're trying to purchase is wooded, will never have anything built on it either. OP, if you're looking to build a home, I cant imagine how much of a PITA that would be.

I am definitely reconsidering building. My brother built and I did learn from him in that process. I am going to exhaust finding another property that is move in ready that ticks of many of the boxes we have. When looking at one such property, these lots were in close proximity with no homes yet built. In the case of this particular lot(several similar individual lots to pick from), they are in a town, developer owned. Sewer, water, gas all run etc. So its a bit further along. Would just need to put an offer on the lot and chose a builder. Obviously the builder/developer that owns the land would like for it to be him or his brother, but they do allow other builders.

[Alderman]

We bought three parcels of land equaling 45 acres after we retired.
Fortunately both parcels were cash sales so very little headache involved. Both sellers were willing to split all costs involved with the sale and a local title company was used.
In one case I made an offer and the seller came back with a request for more which in my mind was still a reasonable price.
In the second, I had no idea the seller would be interested in selling but contacted her and found she was eager to sell the land.
I was originally only interested in one of her parcels but she set such a reasonable price I ended up buying both parcels.


My point I guess is it doesn’t hurt to ask. It almost sounds like you really like the land you are looking at. Only you can decide what you are willing to pay. Personally I’d offer a low price rather than a high one. The seller can only say yes or no and tell you what he is willing to take. It seems a lot of the work has been done if there are houses being built in the area. The title company will help find any hidden traps.
If there are homes being built, hiring a builder could be guided by the opinion of some of the future neighbors who have already had homes built.

[CDRE]

Zillow and Redfin may also provide some data points for values, sales, etc.

[Retired Expat]

Quote:

Originally Posted by compounder I don't really know the best way to phrase this question(s), as there are many variables that could affect the answers but know that I am trying to solicit broad brush, generic style answers here regarding the process and your experiences. Considering buying a lot and building a home on that land. This is not something I have done before. So still much to learn about that whole process and in the infant stages of planning. For people with experience buying lots: 1) How do you go about vetting the price/value of said lot? Went through a development for example that has acre plus lots, they are priced in 90-115k range. No idea how much % wise would be considered reasonable offer vs a "lowball" offer. I realize that in some cases of course, due to high demand, people may pay more than asking etc. Based on property tax records showing several years of builder ownership, these lots don't appear to have that strong of a demand. The valuations from a property tax perspective show the land value at ~40k, though with lots that have sold and been developed the assessed value of the land does appear to jump of course. 2) When making the offer, have you any advice/experience/recommendations with the following? (I don't currently have a realtor or attorney) Deal direct with the builder? Communicate offer via real estate attorney? Use a realtor to communicate offer?

Raw land is completely different than an empty lot in a development. If a development you can usually see the models and have a very good idea of the cost and what you will get but beware of all those extras. Raw land where you can engage an architect and build your dream home? Another story entirely.....a whole different approach and skill set needed? What were you looking at?