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Saturday, May 3, 2014

First time buyers – What do I need to know about vacant land?


Question - I’m thinking of just buying some vacant land right now and building later; what should I know about buying vacant land?

Answer - Buying and selling vacant land uses the same basic real estate sales principles as are used for homes, but there are some unique things that you should understand.

First make sure that there is a good survey available and that the corners are clearly marked. With vacant land all you are getting is the land, so make sure you clearly understand the borders and boundaries. Don’t just guess, based upon tree lines for other things that you might think mark the boundaries and surely don’t take the word of the listing agent. Some owners might not even have a clear picture of where the boundaries are. If these things are not available make sure that you request that the seller provide them as part of any offer. Walk the land so that you can see all parts of it (see below about wetlands).

Most times vacant lands, especially bigger parcels (5+ acres), were almost always part of a much bigger parcel at one time and may have been used for farming in the past. Even though the last vestiges of the old farm seem to be gone there could be some interesting (sometimes dangerous) stuff lurking in the ground. Many old farms had buried fuel tanks or there might be old building foundations that have been buried over time. There could even be old septic fields or cow manure pits somewhere just under the current soil. This is all pointed out not to alarm you but to alert you to some of the dangers that could be there. Most of the time there is no way to know what’s just beneath the surface until you start digging to put in your foundation or septic field. While the seller might have a disclosure on file, many times the current owners have no real idea what went on decades ago.

If you are out in a rural area, you want to ask if the land has ever had a perc test. That would show whether it can sustain a septic field without having to resort to an engineered field. The soil type should give you a hint. Look for sandy soils that perc well and try to avoid land made up primarily of clay-type soils. If there is not already a well, then one will have to be drilled. In areas that have been pasture land for farm animals it is
not uncommon for there to be an elevated level of Nitrates and Nitrites in the well water. Those chemicals are not necessarily harmful to adults, but there are warning about what levels are safe for babies and children. Click here to read more about that. In many areas, Michigan being one. the presence of low levels of arsenic is not uncommon.

You should determine if and where the closest utilities are – electric lines and gas main. If there isn’t any then you may end up paying for a long run to bring them to the land. Having to pay for long runs of gas line or the placement of electrical poles and lines (or even worse having to bury power lines) to bring power to your build site can be very expensive. If natural gas isn’t available then you’ll have to resort to propane or heating oil, both of which are expensive. Put that into your future plans. To read my earlier post about living with propane, click here.

You should ascertain whether there are any utility or other easements that come with the deal and see how they affect any plans that you might have for the property. If your parcel is accessible only by crossing someone else’s property, make sure that you have a written and recorded easement in place to assure that access in the future. If there are any pipeline easements you will not be allowed to build above them, so know where they cross the land.

The next thing to be concerned about is whether the land has some wetlands areas included. In Michigan lots of areas are primarily wetlands. You can usually tell a wetlands area if there are cat tails growing on it. Areas that are designated as wetlands are protected from development out of a concern for preserving the habitats of wildlife in the area. Wetlands can be hard to spot in the deep summer, when they dry out; but a parcel doesn't have to be wet all the time or have standing water to be designated a wetland area. You cannot build on a wetland and in Michigan and many other states you are not allowed to just fill it in with fill dirt. Click here for Michigan’s guidelines to wetlands protection. Your local township or county should be able to supply wetlands maps for your area.

Understand what the situation is with the mineral rights. In our area much of the oil and gas right were sold off to exploration companies years ago. In some cases the rights have expired or the original oil or gas fields were depleted and the rights reverted to the owner; however, in some leases the exploration company still has the right to return and drill again, maybe using the new fracking techniques to make the fields productive again. Make sure you understand who owns the rights and who has the right to do any drilling or mineral extraction. It would be a little late to have built your dream house and have a drilling rig pull up next to the house. To read more than you’ll ever want to know about mineral rights, click here.

Understand the local zoning ordinances and master plan, if any exists. Don’t make assumptions about buying that 10 acre parcel and splitting it into 4-5 smaller parcels. You may not have any right to split it or there may well be zoning restrictions on how small a lot can be in that area and still be buildable. In some cases the only way to break up a bigger parcel is to build a road into it to access the back parcels and building a road is an expensive proposition. Go to the Township where the property is located and talk to the Township planning people about their ordinances and split policies. Things can get a little dicey if the land is on (or crosses) a governmental boundary, like two different counties. You mat be facing two different sets of ordinances in those cases.

One last thing to keep in mind is that there are no mortgages on vacant land. Banks just don’t want to write a mortgage when there are no improvements, i.e. a house. So you have to pay cash or work a land contract deal with the seller. Lots in more populous areas will cost more per square foot for a variety of reasons, but they also usually come with all of the utilities at the curb and may have paved rather than dirt road. They may also have amenities like cable access that are usually missing in rural areas. Getting out into the boonies will get you cheaper land, but usually offer less in the way of amenities.

So maybe you have these big dreams of living on a farm and buying a little piece of land is just the beginning or maybe you just want a secluded spot to build you r dream house. In either case do your homework. Buying  vacant land isn’t hard but it takes due diligence, just like buying a house would. In the meantime, click here to view a few episodes of the 60’s TV comedy show Green Acres, about a big city lawyer who always wanted to live on a farm.


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