Finding the right lot can be a difficult task. Here are some helpful ideas to make the process easier. The first place you may look is at your local Realtor office for land listings. Before calling a Realtor go to their website and see if they offer online MLS (multiple listing services) searches. This should give you a good idea of the inventory in your areas. Realtors have the pulse on your market and can locate the property which fits your budget and overall community in which you want to build. Realtors can find what your are looking for sometimes before it goes into the MLS system. No matter if it is an established development or a secluded piece of land on the other side of town, Realtors can find hidden jewels that are right beneath your nose.
Realtors move fast and want to close the deal quickly to collect commissions. While Realtors are great assets in locating the right property, be careful, they can also hurry your closing leaving you little time to prepare for accumulating bids and performing due diligence on your project.
Most Realtors are not accustomed to the CTP (construction to perm) loans, or one time closings which can take longer to close than the traditional purchase. Until recently, purchase transactions were the only means to acquiring land which takes around a month or less to close. If you are choosing a CTP loan it is in your best interest to ask for the longest escrow period the seller is willing to accept. Typically a 45-90 day escrow period should be ample time to get your project in order.
Setting your Realtor’s expectations is key in relieving the stress involved in closing. There is little sense in putting an offer down on a piece of property with a 30 day escrow period if you have yet to begin planning for construction. Undue pressure on you and your bank can cause last minute goof ups and extreme stress. Avoid the hassle and find the right piece of property and give yourself time to do what you need to do. This being said, asking for a long escrow period from the seller should be accompanied by a solid pre-approval from your bank.
You can find land for sale under the real estate section of your local newspaper. Newspapers are great sources for good deals too. Sellers choosing newspaper ads for selling property can be of great benefit to the Owner Builder.
These sellers typically want to avoid paying a Realtor 4-6% commission on the transaction, leaving you negotiating room. These sellers are also more likely to accept longer escrow periods since they aren’t chomping at the bit to sell. Typically these sellers own the land free and clear and have less motivation to close in a month or less.
Rule one is ALWAYS make your offer contingent upon financing. You will also want to place “perk test” and feasibility clauses to your contract to make sure the lot is buildable. Make sure the current zoning will allow for residential building, the last thing you want is to go through rezoning your new land, so check with your county planning office.
When placing an offer you will be asked for earnest money to ensure you don’t back out of the deal for anything other than the inability to obtain financing. Earnest money can vary from locale to locale, $1,000 to $5,000 is customary. The larger the price tag the larger the earnest money. Sometimes you may want to put more earnest money down to convince the seller to extend the escrow period.
