On the surface, buying a piece of land seems simple enough, especially if the land is high and dry–a level cleared pasture. But, a nice-looking piece of land can also have pitfalls that may not be apparent without investigation. To buy raw land hoping to build either a dream home, a subdivision or a new factory requires a significant investment in order to reveal what’s going on under the surface. It is the reason that 104 hours of study is required to gain an “Accredited Land Consultant” designation (ALC) from the National Association of Realtors, by far the most intensive course of study of and real estate designation.
For owners of raw land, there’s a strong reluctance to spend money on investigations, which might include completing a costly survey, a wetlands delineation, a zoning ordinance analysis, and some assessment of the presence of ledge. Short of gaining this knowledge, coming up with a price is little more than guessing at its value. There may be underground tanks. There may be hidden deed restrictions. The soil may be unsuitable for a septic system. There may be a vernal pool on the property, which no one would know about unless examined by an expert.
To sell land, an owner must walk in the buyer’s shoes, to imagine what financial commitment is necessary to build anything there. Without making at least some rudimentary calculations, pricing the property is not likely to be realistic. Even with having completed a survey and a wetlands delineation, sellers need to be aware of added costs a buyer might incur if a lengthy driveway is needed, or a considerable amount of ledge needs to be extracted. Furthermore, should the land lend itself to a subdivision, the cost of engineering, planning board presentations, stormwater plans, and perhaps lighting plans may be needed. At the end of the day, a developer is in business to make a profit, and land acquisition is only one of the costs to consider. A price that is too high will sabotage a potential sale when the numbers just don’t work.
To a lesser degree, this same dynamic comes into play for a would-be builder of a single home. But, before any construction calculations can be made, the buyer must know the lay of the land – the investigations must be undertaken. Who pays for this? Ultimately, even when the seller does the work and pays the bill, the buyer pays the tab inherent in the purchase price. The difference is: the seller, having gained the knowledge from the investigations, can now price the land appropriately, instead of guessing. The other benefit: the land will sell much more quickly because buyers like to know everything before buying.
Of course, not everyone can pay for these expensive investigations. But for sellers who are simply reluctant, they can offer to pay for the investigation (a survey or wetland delineation), and get reimbursed by a buyer who closes on the property. I’ve done this more than once, and it is a fair compromise, when possible. More than any other real estate transaction, it is crucial to have a competent real estate agent to help you navigate the unknowns of buying land.