Transcription
So imagine how excited you are: you bought land for the very first time. You're going to put the home of your dreams on this property, and you can do whatever you want. And that's going to be next year; this year you just bought it, now you get to celebrate.
But in the meantime, you know you heard about this timber company. They worked with your neighbor; they gave them a really good deal when they bought the neighbor's timber, and they're going to pay you for your timber too, of course. What is there to think about, right? You even did everything right before you bought the property: you got a perk test done, you got the septic permit and everything, and now you're so happy and you're ready to go. You signed the timber agreement; they buy the timber, and the land's perfectly cleared. You can visualize: okay, my home's going to go there, my pool's going to go there, driveway through here.
And in a couple of months, you're going to pull construction permits. When you do, you have a big, big problem. You got a big problem because the environmental health official that's going out to check the soil for the area where the septic permit was issued, they give you an email and they give you a phone call, and they tell you that the Timber Company, when they were out there, they weren't too careful. And the thing about Timber companies is that when they're not too careful, they have a tendency to just rip up your property and destroy the soil. So the soil that you were counting on for septic, you cannot use; you can't use it for septic, which means you can't build a home.
And you might be thinking, well, okay, I'll just sell the land, and and I'll use that money to buy another property that'll work out better, and I'll just build on that land. Okay, well, the problem with that is that you now have to disclose that because when you go on the market, your buyer needs to know that the land doesn't perk. And a property that you spent $50,000 on with a septic permit, that land you might have to sell for 10 or 15,000 to a neighbor, and even then it'll take a while, and you got to pay commissions off that sale price when you do finally pay it, when you get that far down the line on a bad land deal. The punchline of everything is that at the very end, you're going to be grateful that you got any money out of it at all.
The information I'm going to give you is a lot of information that you cannot get on the street. You can't get it on the street. The land brokers in your market don't know this in most cases. The reason they don't know it is because even though they represent buyers as a buyer agent on land transactions, they don't buy land like we do. They haven't done the number of transactions where their money is on the line. When your money is on the line, you start paying really close attention. My name's Alex, and I've spent the last four years working all day, every day on one thing and one thing only. That one thing is buying land, okay, and I've learned a lot in that process. And what I want to do is I want to share with you the information that you're likely to run into if your deal goes bad. It's one of these next 10 things that I'm going to cover, and I'm going to cover as quickly as I can just to get the information across, so you're going to want to do yourself a favor, and you're going to want to grab a pen and a piece of paper, something to write with.
So the first thing you want to be aware of is what the land's value actually is in today's market, just to make sure that you know that you're not overpaying for that property. And the way you do that is you talk to three or more different appraisers or land-specialized brokers. You want to get at least three opinions of value and not take anyone at face value, because a lot of times you'll be surprised that they don't get it right. And they're just people; they do their best, but sometimes they don't see aspects of the property that the next person's going to see, and that would be a risk for you because you're counting on them to tell you what the value is, but you don't want to rely on anyone but yourself. And so you want three experts to give you an idea of what that property can sell for in today's market.
And you want to be careful because if you're buying a property for a residential home site, there's a lot of misconceptions. A lot of people think in terms of price per acre for H sites and single-family residential land. Price per acre doesn't really hold a lot of sway in that market, and yet everybody's so fixated on it, like it's like the North Star that everybody's following, but it's not. And you'll you'll see a lot of people, oh, it's four acres, you know, I sold a two-acre for 20,000 an acre, so that you know, maybe 80. Don't listen to someone that says that; they don't know what they're talking about; they don't know how to value residential land. Okay, so you got to make sure you're careful. Go on Zillow, look at sold comparable sales of building lots in that area that have sold in the last 3 to 6 months, and understand that size isn't everything. Because if you have a cleared, level, flat 4-acre building site, uh, it's going to be more valuable than a 12-acre flag lot with rough topography, bad access, and wet soil eight days a week. Okay, so size isn't everything; you have to look at the big picture. And when you find a comp that you think is valuable, you want to really compare and contrast what what's better about that property compared to mine: Is it more level? Does it have a better soil map? Is it in a better neighborhood? What are the differences, and how do those differences contribute to the value of the property? And then compare that with the experts that are providing their opinion to you, and you're going to get pretty close to the actual number.
The next thing that you have to be really careful with is to verify legal and physical access for your property. Because property that's on a County Road, you have a right-of-way from the street; it's public, and so it's pretty easy to see that, okay, your driveway goes right there; there's no issue with access, no trouble. But when you're on a private road, and a private road that goes through private property, uh, there's a ton of risk there. A lot of deals have gone bad when people look at a private road with a street sign on it and they assume that the property that they're buying that is served by that road grants them legal access through that easement. And a lot of time times these old easements, these handshake easements, the paperwork was never done. And you can buy a property with everything looking spectacular, but the problem that you run into is that when you go to get a loan later to get a mortgage on your home or when you go to get a title insurance policy, you'll find out that the access that you have is not insurable, and actually your property's landlocked. And landlocked property can sell for 70 or 80% less than the same exact property that has insurable access. So don't let that happen to you; it happens all the time. The way that you make sure that doesn't happen is you go onto the County register of deeds and you pull the deed for the subject property, and then you find if there's any survey maps for the subject property. Because if there are, that deed and that survey map should both show or describe a legal easement that goes through that property, and you'll see it on a survey map; it's typically dotted dashed lines, and on a on a deed you'll see a reference to an easement. If you don't have that, that's a major red flag because before you buy that property, you may have to go work it out with the neighbors and make sure that the paperwork is done right. And as much of a hassle as that sounds, and it is, believe me, I've done it; it's nothing compared to buying that land assuming that you have access on that right-of-way and finding out later that you don't.
You've got to get a soil evaluation on that land before you buy it because until you do that, you're not even going to be sure that you're able able to put a septic system in. So once you get that soil report back, that's also going to show if there's any wetlands on the property, and that's going to give you insight into whether the property has enough usable soil that you may be able to split that property into one or more building lots in the future, which always makes the land more valuable, even if you just want to put one home on it. The fact that you can prove that that land can be subdivided down the line makes the land more valuable today. Last word to the wise is I want to make sure you understand that when you have a soil area close to a property line and it's enough soil and the soil scientist tells you that you have what you need for septic, but there's a neighbor on the other side, you want to really double check to make sure that that neighbor doesn't have any wells near the property line where your septic is going to be located. Because wells carry a 50- to 100-foot setback where you can't put a septic system near the well, and it transcends property lines, which means that if you find out after the fact that the limited soil area that you have that looks like it's enough for septic, you can't use because the neighbor's well was there, and their their well got there first. And and if that's your finding, you're going to find out that the neighbor's not going to move the well to help you; you should have found that out first. The soil map is going to be the best money that you ever spend in due diligence, and that's probably in certain parts of the southeast, certain parts near the coast of the United States; it is just a landmine of bad properties that look great from the street that you can't build on and never will have a home, and you don't know why it hasn't been built because it's so charming, but the neighbors know; the neighbors know, and they've heard the stories; they've heard the stories of the people over the years that have tried to buy that property; they weren't successful, and they weren't successful because everybody knows it doesn't perk. But the problem is they don't know that you're buying it, and if you don't talk to them, they're not going to tell you until after you buy it, and that's when it's too late.
So next is that you really have to understand where the flood zones and or wetlands are on your property. So flood zones, we'll P we'll we'll identify first; it's pretty simple. You have to know that all the maps for the flood zone property are mapped nationally; the Naps, the maps are done by an agency of the government called FEMA, and at the state level, the maps are distributed into State data databases called FIRM. All you have to know if you're buying flood zone property is you want to call the zoning office because in that zoning office you're going to be able to talk to somebody that is the designated flood plane administrator in that city or that county; that is someone who can look up the parcel with you over the phone, and they'll give you the skinny on your property. They'll tell you if there's any expired permits; they'll tell you if there's any red flags. And what you want to ask them about the flood zone property is you want to ask them, how high is the base flood elevation? This, the level of the 100-year flood, and then what, how high is the freeboard? The freeboard is to say that there's a one, two, or three-foot buffer on top of the 100-year flood elevation, where above those two numbers is the bottom level of your first floor, and you cannot build below that line, which means that the the lower your property is relative to the base flood, the more expensive it's going to be for you to do your building foundation the way you want. So you got to be careful, and you got to talk to that flood plane administrator because they're there to help.
So wetlands are a little more serious, and just like flood plains, wetlands have a lot of categories to them. The big distinction when you're dealing with a property that has wetlands on it is whether that wetlands area is part of a continuous year-round body of water or whether it's standing water that connects up to a river, a creek, a stream, or a lake. Because the distinction is what's called Waters of the United States, and Waters of the United States are regulated by a federal agency in the Coast Guard called the Army Corps of Engineers. With wetlands, as long as you're not in an area that's considered Waters of the United States, you don't have to deal with the Army Corps of Engineers; typically you're dealing with a state office in a state department either called Department of Environmental Quality, DEQ, or de Department of Environmental Protection, that's D, just one or the other depending on your state. They're going to tell you what the building regulations are, and so you can make sure that when you go to build, you're not going to be caught off guard because there's regulations impacting your property that you didn't expect. For wetlands maps in particular, you'll be surprised how often it is that the wetlands maps that are provided either through Fish and Game or through the County GIS mapping system often are not accurate. When you get your soil scientist out there to do your soil report, you can do what's called a wetland delineation, which enables you to see the exact outline of the wetlands map according to the soil scientist when they went out there. The soil scientist has the lure to overrule and establish the facts on the ground if they conflict with the federal maps, and so they can work with you as your pulling permits to go through construction to make sure that the reality of the wetlands as described by the soil scientist enables you to build where you want to build.
So when you actually go down the path and you're getting into the weeds of wetlands delineations and you're dealing with soil scientists, you're dealing with maps from Fish and Game, you're trying to figure out where the wetlands are, where they're not, I want you to know that a lot of people in the zoning office are going to give you misleading information because they're not really going to know some of the answers to the questions you're asking because it's not every day that they deal with this. Don't be discouraged; anything they tell you, you want them to provide you with primary source information about what the regulations are and exactly where those regulations or statutes are modified. Because anything that you cannot find on the primary source online, you should doubt. And the people in the county offices that tell you conflicting information about wetlands, a lot of times they just don't know, and so because they don't know, they're afraid to tell you that because they don't want to embarrass themselves. So they'll give you the most cautious and conservative information just to save face, even if it's not correct later and even if it limits your view of what you can do with the property that you're buying. So you want to really study the wetlands because the fact is wetlands and flood zones are not a not only not a bad thing, but some of the best land in the world is land that's inside of wetlands or flood zone areas. So so next is you want to really go through the zoning information and go through the County zoning ordinance and specifically the table of permitted uses as well as the dimensional requirements for the zoning class that your property falls under. Because what you want to see is, number one, is the type of home or the type of development that I'm going to do on that property, is that actually permitted by the county? And then if it is, do I have the setbacks between the edges of my property line where I want to build that will allow me to actually build successfully? Every property has a zoning class, and every zoning class has setbacks, and those are buffers where inside the property lines you cannot build; inside those buffers you have to go further into the interior; it's why houses don't have their front door on on the on the sidewalk.
So the other setbacks you have to be aware of, they're not just having to do with the dimensional requirements of your property. The other setbacks you should be aware of are setbacks for things like streams, riparian buffers for vegetation; if you have a bank of a stream or a pond, you can't build right up on the pond. So the question is, where can you build, and how big is that buffer? The other setbacks you should be aware of are things like utility setbacks; do wetlands have a setback? Do you need to BU have a setback from a flood zone, or can you get right up to the flood zone without touching it and not worry about additional cost? With setbacks, it's not just one thing; it's everything together, and you have to overlay all the different types of setbacks, the natural setbacks and the zoning setbacks together to see and make sure that where you want to build you have enough space, and that's really important. The other important thing is to make sure that you go onto the register of deeds to make sure that there's no restrictive covenants that are filed against your property. Because a lot of property, the table of permitted uses and dimensional requirements from zoning are only part of the picture; there's a whole other side of the coin because a lot of property that you'll buy is in these subdivisions where when you buy that land, the developer that platted the subdivision and actually set up all the building lots there, they made a bunch of rules, okay, and then you need to follow the rules in perpetuity. So when you buy land that's in a subdivision, you want to talk to zoning and ask if there's any restrictions, and no matter what they tell you, you want to go onto the register of deeds and see if you can find the name of the subdivision to see if there's restrictive covenants because the restrictive covenants that may apply to your land sit on top of the zoning requirements, so they add another layer of restrictions of what you can and can't do.
Next up is you have to double-check all the utilities that affect that property; don't take anything for granted. So, for example, are is it well and septic or is it water and sewer? If you have county or city water at the property line, where's the pipe? Where's the where's the water pipe? How close is it to your property? Is it next to the property? Is it on the other side of the road? This stuff really matters; it can cost a lot of money if it's further away than you think. And same with power because with power it's like, oh yeah, we're in Duke Energy service area, okay, we're in Pico's service area, great. The problem is, where's the closest pole? Where's their infrastructure? Because if you're buying land in the country, then chances are you're like a little bit off the grid, and so you want to make sure that you know exactly where their their closest pole is to your property. And just like water service, you also want to be sure that if you have to extend water or power into your property, especially if you're going through a private easement or a private road, you want to be so careful to make sure that you don't have to get any easements from the neighbors to be able to pull the utility through that right-of-way.
I had a property I was buying that was part of a survey map; it was behind a property that was by the road. The property I was buying was a property that was served by a private easement that went through the side of the property in front of it. That easement was part of a survey map that was approved by the county that the property was in; they signed it, and in that easement they said that this easement is for access and utilities; it's a utility easement. But what we found out the week of closing was that that power company in that area, it was a new power company, and their whole thing was, hey, our name is not on the survey; our name is not on the easement; we need our name on the paperwork or else it's not real; it doesn't exist. And at that point, we had to go deal with the neighbors up front. The neighbors up front, oh yeah, yeah, yeah, yeah, we want to help you. No, no, go sorry to hear that. Yeah, yeah, they wanted to help; they said it's like, oh, it's okay, we'll sign the easement. They said, oh, do you want to sell the property? Then they wanted to buy it. Oh, we don't want to buy it; there's issue with with the land. Oh, we we need to we'll do the easement, but we got to look at the paperwork; we got to send it to our attorney; he's reviewing. They didn't want to help; they didn't want neighbors behind them. The neighbors don't care; sometimes they don't want you to build a home there, and they're not going to tell you that; they'll wave their hands, and they'll say anything else but the fact that they don't want you to be successful; they don't want to have an easement on their land. And even if the easement is already there, if the power company says it's not, they don't care. The power company and the utility companies, it's not that they're bad people; they're good people; it's not that the neighbors are bad people; they're really good people; they just don't care about your scenario, okay? And that's really important that you understand that upfront.
And don't forget the other utilities too, like internet. And don't assume that you have good internet; assume actually that you have bad internet, and that like, just make that assumption; be cautious and then go from there. Because chances are you do. In the country, man, a lot of these beautiful properties have some of the worst internet in the world. And if you're a professional that needs internet access in order to do your day-to-day job and you want to work from home, you're going to be sorely mistaken if you make the assumption that these properties have great internet. And if you don't have a FiOS provider, what I would recommend that you consider is alternatives such as Starlink. And even Starlink, some areas it's either not available or it's available, but it's spotty. You really want to know that, and part of how you know that is you want to call real estate agents that have sold land or homes recently right up and down that stretch of road because they can tell you what the deal is with utilities because chances are they're the ones that get the call after the deal goes through, and the new homeowner that made the mistake that you're going to avoid calls them angry and upset about how they didn't tell them that the internet was no good. Okay, so you can call those agents right up and down that street that have sales history, and you'll be shocked at what you learn.
Another thing that we do before we buy any piece of land is we call particular County offices and check for red flags. What's a red flag? Well, you know, like like Bill Clinton said once, you know, I can't describe it, but I know it when I see it. A red flag is anything that if you were about to buy the land that you would want to know before you spent tens of thousands of dollars to make the purchase, and that's exactly what say to the county offices. You want to call environmental health; you want to call zoning; you want to call Central Permitting, and you also want to call Building Inspections. And what you want to do is call them; have one of their associates look up the property in their system, and you want to ask them if there's any red flags that would cause them concern if they were buying it. And a lot of times they'll tell you things that you're already going to know, but that's good news. Sometimes they'll tell you things that you would never know because the County GIS map is one thing, but a lot of times the zoning officials have a different map; the environmental health folks have internal maps; the this the utility office is the other phone call; they have other maps too; they each have their own mapping systems, and all their maps are different, and the maps they have…
They don't. You don't. You can't find them online. Next is you want to walk the whole entire property, preferably with a GPS app like, uh, LandGlide or something similar, where you can see the property and the boundary lines and dimensions of the property. And you can also see, uh, in real time on your cell phone where you are within the perimeter boundaries of that property you're walking.
You want to walk the property during times where—in not just dry season like right here—you want to walk the property after it rains. Because land will behave differently after you have a big rainfall. So you might actually be surprised because a day or two after it rains, the land can look very different and behave differently. You might even notice things that would surprise you. Sometimes you'll see standing water. Sometimes you'll see little ponds show up that are kind of like dried-out, um, divots in your land. Sometimes you'll see seasonal creeks, intermittent creeks, ephemeral creeks. You want to know the difference because if there's a creek on your property that shows up part of the year, it's called an intermittent stream, and if it's an intermittent stream, there may be some regulations that you wouldn't even know to ask about unless you looked. So you really want to walk the property.
You also want to make note of anything out of the ordinary. You want to take pictures of anything out of the ordinary. You want to double-check and make sure that you're within the property, and if you're not sure, you should consider getting a survey.
The other thing you want to do is make sure that the neighbors didn't dump any trash. That's a big thing that neighbors do. They'll they'll be really nice to your face, and they'll act confused, but sometimes they dump trash out there in the woods. It's a thing. Be careful when they dump trash. The big thing is that you want to go and walk the perimeter boundary lines, especially the boundary lines adjacent to neighboring property—neighbors that have lived there for many years, neighbors that are comfortable doing what they want for many years. Those are the areas, the hot spots, where people are likely to dump trash. And when you see it, the good news for you is you spotted it before you bought the property, and that's the seller's problem because they didn't disclose that, and that came up in due diligence, and that's a material fact, too. And so you can typically work it out with them. A lot of times they'll pay to get the junk hauled away just to get the deal closed, but either way, you can get a concession from that; you can renegotiate from that, and you should, because that's something—you're not buying a trash pile; you're buying a future home site. So that's that's the investment that you're making when you walk that land.
You also want to verify that there are no encroachments on the property. Encroachment is a big deal because a lot of times neighbors will build a permanent structure just beyond the property lines, and that becomes your problem because a lot of the things that are encroach that encroach on the boundary are things that like cannot be easily moved—things like trailers, things like fences, things like sheds, okay, permanent structures. Sometimes people have a carport with this cement foundation; they have like major infrastructure that they just set up across the property line, and that's a big deal. So you really want to walk those areas, too, and make make note of any encroachments. And this is again where we recommend you consider getting a survey if you're not comfortable with the boundary lines, if you don't have a recorded plat map on file with the county, if you're not totally sure—you want to get a survey just to just to be sure. And sometimes when we get surveys, it's not even for the full property. A lot of surveys we do are just partial boundary surveys, like like for—so for example, we're buying a property tomorrow, and this is a property that on the county maps you have a what looks like an obvious encroachment from the neighbor to the west, but what what we found out is we got a partial boundary survey just on that western line. We were pleased to find out that the surveyor walked it, he flagged that perimeter boundary line, and he told us that there's no encroachment and that the satellite maps and the GIS boundaries are all shifted 10 feet off. We never would have known that. And so sometimes you don't even need a full survey; just get a surveyor to shoot one of the boundary lines, and that's 80% of what you need in most cases.
Lastly, you want to get a title policy when you close, and you want to review that title policy and go through a section at the end that's called exceptions. Exceptions are—think about like pre-existing conditions for health insurance—it's something where if this comes out later, then we're not accountable for the for the title insurance. So when it comes to exceptions, it's any exception that you don't know what it is—don't be shy—you want to ask the closing attorney, you want to ask the title company, you want to ask the real estate agent, or all three, what it is and what it means because you're entitled to that information. A lot of times on title policies they come back—we look the other way on stuff—and then when we go to buy it, the buyer and the title company on the other side of the transaction months later, even a year later, they pull the title policy from when we bought it, and there's an exception where it's like, "What is this thing about access? What is this utility like? What what"—there's an underground utility map—where is it? So a lot of times the title exceptions will talk about previous survey maps, and a lot of those survey maps you won't even find on the register of deeds online. So what I want you to do is when you get a title commitment and a title exception, uh, lists out a bunch of deed book and page, map book page, deed book and page, utility easement here, former deed there—for all those book and page references, the title company or the closing attorney can give you the backup; they can give you the maps; they can give you the easements. A lot of times you'll find out that there's like an energy company that put an easement for an underground gas line or power lines now or power lines in the future maybe, and there might be a big easement in the middle of your property that you would never know. And so sometimes in the title exceptions—it's a very dry reading—but you really want to ask because sometimes when you ask and you get the backup from the closing attorney, you'll just be stunned the day before closing—the types of stuff that you find out that you never would have known. So don't be shy; ask for the backup when you go through your title exceptions.
And the last thing is, if you've gotten this far in the video, and I hope that you did, you realize by now that, hey man, this is a ton of work. So can't I just find a buyer's agent, and can't the land broker, can't the real estate agent just do this for me? And the answer is no, actually; they won't. They'll do most of it, and they'll do some of it; they might even do all of it, but the problem is they're not you, okay? And so their money is not on the line—yours is. So you you're the one that cares most; you're the one that wants to make sure most that everything goes well, and they do, too, but it's it's a different level of commitment, okay? Your personal finances are exposed when you buy land; it could be the best investment you ever made, could be the worst investment you ever made, or anything in between, and it's all up to you to make sure it goes well. That's something that they can't do for you, and they can help you with the research; they can help you develop contacts with the county or city offices, but ultimately, if you want to buy that property and you want it to go well, that's on you, and you can make it happen.