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How to buy Vacant Land

Updated: Apr 8


Buying land can be tricky, here are some things to consider:

Decide How You Want To Pay For The Land

Before you begin searching for undeveloped land, you need to make sure that you can afford it and determine how you will pay for it.

One of the best strategies is to pay cash, because lenders consider vacant land a riskier investment than a house that's already built, and charge more to finance it as a result.

If you plan to pay in cash, you'll want to budget for both the land and additional expenses like property taxes and utilities.

If you plan on financing, know that lenders typically require 20 to 25 percent down on raw land and farms, though there are some agriculture-oriented credit unions that sometimes only require a 15% down payment but check with your lenders to see what is available to you. Buying land can be a complex process. Land loans aren't the same as conventional mortgages, and their higher costs tend to reflect the amount of risk assumed by the financial institution dealing with an undeveloped property.

Some Types Of Financing:

  • Local Bank or Credit Union Land Loan

  • USDA Loan

  • SBA 504 Loan

  • Home Equity Loan

  • Seller Financing

Once approved for the land loan, what's next?

  1. Appraisal - this typically takes two to four weeks, and a professional appraiser will measure and appraise the property.

  2. Property Documentation Investigation - a lender will order a title search to ensure there aren't any outstanding liens or judgments against the property.

  3. Insurance verification - Be prepared to provide proof of all necessary coverage, such as general insurance, liability, hazard, and flood.

  4. Document preparation - loan officer will create the loan paperwork showing the approved terms.

  5. Fee Calculation - Be prepared that you may need to pay fees at closing like title fees, a recording fee, property taxes, real estate commission, or other costs charged by the lender, title company, appraiser, or real estate agent.

Consider Every Expense

Depending on how you plan on using the property, owning land can come with many hidden costs like permit fees, paying to install a septic system, and running utilities such as electricity to the planned building site. Some properties have public water available at the road, but the lines may need to run to your build site. Depending on your area, you may not have access to public water and will need to look into installing a well. Owning property, even vacant property can come with maintenance costs such as mowing or general landscaping duties depending on the property type.

How to find land for sale

  • Real Estate Agent - I can set you up on a search that will email you all the available properties for sale in the area. We can customize your search by price, location, and how much property that you want. Additionally, sometimes agents know about upcoming properties from other agents within their office before it hits the internet.

  • Internet - Home/Land searches can be useful for general information but please note that sometimes I have found information on these public websites to be outdated/incorrect. It's best to have your realtor send you the official details on the property from their local MLS system.

  • Take a drive - If possible, you always want to do a drive-by of the property. Many times, photos will not give you the entire picture of the property. We especially see this in Tennessee, where we have many properties on a mountain and wooded. Many of our backroads do not have the street view data on the internet. Driving by the property will also allow you to check out the neighborhood. If you decide that you like it and want to walk the property, be sure to talk with your agent about setting up an official showing. Be mindful that the property owners may not like you coming onto the property without permission and that can be viewed as trespassing. A real estate agent will have access to documents, such as a survey, restrictions, and other disclosures that are important when considering a property. Please be respectful and ask before stepping on private property. Be a nice human.

Let's say you found a property that you like, now what?

Research the property:

  1. Utilities - Are hookups for water, sewer, electricity, and internet available? If the property does not have these available, you will need to research the cost to have them installed.

  2. Road Access - Is there access to the property from a public road? if not, you may need to get an easement to build a road.

  3. Zoning and Land-Use Restrictions - you can check with your local zoning authority, or visit the town hall in-person to learn about regulations in the area, and any construction plans that could impact your parcel. In Tennessee, many clients want to know about what they can build on their property, can they live in a camper while they build their home, can they build a barndominium. You need to check with the county codes office to make sure your plans line up with restrictions/codes.

  4. Property Taxes- taxes on land can be costly and make holding the property long term economically unfeasible which is why most raw landowners try to ensure that their parcels fall under agricultural exemptions.

Make Your Offer

Work with your real estate agent to submit an offer. Common contingencies with land purchases include environmental tests; septic system permits; land surveys showing property lines, parcel size, and easements; zoning regulations.

A Final Thought

Buying land can be more costly than buying a home, and there are different requirements for getting a land loan compared to a home purchase mortgage. If you intend on building a house on your land, you'll also need to factor in construction costs. Talk with your lender about options including construction loans.

If you are interested in buying or selling in the East Tennessee area, I would love to have you as my client.

Katherine Davis, Realtor

Great Life RE brokered by eXp Realty

888-519-5113 ext 909

Direct Cell: 865-256-3190

223 West Broadway Ave

Maryville, TN 37801






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