Conducting Your Research When Buying Vacant Land

When purchasing a piece of vacant land, thorough research is a key component to a successful transaction. There are a number of items to consider, from what’s allowed to be built on the property to ensuring you have clear title. In this section, we’ll show you how to conduct proper research when buying vacant land.

Zoning

The first thing to consider is the zoning of the property. The zoning designation predicates what can be built on the property. The purpose of zoning is to create synergy throughout communities as they are developed and not to interfere with existing uses. Putting a recycling facility in the middle of a neighborhood with single-family homes could cause conflict among neighbors and also have a negative impact on surrounding property values.

Three common zoning categories are Agricultural, Residential, and Commercial. Within these categories, there are many zoning subcategories and it can be overwhelming as you first start looking at each one. Don’t let yourself get too caught up in the details if you are planning on building a standard structure, like a single-family home on a property that is residentially zoned. It’s relatively easy to tell if a property is zoned for what you want to build, unless you are trying to build something more unique using non-standard building materials.

As you look into the zoning of a specific piece of vacant land, make sure it allows what you want to build on the property. If you are unable to tell by reading the zoning regulations, call the regulatory agency that has jurisdiction over that area. In some cases, there may be more than one regulatory agency. Properties in rural areas may only be governed by the county, while properties in metropolitan areas may be governed by the county, the city, and perhaps an HOA.

Highest & Best Use

In simplest terms, the highest and best use of a property provides the greatest financial value of a property while at the same time being physically possible and legal. If you are planning to develop and resell the property strictly as an investment, you would want to build a structure that would be considered the highest best use for that piece of vacant land. However, if you are building a structure that you’ll be using for your own personal use, you don’t need to worry about this as much because your own enjoyment of the property will likely outweigh the potential return on investment from reselling the property.

Utilities

Water, Sewer/Septic, Electricity, and Gas all fall under the category of utilities. You’ll want to know the status of each one before you purchase a piece of vacant land. In rural areas, it’s common to get utilities using a more “off-grid” method. However, in areas where significant development has occurred, you may find that all of these utilities can be connected to right at the property line. It’s plug-and-play. Below we’ve listed common ways you’ll see for getting utilities to your property.

Water

o   Connect to the public water system if available

o   Install a well

o   Install water holding tanks and have water delivered on a regular basis

o   Rainwater collection

o   Water purification from a river, stream, or creek

Sewer/Septic

o   Connect to the public sewer system if available

o   Install a septic system

Electricity

o   Connect to the public electricity grid

o   Install a solar power system

o   Wind generators

o   Gas generators

Gas

o   Connect to the public gas lines

o   Install a propane tank and have it filled on a regular basis

Survey

There are a number of different surveys you can have done on a property, but the common survey is to confirm the location of the property lines. This is most commonly referred to as a Boundary Survey. In many cases, there is not a need to have a survey completed prior to purchasing a property because, you can typically tell where the property lines are by looking at a parcel map or a GIS website which shows you an overlay of the property on a satellite image of the ground, like Google Earth. However, if you are going to build a fence or a structure that is close to the property line, it’s good practice to get a survey prior to building anything. There are cases where someone built a fence on what they thought was the property line, only to later find out that the fence was built on their neighbor’s property and had to be moved.

Title Research

When conducting title research on a property, you’re looking for three primary things:

Chain of Title
Liens
Encumbrances

The chain of title shows the ownership history of a property. What you’re mainly looking to do is establish that there are no breaks in the chain of title. This means that you should be able to tell who owned the property at any point in time since it was originally created and there are no periods of time when you can’t tell who owned it. Owner A sold the property to Owner B who sold the property to Owner C and so on until the property is owned by the person or entity you are purchasing the property from.

A lien refers to a monetary interest in the property by a third-party other than the current or previous owner. One example of a common lien is a mortgage. When a lender loans money on a property, they record a lien against the property for the amount owed and the terms of the loan. This will show up as a lien when you’re doing title research.

Another example of a lien is what’s known as a mechanic’s lien. This type of lien is typically recorded against the property for services rendered but not yet paid for. One example would be if a contractor performs work on the property but doesn’t get paid by the owner. If the contractor wants to get paid for their services, they may need to record a mechanic’s lien against the property to ensure their compensation is received.

A lien can be removed by the person who originated it by recording a lien release which effectively removes their interest in the property. If you see a lien recorded on the property you’re looking to purchase, make sure there is also a lien release recorded.

An encumbrance is a broader version of a lien which can be monetary or non-monetary. All liens are encumbrances, but not all encumbrances are liens. Common examples of encumbrances include deed restrictions and easements. A deed restriction may prevent a future owner from doing certain things on the property, for example, building a structure on it. An easement grants access across some portion of the property. Both of these encumber the property to some extent and should be considered when looking to make a purchase decision.

Water Rights, Mineral Rights, Air Rights

Water rights, mineral rights, and air rights refer to the rights of a user to use any of the elements contained within these definitions. Water rights allow for the use of water from a water source that is part of the property such as a river, stream, creek, or groundwater. Mineral rights provide the right to extract minerals below the surface of the property. Air rights refer to the users right to use the air above the surface of the property. A book could be written about each one of these topics and it would be unjust to try and explain any of them in detail here.

Access

When looking into access there are two types. Legal access and physical access. Legal access means you have the legal right to get to the property from a public road. Physical access means you can physically get to the property while on the ground, typically by driving on a road.

You can have one without the other, but the more important one to have is legal access. If you have physical access to a property but you don’t have legal access, you would technically have to trespass to get to your property. When trying to determine legal access, there are a few places you can look. One easy source is a title report. You can pay for a title report, and if the title company will insure for access, that means the property most likely has legal access, either by public road or by an easement. Another place to look is the plat map. If the property has a platted road going to it, it should have legal access.

Conversely, if you have legal access to your property but no physical access, you can usually build a road to the property. In this scenario, the bigger question would be the cost to build the road. In some cases, you may be able to commission a crew for a few thousand dollars. In other cases, it could cost significantly more. When trying to determine if there is physical access, the most accurate way to do this is to drive to the property yourself and examine the access in-person. The next best option is to look at the property on google earth, or a similar mapping application, and see if there appears to be a road leading to the property.

HOAs & POAs

An HOA and a POA are similar in nature but have some key differences. The acronym HOA stands for Homeowners Association and the acronym POA stands for Property Owners Association.

An HOA is made up of people who live in a community of homes or condos and the purpose is to create and enforce standards for that community. There are typically rules and regulations in a community with an HOA which dictate how structures are built and how the community is run. The intent is to make the community a nicer place to live for everyone in it.

A POA can be made up of people who live in the community and also business owners and area representatives. POAs are focused more on the actual real estate and could consist of empty lots only. The intent of a POA is to support the local community and other associations who are involved in the community, so the public is aware of the benefits and the value of property improvements over time.

 

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