Land owners have a legal duty to disclose to buyers all material facts about the land they’re selling. This duty, however, is limited to information the seller is actually aware of. Buyers are sometimes dismayed when they learn that sellers have so little knowledge about their own land.
Here is a typical scenario: A buyer asks me a question like “where are the exact corners?” or “will this property perc for septic?” When I say that I don’t have that information, the buyer says “well, could you ask the seller?”
The thing is, the seller has no idea either.
“How could that be?” the suspicious buyer wonders. “Surely the seller knows everything there is to know about their own land, right?”
The vast majority of sellers are ethical and helpful and will provide the information if they have it. However, there are many reasons why some sellers know little about the land they’re selling. Here are the top ten reasons:
- Bought it at a tax sale
Seller Larry is an investor. He buys land at county tax sales at low prices. Then, he “flips” the land a couple of years later at a profit. For parcels under $50,000, Larry does not go to see the land in person. To decide what to buy, he relies on studying satellite maps and other online information sources. As a consequence, when it comes time to sell the land, Larry does not have detailed knowledge about the land he’s selling.
- Just the lenders
Seller Seymour did not invest his retirement money in the stock market. Instead, he became a hard money lender because the rates of return were higher. A few years ago, buyer Jane wanted to buy some land and Seymour loaned Jane the money. At that time, Seymour had the land appraised. Unfortunately, after buying the land, Jane lost her job and did not pay Seymour. Seymour foreclosed on Jane and took the land back. Now he wants to sell it and the old appraisal report is the only information Seymour has about the land. Seymour will be happy to disclose the appraisal to new buyers, but that’s all the information he has.
- Purchased it for someone else
Sellers Wang and Chen purchased a lot for their daughter Lilly to build a home in California. Wang and Chen live in New York. Although they are the owners, they have not seen the land. A year later, Lilly’s company transferred her to an office in a different state. Lilly moved away from California and so decided not to build. The family now wants to sell the land. It is Wang and Chen, not Lilly, who must list the land for sale with a Realtor and complete the official disclosure forms. This is because they are the legal owners. Sellers Wang and Chen know almost nothing about the land and their disclosures reflect their lack of knowledge.
- Live far away
Sellers Brad and Leslie live in the Rocky Mountains of Colorado. They purchased land on the Oregon Coast 10 years ago with the intent of someday building a retirement home there. However, they have now decided to stay in Colorado near their children. Brad and Leslie live hundreds of miles from the land. They bought it on a whim based on the amazing ocean view and have little information about the land beyond happy memories of salt air and seagulls.
- The person with detailed knowledge about the land is deceased
Seller Myrtle owns land near Crescent Lake in Oregon. Her husband Fred used to love to take the RV over to Central Oregon to go fishing with his friends. The guys would camp on the land and Fred would dream about someday building a cabin there. Fred was a fastidious person and knew every single detail about the land. Myrtle, on the other hand, preferred the comforts of city life and did not get into detailed discussions about the land with Fred. Fred is now deceased and Myrtle is trying to sell it.
- Have not seen the land in decades
Seller Cecil, age 85, purchased 160 acres of desert land 50 years ago. Cecil went to see the land prior to purchasing it. In addition, while on vacation 10 years later, Cecil took a detour to go “visit” his land. At that time, access was via a dirt road and the nearest electric pole was 1 mile away near a small development of new homes. Decades have now passed and he has not seen the land for 40 years. Cecil has no knowledge of whether or not additional development (paved streets, water, electricity, sewer) might have reached his land or not.
- Didn’t do their research when they bought it
Seller Omar received a large inheritance 5 years ago. He bought 12 lake-front lots at the time. He chose the parcels based on how pretty the lake looked in the Realtor’s online photos. Omar relied on what the Realtor told him and did not do any independent due diligence on the parcels prior to purchase. Consequently, now that Omar is a seller he is is unable to provide much information to potential buyers.
- In the hospital
Seller Thelma hired a listing agent to sell her land. A few months later, when the agent located a buyer, he called Thelma’s home to tell her about the offer only to learn from her family that Thelma was in the hospital. Thelma is scheduled for surgery next week. She is anxious to sell her land so that she can pay her medical and after-care bills. Thelma is of sound mind so, with the assistance of a mobile notary, she is able to sign the offer and escrow documents to sell her land. However, since she is in the hospital, she is not exactly in the position to be looking through her files at home for additional documents.
- Never had plans to build
Seller Juan purchased 10 rural acres from a friend for about 50% of its true value. Juan already owns his dream home so he has no plans to build on this land. He bought it strictly as a long-term investment and to help out his friend, who needed fast money. Because Juan never planned to build, and because he bought it at such a bargain price, he did no research on building and has no knowledge about things such as utilities or even whether there is legal access.
- No legal duty to research
Seller Tamar owns a view lot in Malibu. Tamar is an orchestral musician and does not have a background in construction. Tamar is represented by a Realtor. Buyer Manuel is considering purchasing Tamar’s lot to build a fabulous architectural house for his family. Manuel has never built a home before. He does not have a contractor or architect yet. Manuel has many questions about whether or not the lot is buildable. He asks Tamar’s Realtor for information about the degree of slope, whether a flat pad can be graded, the minimum square footage for a house, the cost of a water meter, etc. Seller Tamar and her Realtor reply that they do not know the answers to these questions. The Realtor explains to Manuel that the owner is selling dirt and has no duty to research matters related to building. The Realtor helpfully advises buyer Manuel to seek the assistance of a contractor, architect, engineer, or other building professionals to assist him.
What’s a Buyer to Do?
Land buyers should do their own independent due diligence. Here is a partial list of things that land buyers will want to research: Zoning, building restrictions, electricity, water/well, sewer/septic, and legal access.
Buyers sometimes wonder whether the Realtor will get answers to all their questions. Realtors do sometimes have considerable knowledge about the land they’re representing. In fact, Realtors often know more about the land than the sellers do. On the other hand, it is also common for the Realtor to have little information. The Realtor’s ability to provide answers, varies depending on the parcel. So just ask. If the Realtor has answers, the Realtor will be pleased to provide them to you. If the Realtor does not have the information, they can usually be very helpful in advising the buyer where the buyer can go to get answers.
Note however that while the Realtor will happily disclose what they already know about the land, it is not the agent’s role to perform new research, especially on matters related to building.
Further, experienced Realtors have learned that the best way to prevent misunderstandings and lawsuits is for the buyer to get as much information as possible from an official source instead of relying on the Realtor or seller. A wise Realtor will advise a land buyer to roll up their sleeves and get answers “straight from the horse’s mouth”. This means that the buyer, not the Realtor, should phone the utility company to get information on utilities or drive down to the Planning or Building Department to discuss building restrictions.
A great side benefit to a buyer doing their own due diligence, is that they may learn things about the land that they did not even know they had questions about. For example, a buyer who calls the water company to ask about the cost of a water meter, may learn there is no sewer. Or, a buyer who sits down with a City Planner to discuss building setbacks may discover, in the course of conversation, that the mother-in-law unit they were planning is not allowed by the municipality.
As a buyer, you may feel that you don’t have time to do your own independent due diligence. Or maybe you feel it’s not that fun and you just don’t want to do it. I understand completely. However, in that case it is in your best interest to buy a house or condo, not land.
For the reasons described above, it is common for sellers to have little knowledge about the land they’re selling. The careful buyer will seek answers from official sources such as the City, County or utility companies.