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buying-land-for-custom-home

As a real estate agent in Colorado Springs, for many years I’ve been helping people buy not only existing homes, but I’ve also helped many families buy land to build a new home on. In that time, I’ve found that there are a few things potential home owners need to carefully consider before buying land.

So today I decided to compile a handy list to help you if you are in the process of buying a lot. If you’re building a custom home, or even thinking about building one, hopefully this can help you avoid some of the common pitfalls and be an educated buyer so you end up with a great piece of land with no surprises now or later down the road.

#1: Remember: It’s All About Location, Location, Location

This is, above everything else, the most important consideration when buying a lot. Aside from just choosing the right location on a macro scale (i.e. the side of town you want to live on), it’s also¬†important on a micro scale as well: for example, if your lot is part of a bigger real estate subdivision, is it going to be on the side that has a nice view, or the side that’s right next to a highway? If you have children, you’ll want to think about nearby school districts. If you are still in your working years, you’ll also want to make sure you don’t build a house that’s so far from work that you have a commute time that’s longer than you like. If you are retired or retiring, you may want to look into nearby community amenities including medical services, recreational facilities, clubhouses, fitness centers, etc..

#2: Try To Picture Your Neighborhood in 5-10 years

The biggest mistake I see people make when they buy real estate land is that they often get into a “house fever.” By house fever, I mean they fall in love with some aspect or feature of the property that they forget to ask some of the biggest questions.

For example, when buying an existing home for clients, sometimes I have to ask them, “There’s a railroad track right behind your house. Will you be able to go to sleep with a train passing by outside your bedroom at night?” When helping clients buy a lot to build a home on, I often have to help them ask the question “is there any chance a major street could end up adjacent to my property?

We’ve seen this kind of thing in Colorado Springs several times recently where a subdivision is being developed and the first people who buy lots start building and everything seems to be going great. But as the rest of the lots are sold, you may start to get a clearer picture of how the neighborhood will end up, and it might be different than you initially hoped. Could it be that the beautiful treed lot next door or across your back fence becomes a major shopping center in two to three years? If so, are you okay with that?

If you buy a lot in the middle of a beautiful, pastoral area with lots of room and gorgeous green grass, is there any chance the people who live next door might build a Motocross track and race motorcycles and Go Karts all hours of the day? Could it be the stack of hay bales your neighbor has all in a row at the end of his property means he has a shooting range? Some of these things may not be evident upon first glance, so it’s worth taking some time to research.

#3: Know The Property’s Setbacks

What are the setbacks on your lot? (If you are not familiar with the term, “setbacks” are the guidelines that state how close to the border of your property you can build.) Your local building department or owners association will have the answer to this question, and it may affect where you put your house; on smaller lots, setbacks may even dictate the size of the home’s footprint.

#4: Ask: How Will You Get Utilities and What It Will Cost?

Making sure that you understand exactly how you are going to power your house and take care of water and waste is very important, because these items can be a deal-breaker in some cases. Before you actually complete a purchase on a lot, you’ll want to know exactly how you are going to get access to the following:

  • Water (either from a utility company or from a well)
  • Waste (either septic or sewer)
  • Power
  • Gas (either from a utility company or from a propane tank)
  • Phone and Internet service

For example, you may be interested in a lot that’s in a very remote location, and you may see that the property is listed as having access to municipal utilities such as water and sewer. However, if you are far away from other homes or from the utility provider, you may be charged a hefty fee to actually bring the utility lines out to your property. (When I say hefty, I’m not joking: these fees can be as high as $100/foot, so if your property is 200 feet away from the utility lines, you may need to pay $20,000!).

In our part of Colorado, there are some places just 45 miles from Colorado Springs where you can buy two acres for only $5,000. But just because you can find a lot in a beautiful area that has a low asking price, that doesn’t mean that you’ll save any money if you need to pay large fees to connect to the utility services. The solution is just to call the utility company ahead of time and get a quote on the costs before you buy the land. The same thing goes for gas service: if you need a propane tank, is there even a nearby gas service company? See if you can find out before you buy the lot, and see what it will cost you.

If you live in a city near a utility company, what are the tap fees to hook up to the existing water and sewer lines? In Colorado Springs, our local utility tap fees are approaching $18,000, which is a big chunk of change.

#5: Know That Natural Resource Rights Are More Complicated Than You Think

Depending on where you live, there may be certain rights on the lot you are interested in buying that are held by a third party which you may not even be aware of. For example, in the Colorado Springs area, there are several kinds of natural resource rights that may include:

  • Water rights
  • Mineral rights
  • Timber rights
  • Access rights

With water rights, just because your land has a river, or stream, or creek, or even a small pond on it, that doesn’t necessarily mean that you actually own the rights to the water. Not only that, but you may be restricted in how you use your land if there’s water near it. For example, if you live right next to a lake that is used for drinking water, you may not be able to raise livestock on your land due to the possibility of contaminating that water with cattle waste. So if you’ve got your heart set on raising cattle, you better check first.

Mineral rights are easy to gloss over when signing a contract, because you might think “this will never affect me,” but you’ll want to be cautious. In Colorado Springs, there’s been some exploratory drilling by oil companies over the past few years, and if you own a lot but not the mineral rights, it could be that there’s a company out there with the right to come drill for oil on your land, whether you want them to or not. Could this happen to you? It might, or it might not, but you’ll want to know either way if there’s the possibility.

Timber rights are just like mineral rights: if you buy a lot in the forest, will you own all the trees? There may be some circumstances where a third party owns a timber contract and therefore has the right to come onto your property and harvest a certain number of board-feet each year.

Access rights can also be tricky. It is possible to buy a piece of vacant land to which there is no way to access it without trespassing on someone else’s land. If your land is surrounded by land owned by a private or government entity, and there is not a recorded agreement to allow you to walk, drive, or otherwise get to your land, you may never be allowed to legally set foot on it. Other access issues may be a public or conservation easement on or near your property.

#6: Find Out Who is Responsible for Maintenance

Who is responsible for maintenance in the surrounding area? If you live where it snows, who is responsible to plow the snow off the access roads in your neighborhood? There are many potential answers: it could be you the homeowner; a homeowners’ association; the county; or even the city. What would happen if you are out and about snowplowing your driveway and you accidentally nick the curb on the sidewalk? Are you going to be fined by your municipality? You should find out before buying the lot.

#7: Don’t Forget Zoning & Restrictions

Finally, you’ll want to know all about the restrictions on the property. Are you buying land in a community that has Covenants, Codes and Restrictions (CCRs)? Is there an Architectural Control Committee (ACC) that you’ll have to run your design and landscaping decisions by for approval? You’ll want to make sure you know this before you buy the lot, and certainly before you start building.

Zoning is important as well: some areas have land that is zoned for either commercial or residential use. You probably don’t want to build a house where you’ll end up with a gas station as your next door neighbor… but even if you are in an area that’s zoned for residential homes, is it zoned for more than one structure? If you want to build a barn, a detached garage, or a “mother-in-law cottage” behind your house, you’ll want to make sure your lot is zoned properly for this, and finding a lot with this kind of zoning may be more difficult than you think.

Some areas have minimum home sizes on their lots. One community association just north of Colorado Springs requires that a home is at least 5,000 square feet in order to be approved by the architectural committee. Can you afford a 5,000 square foot home? If not, you’ll want to make sure you buy land somewhere else.

I hope this has been a helpful list of items for you to consider as you look at buying land. I wish you the best in your search, and if you have any questions, feel free to contact me or simply comment on the post below. Happy searching!

About Ray Brown

Ray Brown is a Colorado Licensed real estate agent based in Colorado Springs. Born and raised in Fort Walton Beach, Florida, he is one of the top real estate agents in the Pikes Peak region and has almost 20 years of experience buying, selling, and managing properties. If you're in the market to buy land in Colorado Springs to build a custom home on, Ray would be happy to assist you. He can also help you sell your existing home or rent it out with his property management service. Visit him online at First American Real Estate or First American Property Management.