How To Enter Into A Contract To Purchase Land For Your Homestead

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    A friend of ours is considering buying about 6 acres of land from a friend of their family and they expect to work on the land slowly and build on it within the next 5 years or so. They are asking for advice on what they need to look for before they get into the deal.The price is extremely reasonable and under $20,000 total.

    First I want to say I am not a lawyer and whenever you are doing a real estate deal you need to talk with a Real Estate Lawyer that specializes solely in Real Estate Transactions. Don’t think you can get away with a standard lawyer who may only process a few property deals a year. Its like going to a chinese restaurant to buy a pizza .. sure they might make a great pizza maybe .. but do you want to take the chance when there is a pizza place right next door? In all honesty you don’t even need a lawyer to write up a deed and register it with your county. You can do this on your own with a quit claim deed. But again do you know you are checking everything correctly? So, see a lawyer and find one that will do it for a Flat Fee, not hourly and it should cost you $500 or less for the paperwork and the processing.

    Initially a Right of Refusal Agreement for Purchase should be signed by both parties establishing the amount to be paid, the parcel or technical deed details to describe the property legally and the time that the seller is giving the buyer to investigate all of their Financial Possibilities and the Other things that come along with owning this piece of land.

    As for general suggestions there are a lot of things that everyone needs to look into when buying land that they want to build on.

    The first would be is the owner of the property the legal owner without liens or encumbrances on the property. Sometimes property owners forget that contractor lien or maybe there is another family member that has to sign off on the sale. If you try to register the deed you will need title insurance to investigate the person selling the property has the right to sell you it in total. If not you could be out a lot of money.

    Second you need to be sure that you can legally use the property for the purpose you want. In some areas there are zoning laws that restrict property to only farming and you would only be allowed to build a barn to house your equipment. Other areas are restricted from residential building by acts of preservation for open spaces. Zoning is not difficult to find out but you should before you begin and if you wanted to have a residence and maybe a small business out of the property you have to know if that is allowed. Maybe you want to offer a towing service or plumbing or something else not related to the land but also have your residence at that location. Are you allow to use the property as you want to or what will you need to do to get that right. It might include getting a variance from the county after attending a board meeting. Or you may not need to do anything to have a small business so investigate it.

    After you know that you are ok with the legal purchase and use of the land as you want then you need to look into what property rights might beĀ  attached to the deed. If there is a right of way by utilities that runs a road up the center of your property so they can access power lines this is something you need to know. Or maybe there is a landlocked neighbor that uses your property to access their property. I have seen those issues get really hairy .. i have even seen one person intentionally sell off land along their side of the road and land lock themselves then expect access across a neighbor’s property with whom they had no agreement with. Police were called many times and the police didn’t respect the rights of the person who was being forced to provide access until the courts got involved. However there are many parcels out there that are two or more deep and a shared driveway runs up the side of the front property owners land and the person behind does not own that road and they abuse the right or the presumed right.

    Next you want to look into the usability of the land and see if there is water and an area that can be used for your septic system if you are not on county water and sewer. If your water well has to be dug more than a couple hundred feet you are talking a large expense to not only dig it but to maintain it and pump the water. Also what quality is the water is it good enough to drink and how much treatment will it require. If your land can not support a septic system leach field you will need to truck in large amounts of sand to amend your soil which can be extremely expensive. These two costs can range from a few hundred dollars if everything goes great to many tens of thousands of dollars if things go bad.

    Making An Offer To Buy The Land

    Once you have done your best to investigate some of the primary things that have to be established before you can even consider a property one that you can build on you are at the point where you can make an offer to purchase the property.

    In some instances people who are friends look for agreements that leave out the bank or legalities of deal making but many times this can come back to bite you.

    For instance in this specific case the price of the property is pretty small but the owner is willing to have a small down payment and then take monthly payments until the property is paid off. Since the buyer is purchasing the property as a second home initially until they can move the initial expense if any is going to be something they have to budget and this deal might look attractive. But you have to consider all of the things that might happen in the years to come before the property is paid off. If the friend who is elderly ends up in a nursing home the property will end up liquidated to pay for those services. If they end up in a car accident and are at fault or have any other problem where they are sued the property could be sold or taken.

    For this reason it is best if the buyer purchases the property outright even if it means they need to get a loan from a bank. A bank won’t want to foreclose on the property or take it if payments are being made. It removes all of the risk of not knowing what might happen with the other person in the deal and places the responsibility on you.

    On the other hand it might be worked out that the deed is transferred in total but a loan is established and maybe a lien is placed on the property until the loan is paid off. In this case only non payment would be a problem. Again these things are legalities that a lawyer should talk with you about.

    Final Note

    In this How To we looked at the purchase process and the primary things that are required before you make an agreement to purchase land for your homestead. A lawyer should be consulted and there are many resources online to help you through the process. The main thing to remember is you want to approach this type of deal like you would any other. Use Professionals to manage the details, Use Title Insurance to make sure the property is yours after the deed transfer, Investigate the quality of the property for maintaining a homestead and don’t follow through until you get your answers.



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