Skip to main content

Everything You Need to Know About Purchasing Land

5 min read

Legal Boulevard Square Logo

By Sheryl Walters

Learn about the exciting (and sometimes confusing) process of purchasing land! Whether you need land to build a house on or you have a more commercial interest, find out what’s involved.

Purchasing land is one of the biggest investments many people will make in their lifetime, so it’s important to get it right. From the initial search for a property to the due diligence Define: Due Diligence The reasonable standard of care, investigation or assessment required before signing a contract. it takes to make sure you know what you’re getting, and the complicated rules for financing, purchasing land can be a daunting task for buyers, particularly first-time buyers. Here are some of the things you should know before you commit to a major land purchase.

Purchasing Land Can Get Costly

The first step of purchasing land is to take stock of the resources you have to make it work. Beyond the likely cost of land in the area you’re looking into, there are always other associated expenses. Most land purchase agreements in the United States include various fees, permits and taxes, as well as the cost of financing and construction if you plan to build on the plot. You could also have surveying and landscaping costs to level the ground, plus access costs for electricity, water and sewage if those aren’t included.

The costs you can expect to pay vary from one area to another, even within a single state. Even a brief consultation with a local expert can help you model the financial costs you’re signing up for with this type of purchase.

Tip: If you are purchasing land in another state, it’s a good idea to speak with a local real estate agent who specializes in land purchases.


Tierra Mallorca/Unsplash

Searching for Good Land

Not all land is equal, and depending on what you plan to do with yours, some plots are better than others. If you plan to build a house on the land you’re buying, the physical layout of the property can be the difference between smooth sailing and an impossible (and costly) hassle. Issues with drainage, fire danger, wildlife and even the proximity to historical or natural protected areas can all affect whether you can build anything useful in a given location.

You can somewhat mitigate the risk of purchasing land for a house by doing research before the deal closes. If necessary, hire a surveyor or an engineer to inspect your potential new plot of land and report back on any adverse or concerning conditions. Even something as simple as faulty drainage from a nearby interstate highway could cause water to pool and form a legal wetland, which could trigger environmental laws that hold up your home construction. Know about these issues before you buy.

Noah Silliman/Unsplash

What Do You Plan to Build?

Most people who buy land in the United States do so in order to build a house, but there are several other reasons to invest in land. What you plan to do with the land can make a difference to whether a plot is worth the cost or not.

Farming is a common use for privately held land. Before you buy, find out what irrigation is likely to cost and whether there’s convenient transportation for your crops. If you plan to build a more commercial property, such as a workshop or factory, remember that every state and urban area has its own rules about noise, pollution and other issues affecting your operation. Even if you plan to build a rental property on the land and rent it out, you should know that many areas have different zoning laws and restrictions for commercial rental properties than they do for an owner-occupied dwelling.

With the rising cost of housing, buying vacant land and living on it in an RV or other similar travel-trailer is also of growing interest to many people. However, many cities don’t allow this and will issue fines and eviction (from your own land) if you attempt it and are caught. It’s critical to find out all of the rules relevant to your post-purchase plan before actually purchasing the land.

Financing a Plot of Land

Unfortunately for many residential buyers, most land purchases are treated as commercial loans by the lender. This is true even if you plan to build a house and live on the land you purchase. As a rule, residential land purchases are split into two loans: the commercial loan you need to buy the land and a residential loan that pays for the improvements, usually called a development loan.

The rules for getting a development loan are similar to the standards for getting any other mortgage. The land mortgage, however, is almost exactly the same as a business loan for equipment or facility construction. To get one, you might have to draft a business plan for the bank to review. This is often the case even when you have no commercial plans for the land at all. In these cases, the “business plans” borrowers submit often include likely projections of future real estate values and proof of the borrower’s ability to pay back the loan.

Precondo CA/Unsplash

Making an Offer and Finalizing the Deal

When you have land picked out and have consulted with legal and real estate professionals, you are finally ready to make an offer. This can be done through a local real estate agent, or you can make the offer yourself to the current landowner. Be aware that an offer to buy land can be considered an enforceable contract in some ways, and you might be liable for damages if your offer is accepted and you later back out.

It’s common to make a formal offer via a purchase agreement form. You can download a land purchase agreement form in PDF here. While every agreement for purchasing land is a little different, in general, the best contracts include:

As with any legal document, always ask a lawyer who knows the real estate market to review your contract before signing. It can make purchasing land much easier and give you peace of mind that the property is safe to buy.

Legal Boulevard Square Logo



How to Prepare for the Immigration Process Immigration

How to Prepare for the Immigration Process

The immigration process can be difficult to navigate. Learn what steps to take when preparing for your personal interview, naturalization test and medical exam. For many applicants, the immigration process is overwhelming and difficult to navigate. By taking the following steps to prepare, you can improve your chances of successfully achieving U.S. citizenship…

Read More about How to Prepare for the Immigration Process

5 min read

How to Determine If You Are Eligible for a Green Card Immigration

How to Determine If You Are Eligible for a Green Card

Determining eligibility for a green card can be complex. Discover eligible categories and which one might be the best fit for individuals or their families. For many people, obtaining a green card is an important milestone. It could be their first step on the road to working in the United States, joining a spouse or […]

Read More about How to Determine If You Are Eligible for a Green Card

5 min read

Class Action Lawsuits FAQ General

Class Action Lawsuits FAQ

Class action lawsuits let individuals join together to fight back against harm caused by corporations. Discover how class action lawsuits may pertain to you. Every day, deceptive business practices and outright on the part of corporations and other institutions cause physical and financial harm to individuals. Class action lawsuits give consumers the ability to fight back. Learn more […]

Read More about Class Action Lawsuits FAQ

5 min read

U.S. Immigration: How to Apply and What to Expect Immigration

U.S. Immigration: How to Apply and What to Expect

Explore the application process for U.S immigration. Learn about visa categories, eligibility requirements and information on visa approvals during COVID-19. Every year the U.S. Department of State issues immigration visas to family members, skilled workers and diversity immigrants. In 2019, the U.S. issued more than 450,000 immigrant visas to applicants across seven categories. There are different immigrant visas in […]

Read More about U.S. Immigration: How to Apply and What to Expect

4 min read