Land & Lots

What to Consider When Selecting a Vacant Lot to Build a Home

What a great idea to buy a lot and to build a home in the location of your choice! To design a modern home with all the amenities you want, to enjoy your life with family and friends, or to sell for a profit. 

First things first. What are the restrictions? What should I do to start the process? The first thing to do when exploring the idea of buying an undeveloped lot is to identify and find the land or lot parcel you want to buy, and then see what the financing options are available. If you are not paying cash, then decide your budget. 

Several banks will offer home building packages. I know US Bank had a wonderful home building package that included the lot purchase, the take-out financing (Construction Loan) and then they would roll that construction (take out) financing into a 30 year fixed rate, fully amortized mortgage. 

Another possibility is for the property owner who is selling, acting as a bank or lender. This is called Seller Financing. The way this works is simple and as old as time. The buyer arranges with the seller for the seller to provide financing by acting as a bank. The buyer offers the seller a price and terms that are agreeable to the seller, and the downpayment and monthly payments are agreed to. The benefit to this financial structure is simple. Since there is no bank involved, the approval process is simple; the buyer and seller agree, and the purchase is executed with a loan created in favor of the seller acting as “the bank”. It is that simple. The downside to this arrangement is if you go to a bank to get a loan for the construction of a home, the bank offering the construction loan will no doubt insist on being in the first position. At this point you will need to regarding the loan on the property itself, they will not take the second position. What that means is this: 

1) The loan for the land or lot and.. 

2) The loan for the construction of the house itself. 

If the seller of the lot who is holding a note or mortgage for the land or the lot will not subordinate or take the second position (such as a second trust deed), the bank will not loan for the construction. The bank will always want the first position or First Trust Deed before they will lend on the building.

**Always keep in mind the benefit of using a Realtor. 

It is highly advisable to use an experienced Realtor, because using a Realtor and the Land Purchase Contracts that are available to them is a huge benefit, not to mention that in most cases their service is of no cost to the buyer because of the way commission structures are. They are most often paid by the seller in most areas of the country.

Do Your Due Diligence

Due diligence is the inspection you must do to make sure you can build the home you want to build. This involves many things including but not limited to: 

Setbacks: this is the distance from the property lines that you must maintain in compliance with Government regulation or Homeowner Association requirements. Where you decide to buy is governed by the County, City and or Association rules and regulations, or all three. Building within an Unincorporated County Area is the easiest unless it is within a specific development that has an existing Homeowners Association. In which case, you must comply with these rules and regulations. 

Don’t forget Environmental Regulations. In California where I practice Real Estate, there are many habitat issues of endangered species. This usually requires an Environmental report that may include detailed studies on plant life and all kinds of critters, (ie: birds, mice, grubs, grass, plants, etc.) It can become quite a task, and usually, these reports are created after you purchase or during escrow. In all cases, in my experience, the buyer will have to pay for these reports and studies because if it turns out that you can’t build what you want, then you must decide to pass or play.

Once you know what the rules are and you have done your due diligence, it's time to design your home. Selecting an architect to design your own home or buying plans from a company are two choices I have used in the past. When you use an architect, you should choose one who specializes in the style of home you want to build. I would not go to an architect who specializes in Modern styles if you want a traditional house and I would not go to a traditional ranch style home designer for an ultra modern style design. 

It is hugely important especially in California to know that the Fire Department in most cases has ultimate power in the approval of your home plans. Be sure to keep this in mind when you choose the lot you want to buy, and that your architect is well educated on all the local Fire Department requirements. Do not make the mistake of leaving this at the end of your list in your design plans. Keep the Fire requirements at the top of your list from the very beginning of your search for a home site.     

At the top of the list for purchasing a lot to build is the connecting of the sewer. Location of the connection can have a major impact on building costs. Is there sewer access close by? How far away is the connection? Remember putting in a trench sewer main line to the home is costly and needs to be addressed before the project starts, so you know the costs.

If there is no sewer, then you have to plan and build a Septic System. A Septic System is approved and based on a soils report called a Percolation Study or a Perc Test. This is a test that is fairly basic that involves digging a big hole in the ground on the site (the lot) and adding water. The water percolates down into the ground, and the test involves the amount of time it takes for the water to sink into the ground. If the water does not drain, then you can’t have a system. Some reasons for this would be bedrock that stops the water from draining into the ground another reason may be a thick clay, the soil condition is key. The size of your home based on the number of bedrooms is regulated by the volume of water that percolates from your Perc Test. 

For More Information on Lots and Land in Your Area & Real Estate Marketing Call:

Don Clark Realtor 858 997-3859


I take personal care of you, making it easy for you through your home buying process. Insightful local knowledge and extensive expertise.

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