First-Time Land Buyer? What You Should Know Before Buying Land

Whether you’re considering buying your first house or are looking for a new place to call home, you may be wondering if buying land is right for you. As a first-time land buyer, there are several key differences to know before embarking on your search, from zoning and utilities to financing and site conditions.

In this Redfin article, we’ll outline what you need to know about being a first-time land buyer from loan options to due diligence. That way, whether you’re considering buying land outside of Boise, ID, looking for land for sale in Raleigh, NC, or anywhere else in the U.S., you know what to expect from the process. 

Key takeaways

• If you plan to build, learn about the land’s terrain, access points, utilities, and water. 
• Understand if you need a land loan, a construction loan, or both. 
• Budget for surveys, environmental testing, and additional upfront due-diligence costs.

How do you plan to use the land?

As a first-time land buyer, you’ll want to determine how you plan to use the land. Are you buying land to build a home? Or are you planning to make it a recreational area? Zoning requirements will differ depending on how you use the land. For example, you’ll need to consider the property’s access and zoning if you’re building a home. Some areas also have HOA rules or CC&Rs that limit what you can build and how you can use the land.

Knowing what you intend to build on the land or not can also help determine how much acreage you should look for. You’ll want to consider the land’s condition, whether it’s suitable to build on, and isn’t prone to flooding. Checking FEMA flood maps or county floodplain data can give you a clearer picture.

First-time land buyer loans

Getting a mortgage loan for land is a little different than buying a traditional home. Lenders often distinguish between raw land, unimproved land, and improved lots, and loan terms vary depending on how developed the land is. Most land loans require at least 20% down and can be as high as 50% down. Interest rates are typically different, and often, are 1-2% higher than a conventional mortgage rate. Repayment terms are often shorter, from 5-15 years. Although you may be able to find some as long as 30 years. 

Land loans only finance the purchase of land and don’t cover building a house. Therefore, you may need a construction loan as well. Construction loans cover the cost of building a home and may convert into a traditional mortgage once construction is complete (a construction-to-perm loan). It’s likely you’ll need both loans if you plan to build a home on the land you buy.

Due diligence for a first-time land buyer

When buying land, there’s additional due diligence and factors to consider. Here are some of the top things to cover as a first-time land buyer. 

Work with an experienced real estate agent

Choosing an agent who specializes in working with first-time land buyers can be important to finding the right area and addressing any special circumstances. Some agents focus specifically on rural, off-grid, or recreational land, which can involve extra steps and local knowledge. A real estate agent with knowledge of land can help ensure you ask the right questions, schedule inspections, and know if you should walk away from a piece of land. 

Survey and title searches

Land surveys establish the legal boundaries of a property. If the land you’re considering buying doesn’t already have a land survey, consider having one completed. Some lenders may also require a land survey to determine the exact acreage, any easements or encroachments, and to determine flood zones. If you’re planning to build on the land, a topographic or elevation survey may also be needed for drainage planning and permitting. 

It’s also important to do a title search, just as you would if you were buying a home. A title search will uncover any ownership issues, liens, deed problems, or unaddressed claims to ownership. If the property was recently subdivided, confirm that the plat was legally recorded.

Environmental testing

If you’re planning to build any structure on the land, you’ll likely need environmental testing. A soil percolation test will show if the land is viable for a septic system. Well water can also impact your ability to live on the land, so you may need groundwater testing. Groundwater testing can show chemical, bacterial, and mineral contamination that may impact water quality on the land.

In some areas, you may also need:

• A geotechnical or soil stability test to evaluate landslide or erosion risks
• A wetlands delineation if the land could include protected wetlands
• Wildlife habitat reviews, which are required in some regions for protected species

Access rights

Is there legal access to the property? If there isn’t a private or public road leading to the home, it can impact property values. You may need to factor in the costs associated with building a road and establishing deeded easements if there is no accessible road. Shared access roads may also require a road maintenance agreement, which some lenders require before approving the loan.

Availability of utilities

Regardless of how you use the land, utilities will be important. Be sure to ask whether the property already has utilities and water. If not, how much will it cost to add? Running electricity to a site can be costly depending on how far the nearest power source is, and some areas have limited access to high-speed internet or cell service.

Inspections during different seasons

It’s important to note that the time of year you have the land inspected can determine what you’ll learn. For example, winter and spring months may show flood risks and potential drainage issues, while summer months may show drought problems. 

Understanding future developments

While it’s not always possible to know what an area will look like years down the line, it’s important to check if there are plans for future developments in the area. It’s likely that the county planning department will have information on potential subdivisions, infrastructure projects, commercial developments, and proposed highway or major road expansions. These can all change the land’s value or lead to loud noise disruptions and increased traffic. 

Red flags to consider when buying land

Like buying a home, there are some red flags to consider when buying land. Some issues to look out for include:

• Failed percolation tests that prevent building a septic tank
• Water contamination that causes costly remediation 
• No established utilities
• No deeded access to the property
• Unclear title of ownership
• Excessive costs for development on the land
• Protected areas that eliminate the areas where you can build 
• Marshlands or flooding problems
• Soil instability, erosion concerns, or landslide zones
• Easements that limit where you can build
• Strict zoning that doesn’t allow the use you intend

Property taxes when buying land 

Owning land can come with some property tax differences. If you’re using the property for farming or ranching, you may be eligible for agricultural tax exemptions. There are similar tax exemptions available if you’re using the land for timber production. However, if you’re planning to buy land to build a home on, you likely won’t qualify. 

Vacant land may have lower taxes than developed land, but rates vary widely by state and county. It’s best to speak with a tax professional if you think you may qualify for these exemptions. 

Final takeaways for first-time land buyers

Becoming a first-time land buyer is a big leap and requires extra due diligence, whether you’re planning to build a home on the land or use it for agricultural purposes. Working with an experienced agent, having the proper inspections and surveys, and choosing the right loan can help you through the process.

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