Urban dwellers often idealize what it's like to live on an acreage outside city limits, and there are indeed some advantages. Land costs in the country tend to be much lower. The farther away from the city you get, the cheaper the acreage generally becomes. Add to that cleaner air, more space, and building a custom home to your own specifications.
The realities of buying your piece of the countryside can cost you after closing. Obtaining a mortgage for your dream home might be tougher than you think, and a number of pitfalls can await the unwary.
- Check with local authorities to determine zoning ordinances in the area where you want to buy.
- Get title insurance, which will disclose easements, restrictive covenants, or conditions, and consider ordering a survey of the land as well.
- Determine your access to water, electricity, telephone, and cable service, and find out whether you need to install a propane tank.
- Getting a mortgage may be tricky; it's common to pay cash for land, because many lenders will not give loans for land purchases.
The Drawbacks of Building and Living in the Country
Finding skilled craftsmen who are willing to travel to your location might be difficult. Those who are willing will probably charge more to compensate for driving the distance. Transporting building materials and paying for delivery will also likely cost more than if you were to build a home in the city.
Modern conveniences are usually available, but they aren't always reliable in the middle of nowhere.
Going into town for groceries and other needs generally requires planning and long trips. And you could be stuck at home for days if it snows, and rural roads aren't promptly and properly plowed.
Should You Rent Before Buying?
It might be a good idea to rent a home first before buying land and beginning construction, particularly if you're unfamiliar with the area or if you've never lived away from urban areas.
You can get to know the community and hear stories from local owners that you might not otherwise be privy to. Try to spend a few weekends there, if possible.
Be aware of the pitfalls of this approach, however. All of your neighbors might not be overjoyed to hear you're planning to buy up that land behind their homes and erect your own palace there, obstructing their pristine views. You might meet some resistance—even organized resistance involving municipal and county authorities.
Resale value is often softer in the country than in the city, because the pool of potential buyers is smaller. Home prices tend to be more negotiable when demand is low, and supply is high. As a tenant, you can try to time the real estate market and be ready to buy that parcel of land as soon as it becomes available.
Other Considerations: Zoning Requirements
Check with local authorities—including city, county, and state—to determine zoning ordinances in the area where you want to buy. Find out whether you can build the type of home you want before you commit to purchasing the land. For example, a community within 20 minutes of the Sacramento city limits doesn't permit the construction of any structure on parcels smaller than 20 acres.
Ask about future zoning, too—whether there are plans to put in shopping centers or airports, or to change nearby land uses that could devalue your land.
Smells and Sounds
Realize that you might be trading exhaust fumes from city streets for the odors produced by farms. Some farm animals, such as geese and donkeys, produce squawks and brays that can travel for miles. Horses along country roads drop steaming piles of waste. It's not like anybody carries a plastic bag and picks up after their horses.
Obtain a natural hazard disclosure, and look for soil problems. A disclosure will tell you if the land is a protected habitat, which would prohibit building. Make sure the area isn't a known fire hazard, and find out if the fire department is supported solely by volunteers.
Many homeowners in the country maintain private ponds for fire emergencies.
Determine how likely the land is to shift if it's located near hills. Some slab foundations can crack if the land is unstable. Find out whether your parcel lies within the path of a potential landslide.
You might want to consider building a raised foundation and make sure that you have flood insurance if you construct near a body of water.
Ask neighbors about the condition of their foundations if the land was once a swamp.
Easements and Restrictions
Obtain an easement, and make sure it's recorded if access to your land is provided by driving across an adjoining parcel. Find out who maintains the roads and what your pro-rata cost share might be for upkeep.
You'll also want to determine what rights any neighbors might have to cross your land. Check to see whether the boundaries are clearly marked.
Get title insurance. It will disclose easements and restrictive covenants or other conditions. You might want to order a survey of the land as well.
Water is essential, and not all water is potable. Sometimes water rights don't "run with the land," which would mean you couldn't dig a well.
Find out the depth of your water table, and determine the difficulty of digging. It could present a problem if the ground is rocky.
It can be costly to bring electricity, telephone, or cable service to the property if they're not already established nearby. Find out whether you'll need to install a propane tank, and what it would cost to install a septic system if you can't hook up to a sewer.
Many homeowners in the country keep generators as a backup for times when power utilities fail.
Is a Structure Already There?
You'll probably want to get rid of any existing structure if there's one already on the property, but proceed carefully. Depending on the size of the structure or building, you might need a professional demolition contractor to reduce it to rubble and haul the debris. That can be a considerable added expense.
You might also need local permits for that type of work, and you'll absolutely want to make sure utilities are turned off ahead of time if they're available to your location. The contractor will most likely take care of these details for you, but double-check to be sure.
Consider the Services of a Land Planner
A land planner is like a home inspector, but for raw land. You wouldn't buy an existing home without an inspection, and it might not be wise to purchase land without having an expert size it up for potential problems.
A land planner will look for issues and can advise you as to whether any of them will affect the possibility of you building your dream home there—or even resale somewhere down the road. They may also be able to help you determine whether the size of the structure you want to build will comply with current zoning and land-to-building ratios.
Get an Appraisal
Obtain your own appraisal to determine an appropriate price before making an offer if you're not planning to finance the land purchase through a conventional lender. Financing would require a lender appraisal.
Keep in mind that comparable sales are sometimes difficult to find when you're buying land.
Getting a Loan
It's common to pay cash for land, because getting a loan for this type of purchase can be tricky. Raw land can't be leveraged by a bank.
If you do get a loan—and there are a few lenders out there who specialize in this type of transaction—don't expect to be approved for more than maybe half of the purchase price. You might have more success if your land has utility access and is reasonably accessible by roadway.
Of course, a construction loan to build your home is something else entirely. In that case, the structure can act as collateral. Some financing will allow for subordination to a new construction loan.
According to the National Association of Home Builders, the median cost of new home construction was $296,652 in 2020.
Use this amortization calculator to get a sense of what your monthly loan payment could end up being.