Should I Buy Land? What Are The Risks?
I know of a gentleman who bought a $55,000 lot which represented that it was on a municipal water system, and it turns out he was told that he would have to pay up to $1 million to extend the trunk line for the water line down his street. Obviously, he’s not going to do that. Drilling his own well is going to be expensive in his area apparently, and if you’re in a municipal serviced water area, you cannot necessarily just drill your own private well. The septic system is going to be expensive for him too, perhaps $25,000 to $30,000.
He told me a long story about the multiple bureaucratic nightmare he was up against on several issues, which also included getting a written road maintenance agreement in writing to satisfy lenders. Long established homeowners don’t want to sign anything like a written road maintenance agreement for a new homeowner. By the time he gets done and ready to build a home on his $55,000 lot, he may have over $100,000 in it, and it’s not a premier location either. In this real life case, the answer to the question, “Should I buy land” is clearly no.
Should I Buy Land, What About Drilling a Well?
Another buyer of land closed and drilled a well 500 feet and only got enough water to satisfy his cat’s thirst. I had to help some of my own clients terminate a transaction because the listing agent misrepresented the availability of water on a shared well, which turned out to barely have enough water for one user, let alone two. It only pumped one and one-half gallons per minute, which is definitely not enough for two homes. One of the challenges if you say to yourself, “Yes, I should buy land,” is that you won’t know if you hit water with a good flow rate until you already closed on the land and drill a well. You could discover that you don’t hit water until you drill down 500 feet, which has happened here in Sequim, WA, or you could discover you only get a quarter gallon per minute, which is not enough for a single family home. Or you could drill a dry well. Then when you try to sell the land because you can’t build on it, you have to disclose that to the new buyer. Of course, that means you’ll never sell the land. What a nightmare that could be.
Should I Buy Land, Are There Other Risks?
Another buyer of land built a home and then got into a two year battle with the neighbor who claimed the new guy’s driveway cut over a corner of his land. Even though it should have been an easement by prescription under Washington law, the judge stupidly ruled against the new homeowner and in favor of the neighbor from hell. I’ve litigated easements and adverse possession cases when I practiced law, and judge’s can and do make wrong decisions.
A gentleman called me about land he bought out in Diamond Point, and he planned to build a home. Now he is told he can never build a home, because the septic drain field for his own septic system extended onto his neighbor’s lot unbeknownst to him, and that was originally an agreement with the previous landowner, but that drain field was recently declared unusable. His new lot was not large enough for a septic and drain field under the code, so he bought a lot he can’t build on and cannot sell. He paid about $50,000. His answer to “Should I buy land” is a loud “no darn way.”
I wouldn’t buy land, although there is a case in which I would consider buying land and building a new home. For most people there are far too many uncertainties and risks involved. Most people don’t want to go there, even though they don’t know about 5% of the traps for the unwary that I’ve seen over the years. I would add this. The best land deals seem to be the ones that often end up with the greatest risk of nightmare scenarios, or totally unbuildable land. It’s the old adage, you get what you pay for. Buy a cheap lot, and you might have a nightmare pending.
Should I Buy Land, Can I Build My Perfect Home?
Obviously many people have bought land in the past and built beautiful homes and lived happily forever after. If the lot is in a little subdivision where the builder is the developer where all the infrastructure and utilities are installed, and all that remains is the selection of your floor plan and letting the builder build the home, that’s different. Not much risk there, unless the builder is unreliable. The risk is in rural areas where you have to hope you can get potable water and a septic system the county will approve, that you won’t have any surprise drainage issues below the surface that could mean a major drainage system design, that it won’t be too expensive to extend utilities from the main source to your home, and ultimately that the county building department will issue a permit to build your home. That’s certainly no guarantee by any means. If any one of these items cannot be done, you do not get a building permit.
I know, this article is probably so discouraging for you who want to build your own home on rural property outside the city, you may be thinking I might just as well have written about the riots in Portland. No, I’m not going to do that. But I am here to tell the truth. Would I buy land and build a home today? Yes, if
- I couldn’t find my ideal home in the inventory,
- I knew how to select one of the best home builders in the area,
- I had an outstanding buyer’s agent to help me avoid traps for the unwary when buying land,
- I had plenty of time for the entire process, including the 6 months to 10 months it takes to build a home,
- And if I had plenty of money, because buying land, site excavation, installation of utilities, building the home, and landscaping will cost more than buying an existing home, even in this current market.
If you’re planning to buy land to build a house, I wish you all the best. I did become an expert in buying land in my career, and as an attorney I handled just about every kind of land issue that comes up, but now as a Sequim Buyer’s Agent, I only represent buyers of existing homes. In plain language, land is no fun to deal with, and it is the lowest paying job in real estate. I’m too old to work for minimum wage. LOL