Buying and Selling Land

How to ask if seller financing is available

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A buyer texts me and says: “will the seller carry the loan?”  As a land broker, buyers ask me this all the time. It’s totally reasonable to ask about the availability of seller financing because there are very few conventional loans for vacant land.

The thing is, when a buyer asks the question in this simplistic way, I cannot give them an answer.  And, there’s no point in me contacting the seller, my client, with a simple “hey man, will you carry the loan?”  Because I already know what the answer will be.  The answer from the seller will be “no”.  Or, if it’s not a flat out “no”, it will be a bunch of questions:

  • How much will the buyer put down?
  • What interest rate?
  • How many years?
  • What price?
  • What are the monthly payments?
  • Who’s paying the closing costs?

Then, since the buyer has not stated the terms they are proposing, what happens is a lot of back and forth between buyer, agent and seller. It’s a big ‘ole unnecessary time-sink for all involved.

So, my friends and valued buyers, I offer you my advice on the best way to approach a listing agent to ask if the seller will carry the loan.  I will show you how to save time and get positive results. 

Let’s get started. 

Sample Ideal Email Inquiry From a Buyer

Below is an example of an email that you might send to the listing agent.

“Hi Some Broker,

I’m interested in that parcel APN 987-654-321 at 1234 Some Street in Some City in Some County. I was wondering if the seller would consider carrying the loan with the following terms:

  • Price $80,000
  • Down payment $20,000
  • Principal $60,000
  • Interest rate 6%
  • Term 15 years
  • Monthly payments $506.31
  • No pre-payment penalty
  • Closing costs (escrow/title) shared 50-50
  • Closing in 21 days

Please let me know if the seller would consider these terms.  If yes, I am prepared to submit a written signed offer.

Thank you,

Some Buyer”

Notice the specificity?  Notice how the email includes everything that is needed and nothing that is not needed?  See how the inquiry clearly spells out the terms including the price, down payment, interest rate, length of the loan, and monthly payment?  Do that.  Please.

How to Calculate Monthly Payments

It’s easy to calculate the monthly payment so that you can include it in your email.  However, it’s not as simple as just dividing the amount owed by the number of months that you plan to make payments.  That only works if your interest rate is 0. 

To get the monthly payment for a fully amortized loan, use an online calculator: 

http://www.moneychimp.com/calculator/mortgage_calculator.htm

http://bretwhissel.net/amortization/amortize.html

What Terms Should You Offer?

Buyers, in order to draft the email above, you will need to decide up front, before even asking the Realtor if seller-financing is available, what terms you are proposing.  This will require a little advance thought on your part.  So, spend a few minutes running some numbers.  It will be worth it when you get a positive reply.  Below are some customary seller-financing terms to help you out.

  • Down payments typically range from 20% to 50%.  Please do not offer less than 20% for reasons spelled out here.
  • Interest rates on seller-financed land generally range from 4% to 10%.  I recommend that you not offer less than 6%.
  • Terms (length of the loan) typically ranges from 2-10 years. 

Out of all these items (down payment, interest rate, and term) the thing that sellers care most about is the down payment.  To increase your odds of success, make the down payment as large as you can.

How Not to Ask a Realtor if the Seller Will Carry

For comparison, let’s look at how not to ask a Realtor if the owner will offer seller-financing.

Buyer:  Yo, will the seller carry the loan on that parcel?

Agent: Which parcel?

Buyer:  The one on the internet

Agent:  Which parcel on the Internet?  What street, city, county, state please?

Buyer:  The land listing

Agent:  I have 50+ land listings. 

Buyer:  The one priced at $100,000?

Agent:  There are two, the one in California or the one in Oregon?

Buyer:  California

Agent:  OK, that’s the one in Riverside.  I will be pleased to ask the seller if they will carry the loan.  In order to ask the seller, I need to know the price, down payment, interest rate and term that you are proposing.  Then I can ask the seller.

Buyer:  Can’t you just ask the seller if he will carry, like, in general?

Agent:  Sorry, no, because if I do the seller will ask me to specify the terms before he decides.  What terms are you proposing please?  I need your proposed price, down payment, interest rate and the length of the loan.

Buyer:  I can put 25% down

Agent:  OK what price, interest rate and term?

Buyer:  6% interest

Agent:  Are you offering $100,000?  How long would you like the term to be?

Buyer:  No, I only want to pay $80,000.

Agent:  OK what term? 

Buyer:  10 years

Agent:  Payments would be $666.12 per month.  I will ask the seller and let you know when he replies.

Buyer:  No, I can only afford about $500 per month

Agent: OK then let’s change the term to 15 years.  I will ask the seller if he will consider $80,000 with $20,000 down at 6% interest for 15 years, payments to be $506.31 per month.  I will let you know when he replies.

Buyer:  OK thanks

Buyers, you don’t want to spend a bunch of time going back and forth on the phone, text or email just to get an answer to your question, do you?  I mean, the email/text exchange above took like half an hour.  You don’t want to invest that same half hour with five different Realtors on the five different parcels you’re interested in, right?  It would be much easier for you to spend a little time thinking about it before even contacting the agent and just send the agent the email I recommended above.  You could even use it as a template and send it to multiple agents on several parcels, editing key items slightly for each one.  Save yourself a bunch of time!

Who Should Name Their Terms First:  Buyer or Seller?

I find that Buyers usually want sellers to name their terms up front and sellers want buyers to name their terms up front.  So, who goes first?

I recommend that the buyer “go first”.  Here’s why:  As a listing agent who represents the seller, it doesn’t make sense for me to even ask seller if they will carry the loan at the time of taking the listing.  Why?  Because if I ask the seller if they will carry at the time of signing the listing agreement, the seller’s answer is almost uniformly “no”.  So, there’s no point to even asking.  Almost all sellers prefer cash, and, at the time of listing, they are usually thinking their parcel is so special it will sell quickly and for a full cash price.  At the outset, sellers see no reason to carry the loan.  This means that if you’re the first buyer me to ask, “will the seller carry?” it’s likely that I won’t know the answer to your question. 

And I cannot just pose this question to the seller “in general” or “hypothetically”.  I find that sellers run into a mental block when they are asked whether, in theory, they might consider carrying the loan.  Most sellers have no clue whether they should ask for 20% down or 50% down, whether the interest rate should be 4% or 10%, whether it makes sense to carry for 2 years or 15 years.  I find that most sellers cannot wrap their mind around the question of whether they might carry in general for some hypothetical nameless faceless buyer.  Sellers can only think about financing when the precise terms are spelled out by an actual buyer.  It’s a psychological thing.

So, as an agent, instead of asking the seller at the time of taking the listing whether or not they will carry, I wait a month or two until I get the first inquiry about seller financing from a buyer.  Then I ask the buyer to name their terms.  Armed with those terms, I go to the seller and say hey there is real buyer proposing actual specific terms and I ask the seller if they will consider those exact terms. 

This strategy is more likely to get a positive response from the seller.  One reason is that a couple of months into the listing period, sellers are starting to see that their parcel has not flown off the market with a full price all cash offer.  By this time, sellers are beginning to think about new ways to get their land sold.  A second reason is that if I can specify exact terms to a seller, he can ruminate about it in a concrete way.  Is the 20% down proposed by the buyer sufficient, he will wonder, or would it be better to counter at 30% so that the buyer has more “skin in the game”?  Is he willing to carry for 10 years, as the buyer requests, or will he need the money in 5 years for his kid’s college education?  Is the 6% interest rate proposed by the buyer less or more than what he earns on his other investments?  What would it be like to get a regular check for $506.31 per month?  That might be nice, he will think. 

So, buyers, when you name your terms this gives the seller something concrete to focus his thinking on.  It works much better this way and he is more likely to say “yes”.  Trust this advice from the experienced land broker.

Consider Your Audience

As a buyer, it’s best if you can learn something about the seller and agent before preparing your detailed inquiry about seller-financing.  Is the seller younger or older?  Is the Realtor a residential broker or a land broker?

If the seller is older, you will want to propose a shorter term for the seller-financing.  While banks can entertain long loan terms like 15-30 years, because they exist in perpetuity, land sellers are not banks.  They are humans with finite lifespans.  Some sellers are older and naturally want to get paid off while they are alive.  So, consider the seller’s age when deciding what term to propose.  The older the seller, the shorter the term you should propose.

The reason to consider whether the listing agent is a residential broker or land broker is that residential brokers will be less familiar with seller financing.  Residential brokers sell mostly houses and condos and may have only one or two land listings.  Since conventional loans are plentiful for houses, Residential brokers may not be aware that there are few conventional loans available for vacant land.  A residential Realtor might wonder “why doesn’t the buyer just go to their bank?”  Residential brokers may even greet your seller-financing request with suspicion.  Some may not have a clue how to prepare a seller financing offer, calculate monthly payments, create an amortization schedule, etc. (By the way, these are just some of many reasons that land sellers should list with land brokers not residential brokers, but I digress….)  Buyers, if your audience is a residential Realtor, it is even more important to spell out your proposed terms in detail in your first inquiry as I have shown you above.  If you do this, you will look like a serious buyer.  In addition, you will be educating the residential broker so that they will see that preparing an offer like this would not be all that cumbersome (for them).  Then they may take your “seller financing?” question more seriously.

Also remember that your “audience” for this inquiry, the listing agent and the seller, are probably not mathematicians or loan brokers.  So keep it simple!  I recommend that the type of loan you propose be as basic as possible.  For clarity, make it fully amortized.  This is because loans that are amortized involve just a single monthly payment and when you’re done making those payments the whole principal will be paid off. It’s an easy concept for sellers to grasp. Try to avoid proposing a balloon payment and never ever propose multiple balloon payments such as “I’ll pay you $20,000 up front, then monthly payments, the another $30,000 in 1 year, then more monthly payments, then $40,000 in 3 years.”  OMG.  Do not ask for an interest-only loan because that involves a balloon payment at the end.  A final recommendation is to avoid proposing multiple options.  Never say “we could do it this way or we could do it that way”.  You might think it’s totally logical that the seller would prefer to have choices, that way the seller can get more what he wants and so is more likely to carry the loan.  Wrong.  It just confuses the negotiation.  Think about Trader Joes.  One of the reasons they are so successful selling tomato sauce and frozen burritos is that they offer one option not multiple options.  If you want the seller to say “yes”, just propose a single garden variety amortized loan with one set of terms.

Finally, buyer, keep in mind that most sellers prefer all cash.  So, your audience for your “seller financing?” question will be someone who really doesn’t want to carry the loan.  You will have to entice them.  So, don’t go in with an offer that is low price AND a small down payment AND a low interest rate AND a long term because that’s not going to work.  Give the seller something to hang his hat on.  Make him want to work with you.  You’re not the only buyer out there.  You are in competition with other buyers, actual or theoretical, past, present or future.  And while you cannot make your offer superior to other buyers in all ways (because you’re not offering cash), you can make it superior to all other buyers in one way – and that’s on price.  So, if you’re going to request terms, at least offer full price. 

Buyer Worries

Sometimes buyers worry that if they send a detailed inquiry like the one I am suggesting, the seller will get the mistaken impression that it is an actual offer.  They fret that if the seller says “yes” they will be “under contract”.  Not true.  In real estate, a contract has to have two signatures.  And when a buyer sends this kind of inquiry to a Realtor, and the Realtor forwards it to the seller, and the seller says, “sounds good”, nobody has signed anything.  The seller’s positive response just means “I invite you to submit a formal offer and, if you do, and I will look at it favorably”.  However, until there is a signed agreement, there is no deal and either party can walk.  So, buyers, don’t be afraid to state your terms up front with some specificity.

From the Perspective of the Realtor and Seller

In addition to increasing the odds of getting a positive response, something that benefits the buyer, the strategy that I am advocating also serves the purposes of the Realtor and seller.  Asking the buyer to give a few minutes of thought to the kind of seller-financing deal he wants, weeds out those buyers who are not serious about the parcel in question and are just sitting around in their jammies, watching Netflix, surfing Zillow, and blasting off “seller carry?” emails to random agents.  After all, not all “buyers” are buyers.  And there’s no point in getting a seller’s hopes up if the buyer is not really a buyer. I find that real buyers are willing to spend a few minutes crafting their seller financing proposal. It’s a good test.

Conclusion

If you’re interested in purchasing a piece of land, it’s reasonable to ask a Realtor whether or not their seller client will carry the loan on a parcel of land.  The best way to do it is to briefly specify all terms up front.  This will increase your odds of getting a positive response!

No, the seller will not accept $0 down

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No Money Down

In lieu of requiring buyers to pay all cash, some land sellers choose to offer “owner financing”.  The seller accepts a down payment from a buyer of, say, 20% and then the buyer makes monthly payments to the seller over time.

When one of my seller-clients decides to do this, I ask them to specify up front the terms they will consider, i.e., the down payment, interest rate, and number of years.  An example is 20% down, 6% interest, 10 years.  I put the seller’s terms in black and white in all of my marketing materials.  Yet, inevitably, I find that whatever down payment the seller requires, a few buyers will always contact me and ask if the seller will accept a smaller down payment.

Typical conversation with a buyer

This video shows a typical conversation that I will have with buyers.  It explains why sellers offering “owner financing” will not accept a small down payment:

Additional reasons why sellers will not accept $0 down or a low down

The commission and closing costs are not the only reason sellers will not accept $0 down.  The seller might also have liens or back property taxes to pay.

For example, suppose the seller in our $100,000 video example still owes $4000 on a loan tied to the land.  In addition, he owes $3000 in a child support lien and $2000 in back property taxes.  In order to transfer the land to a buyer “free and clear”, escrow will require the seller to pay those items, along with the commission and closing costs, out of the seller’s proceeds.  Even though the seller is paying these items, and the buyer is not paying them, the down payment that the buyer gives the seller has to be sufficient to cover all of the items the seller is responsible for or the seller will have to write a check to escrow in order to close.  Land sellers do not want to write checks.  They want to receive checks.  Getting money in return is kind of the whole point of selling land when you think about it!

Further, when a seller offers to carry the loan, he will naturally have a keen interest in making sure that the buyer will make their monthly payments in full and on time.  The higher the down payment, the less likely the buyer will flake out in the future.  This is because buyers realize that they will lose their down payment (and the land too) if they don’t pay.

Other sellers have in mind a certain amount of money that they want up front for a particular and immediate use in their life.  Maybe they have medical bills to pay.  Maybe they’re trying to fund the family’s vacation to Hawaii.  Maybe they want to buy another parcel of land.  Maybe they want to renovate their kitchen.  Maybe they owe money to their drug dealer.  Who knows?  The point is, some land owners don’t want to sell their land at all unless they can get some threshold dollar amount down from a buyer.  If they can’t get at least that amount, they won’t sell at all.

Occasionally “the seller” is actually multiple sellers, each with a percent interest.  So, whatever the buyer puts down ends up getting split 2, 5, 8 ways (or whatever) after costs are deducted.  The amount each individual seller will end up with at closing is therefore small.  The more co-owners there are, the more the required down payment can get ratcheted up.

Advice to buyers

Before buying land, consider saving your money for a while so that you will have a sizeable down payment.  Or, find a co-investor.  Or purchase a less expensive parcel of land.

If you really want to purchase land with $0 down or a small down, don’t even look at parcels listed by Realtors.  This is because, when there is a Realtor involved, the seller will always have to pay the commission out of any down payment that you propose.  The math is not going to work out.  So, buyers, if you don’t want to put at least 20% down, look only at For Sale by Owner (FSBO) listings where the seller does not have the expense of a commission.

If you have your heart set on a parcel listed by a Realtor, then at least contact the Realtor and ask if the land is “free and clear” of all liens and back taxes.  Sometimes the agent will know the answer to this question and sometimes they won’t.  Depending on what the agent says, do a “back of the envelope” calculation.  Consider things from the perspective of the seller.  Add up all the costs you think the seller will have to pay at closing:  liens, back taxes, commission, and closing costs.  You won’t have the exact numbers, so just estimate.  When estimating, keep in mind that commissions are not always 6%.  They can be 8%, 10% or anything and the listing agent is unlikely to tell you what commission the seller is paying.  The total you come up with is your estimate of the bare minimum down payment the seller might possibly consider.  Throw in an additional cushion of several thousand dollars over that sum and that’s the down payment you might propose in your seller-financing offer.  If you find that the total exceeds what you want to put down, then don’t even bother submitting an offer.  Move on down the road and buy a different parcel.

Suppose that the seller’s total costs, including liens, back taxes, commission, and closing costs, add up to $9642.  Buyers, please don’t assume that you can offer the seller $9700 down and he will accept it.  The seller is not going to transfer title to you in return for a check for $58 dollars at closing.  The seller will want to receive a check for thousands of dollars at closing in order to agree to carry the loan for you.  That’s why it’s important to cushion the down payment offer by several thousand dollars over and above the seller’s total costs.

Also, note there are basically two ways the seller can carry the loan.  One is with a “trust deed” where title is transferred to the buyer at closing.  Escrow records a lien on the land in favor of the seller and the seller and becomes a non-owner and lender just like he is Wells Fargo.  The second way is a “land contract” where the seller retains title until the loan is fully paid off.  The land contract is sort of like buying a car.  After you make all the payments, then you get the pink slip.  You don’t get the pink slip (title) up front.  I’m not sure about other states, but the trust deed is the most common in California and Oregon, and I have never seen a “land contract” used in these states in my career.  However, a “land contract” is the only kind of agreement that is likely to work with $0 down or a low down.  This is because sellers are unlikely to want to transfer title to you up front when you are putting no money down.  As a buyer, you might try proposing a “land contract” to FSBO sellers instead of a “trust deed”.

Finally, buyers, remember that, in addition to the down payment, you will also be expected to pay your portion of closing costs. Closing costs include the escrow fee and title insurance.  These costs are entirely separate from the down payment and are paid to the escrow and title companies, not to the seller and not to the Realtor.  Even in the unlikely event that you can convince a seller to accept $0 down, you will still be expected to pay your share of these costs.  Purchasing real estate is not free.

Advice to sellers

Offering to “carry the loan” is one way to dramatically increase the odds of selling your land, and for top dollar.  The reason is, there are virtually no good bank loans for most kinds of vacant land.  Sellers who offer to “carry” do not think of it as a burden.  They think of it as an investment that yields a return secured by real estate.  Consider whether or not seller-financing is right for you.  If you don’t want to carry the loan, that’s totally fine, just know that your buyer-pool will likely be limited to those buyers who have all cash.  If you do decide to offer seller-financing as an option, consider requiring at least 20% down.

Conclusion

The notion of a zero-down payment on land is basically a myth. I have never seen a seller accept that in my career.  Purchasing land with a low (not $0) down payment might be possible but not when a Realtor is involved in a transaction.  Buyers who are seeking seller-financing, and want to consider parcels listed by Realtors, should be prepared to put down at least 20%.

How to get access to a landlocked parcel: the basics

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Helicopter

You notice a landlocked parcel for sale, and you think “Gee, that’s a nice parcel at an amazing price”.  But after reading the fine print you realize there’s no road to it and it doesn’t have an easement.  The parcel is “landlocked”.  “How will I ever get access” you wonder?

This is an important question, because access is needed to build.  Here I describe the steps you can go through to obtain legal access.

This is an “Intro 101” examination of the basics, not an advanced discussion.  My goal is to describe the process in a super simple manner to those buyers who have no idea how to get access to a parcel that is landlocked.  If you have more advanced questions, you will want to consult a real estate attorney.

Key Things to Be Aware of First

  • A “landlocked” parcel is one that does not have access to a road because it is surrounded by property owned by other people.
  • The existence of a physical “road” that you can see with your eyeballs does not necessarily mean you have legal access.
  • Your goal is to obtain an “easement for ingress and egress” (access to go in and out). Once you have an easement, you will have the right to cross your neighbor’s private property to get to your property.
  • An easement is basically the right to use the real property of another for a specific purpose. Legal title to the underlying land is retained by the original owner.
  • Easements “run with the land”.  That means when you sell your property or your neighbor sells his property, the easement stays in place.  Humans come and go.  Land and easements stay where they are.  So any future owner of your land would also have access via the easement and any future owner of your neighbor’s parcel would still have to provide access.

Step 1:  Verify That the Parcel is Truly Landlocked

It does not make sense to go to the trouble of trying to create an easement if you already have access.  So, the first step is to verify that the parcel in question is really truly landlocked.

If the land is on an official paved or dirt road, then you probably have legal access and you do not need an easement.  If the land is on a road or path that is unofficial, then you may or may not need an easement.  You cannot tell with your eyes whether the existing road is official or whether there is a legally recorded easement.  The road you see with your eyes could be unofficial and not an easement.

Title

To get some information about whether you already have access, order a title report.  Title companies make decisions about whether or not to insure for “marketable access” when deciding whether or not to insure title.  In my experience, “marketable access” corresponds to what I will call “legal access” about 99% of the time.  If the title company says that they will insure title and will also insure for access, you can be pretty sure you have legal access.  If the title company says they will insure for title but will not insure for access, you can usually assume you have no legal access and your parcel is landlocked.  So, the easiest way to determine whether or not a parcel is landlocked is to order a title report.

When the title company agrees to insure for title, but declines to insure for access, a phrase like “The lack of right of access to and from the land” will appear in the exceptions section of the title report. When this phrase does not appear, the title company is basically saying they will insure for both title and access.

Step 2:  Gather Information on the History of Access

If the owner of a parcel for sale has already tried to get access from a neighbor, and failed, it’s important for you to know this.  Maybe the seller has been feuding with his neighbor over access for years.  This scenario would suggest that you, the buyer and future owner, are also likely to find the neighbor difficult to work with.

On the other hand, maybe the history offers good news.  Suppose that the seller subdivided his 10 acres and sold 5 acres to his best friend from high school, kept the other 5 acres for himself, and just forgot to create an easement across his friend’s land in front to his land in back.  That’s a totally different situation.  Creating an easement in a case like this may be easy.

Understanding the history will help you, as a buyer, to get a sense of the likelihood that your efforts to negotiate an easement will be successful.

About 90% of the time you will discover that there is no history at all and the seller has never attempted to arrange an easement.  This is because many people buy land as an investment, not to build.  They have no reason to visit the land so never tried to create access.  They bought it “as is” and they are selling it “as is”.

Ask about the seller’s history on trying to establish access.  You never know when you might learn something helpful.

Step 3:  Consider Who Will Create the Easement and When

Will the easement be created by the City?  No.  The County?  No.  The transportation authority?  No.  The Broker?  No. The title company?  No.  The neighbor?  No.  The seller?  Usually no.

So, who will create the easement?  You, the buyer, that’s who.  About 97% of the time, buyers of landlocked parcels must purchase the land the way it is, close escrow, own it, and then start working to create an easement after closing.

I find that about 2% of the time, the seller will entertain an offer with a contingency on the easement.  This means that the buyer can try to arrange the easement during their contingency period (part of the escrow period).  If the buyer is unsuccessful, the buyer can cancel escrow, get their deposit back, and walk away.  If the buyer is successful, the buyer will close escrow.  I say this happens 2% of the time because it is a rare seller who will entertain such a contingency.  It can take months or a year or more to go through all the steps to create an easement and sellers typically want to close escrow in 21-45 days.

In unusual instances, like 1% of the time, the seller will actually agree to create the easement for the buyer prior to closing.  Sellers may entertain this option when creating the easement is super-duper easy for them.  An example of this situation isSad when the seller happens to own the adjacent parcel where the easement is needed.  In that case, the seller of parcel A is also the neighbor and owner of parcel B, and can easily create an easement across parcel B, his own land.  Another example is when the neighbor is a family member or close friend of the seller.  A final example is when the seller has already negotiated access with the neighbor and just needs to put it in writing, get it signed, and record the easement with the county.

In my experience, buyers commonly want an easement before closing and sellers almost never agree to this.  It’s just wishful thinking on the part of buyers.  Generally, buyers will have to purchase the land and then roll up their sleeves, in that order.

Sometimes buyers who have not even submitted an offer on a parcel ask me for contact information for the neighbor.  They think I can just give them the neighbor’s phone number or email and they will just contact the neighbor and say, “hey man, can I have an easement?”  They’re hoping the neighbor will say “yeah, sure, no problem” and it will be easy.  Dear buyers, that almost never works.  First, I don’t have the neighbor’s phone number or email and the seller rarely has their contact information either.  I do have access to title records but those show only the neighbor’s name and mailing address, not their phone number or email.  Second, negotiating an easement takes more effort than a simple phone call.  It can take months.  So, a “hey man…” conversation is unlikely to be fruitful.  Third, you don’t own the parcel yet and you’re not even in escrow, so you don’t really have authority to negotiate an easement.  Fourth, generally more than one buyer will have this same idea and it’s not good for multiple buyers to be calling the same neighbor.  So, buyers, I suggest that you put this idea out of your mind.  Please understand that if you want to buy a landlocked parcel at a low price, you will have buy the land “as is” and work through the steps in this blog post to seek an easement after closing.  Or don’t buy it.  That’s the other option.

Step 4:  Figure Out Where You Want the Easement

After buying the land, if you decide to move forward with seeking an easement from the neighbor(s), you will need to figure out which parcel(s) you want to cross.  Get a map that shows your parcel and the neighbor’s parcel(s).  This map might be a plat map or an aerial map.

Landlocked

Say you are surrounded by neighbors B, C and D.  If you cross B you will reach the road.  Alternatively, if you cross C you must also cross D, then you will reach the road.  In the first case, you will need one easement.  In the second case you will need two easements.  So, figure out which direction it makes the most sense to go.

Also assess approximately where on the neighbor’s parcel(s) you want the easement.  For example, is there a well-worn dirt path that you will try to follow?  Do you want to travel along the boundary of a property?  Is your desired easement straight or curved?  How wide will it be?  Ask the City/County what width they require in order to grant a building permit as that will dictate the width of the easement you will try to arrange.

Step 5:  Get Contact Information for the Neighbor(s)

In order to request an easement from a neighbor, you will need the neighbor’s name and contact information.  Their mailing address might not be the same as their physical address.

Vacant land sellers rarely have contact information for their neighbors.  Remember, they’re selling land, not a house, so they don’t live there.  However, your Realtor can look up the neighbor’s contact information in title records.  In order for your Realtor to help you, you must give her the address or Assessor’s Parcel Number (APN), for the neighbor’s parcel(s) that you want to cross.

You can use the official plat map (not a Google map) to figure out the APNs.  For example, if you are purchasing APN 1234-567-89 then the plat map will have an 89 in a circle corresponding to the parcel you want to buy.  If you are planning to seek an easement across a parcel that has a 90 in a circle, the APN for that parcel will be 1234-567-90.  Give your Realtor that APN and she can look up the name and mailing address for the owner of that parcel.  In California and some parts of Oregon, agents have access to title records in Realist through the MLS.

Another way to find the neighbor’s contact information is to use a Geographic Information System (GIS).  GIS systems are available free online.  To find a GIS system for your area, Google “GIS <city name>” if the parcel is in the City. Google “GIS <county name>” if the parcel is in the County.  Enter the neighbor’s APN into the GIS and see if their contact information pops up.  Note that not all GIS systems have contact information for property owners – some do, some don’t.  Also, if there is contact information it will be limited to names and addresses.  There will be no phone number or email.

I have had some success finding phone numbers and emails just by using Google.  This works best if the neighbor has a somewhat unusual name.  Try it.

Step 6:  Ask the Neighbor(s) for an Easement

Armed with the neighbor’s contact information, the next step is to get in touch with them.  You can send the neighbor a letter, call, email, or try going in person.  Or, if you prefer, you can have your attorney do any of these things.

Explain to the neighbor that you are seeking an easement.  Be prepared to explain to them what an easement is.  Reassure the neighbor that they will still own the land where the easement is located.  You just want to cross it.  Let them know that the easement “runs with the land” so it remains there in perpetuity and does not disappear if you sell or if your neighbor sells.  Describe where you want the easement to be located.  State how wide it will be.  Discuss who will improve and maintain the easement.

If the neighbor objects, offer to pay them for it.  How much should you offer?  It depends on the value of the land…$500, $5000, $50,000.  I don’t know.  It’s negotiable.

Pay neighbor

When considering what you are willing to pay for an easement, you might factor these things in to your thought process:

  • An easement will greatly improve the value of your land. This is because parcels with recorded legal access sell for much more than parcels with no access.  I would estimate that easements improve the value of land by 10-1000%.  Ask your Realtor to estimate how much an easement might increase the value of your specific parcel.
  • The alternative to paying the neighbor for the easement is probably going to court to resolve the conflict. Attorney fees are expensive, $200-$500/hour.  In comparison to paying attorney fees, paying the neighbor for the easement might feel like a bargain.
  • By burdening your neighbor’s parcel with an easement, you might be reducing the value of their parcel. It’s only fair to pay him enough to compensate him for any loss in value that he might incur.

If the neighbor agrees to offer an easement, go to step 7 and consider skipping step 8.  If the neighbor doesn’t agree to offer an easement, go to step 8.

Step 7:  Hire a Surveyor

Surveyor

Easements should be recorded with the county.  In order to record an easement, you and the neighbor must sign an agreement.  That agreement must specify the precise location of the easement.

The description of the location of the easement cannot be casual like “along the existing path on the west side of John’s land at 1234 Main St”.  A proper legal description is often complicated and looks more like this:

An easement and right of way for road, sewer, water, gas, power and telephone lines and appurtenances thereto under, along and across a 60.00 foot strip of land lying within Section 10 and 11 all in Township 9 South, Range 2 West, San Bernardino Meridian, in the County of San Diego. State of California, according to United States Government Survey, the centerline of said 60.00 foot strip being described as follows:  Beginning at the Northwest corner of the Northeast Quarter of said Section 11; thence along the Northerly line of said Northeast Quarter, South 86° 05’ 24” East 577.98 feet to the True Point of Beginning; leaving said Northerly line, South 5° 37’ 14” East 310.00 feet; thence South 04° 36’32’ East 164.03 feet to the beginning of a tangent 300.00 foot radius curve, concave Westerly; thence Southerly along the arc of said curve, through a central angle of 27° 07’ 51” a distance of 142.06 feet thence South 22° 31‘19”  West 133.34 feet to the beginning of a tangent 100.00 foot radius curve, concave Northwesterly; thence Southwesterly along the arc of said curve through a central angle of 60° 02’ 43” a distance of 104.80 feet thence South 82° 34’ 02”  West 174.36 feet to the beginning of a tangent 400.00 foot radius curve concave Southerly; thence Westerly along the arc of said curve, through a central angle of 13° 33’ 30” a distance of 94.66 feet; thence South 69° 00’ 32” West 115.77 feet to an intersection with the Westerly line of the Northeast Quarter of Section 11, Township 9 South, Range 2 West, distant thereon South 05°54’22” East 926.55 feet from the Northwest corner of the Northeast Quarter of said Section 11; thence along the Westerly line of said Northeast Quarter, South 05° 54’ 22” East 397.68 feet to the Southeast corner of the Northeast Quarter of the Northwest Quarter of said Section 11 South 05° 22’ 54” East 13.10 feet; thence South 30° 35’ 51” West 281.12 feet to the beginning of a tangent 180.00 foot radius curve, concave Easterly; thence Southerly along the arc of said curve, through a central angle of 29° 17’ 17” a distance of 92.01 feet thence South 01° 18’ 34” West 264.21 feet; thence North 88°41’26” West 30.00 feet; thence South 13°19’28” West 66.15 feet of the beginning of a tangent 100.00 foot radius curve, concave Northwesterly; thence Southwesterly along the arc of said curve, through a central angle of 70°31’28” a distance of 123.09 feet; thence South 83°50’56” West 43.41 feet to the beginning of a tangent 200.00 foot radius curve, concave Northeasterly, thence Northwesterly along the arc of said curve, through a central angle of 47° 02’ 06” a distance of 164.18 feet thence North 49° 06’ 58” West 117.28 feet to the beginning of a tangent 50.00 foot radius curve, concave Southerly thence Westerly along the arc of said curve, through a central angle of 77° 08’ 23” a distance of 67.32 feet; thence South 53° 44’39” West 59.15 feet to the beginning of a tangent 150.00 foot radius curve, concave Southeasterly; thence Southwesterly along the arc of said curve, through a central angle of 28°58’14” a distance of 75.85 feet; thence South 24° 46’ 25” West 609.78 feet to an intersection with the Southerly line of the Northwest Quarter of said Section 11; thence along said Southerly line, North 87° 41‘ 25” West 61.94 feet to the Southeast corner of the Southwest Quarter of the Northwest Quarter of said Section 11; thence along the Southerly line of said Southwest Quarter of the Northwest Quarter, North 87° 41’ 25” West 193.45 feet to the beginning of a tangent 50.00 foot radius curve, concave Southeasterly, thence Southwesterly along the arc of said curve, through a central angle of 57° 08’ l0” a distance of 49.86 feet; thence South 35° 10’ 25” West 169.73 feet to the beginning of a tangent 100.00 foot radius curve, concave Northwesterly; thence Southwesterly along the arc of said curve, through a central angle of 36° 19’ 10” a distance of 98.30 feet thence North 88° 30’ 25” West 31.23 feet to the beginning of a tangent 150.00 foot radius curve, concave Northeasterly; thence Northwesterly along the arc of said curve, through a central angle of 42°51 ‘10” a distance of 112.19 feet; thence North 45° 39’ l5” West 138.04 feet to the beginning of a tangent 189.53 foot radius curve, concave Northeasterly; thence Northwesterly along the arc of said curve, through a central angle of 29° 27’ 20” a distance of 97.44 feet to an intersection with the Southerly line of the Southwest Quarter of the Northwest Quarter of said Section 11; thence North 16° 11‘ 55” West 482.67 feet to the beginning of a tangent 500.00 foot radius curve, concave Southwesterly; thence Northwesterly along the arc of said curve, through a central angle of 12° 50’ 50” a distance of 112.11 feet; thence North 29°02’45” West 376.18 feet to the beginning of a tangent 300.00 foot radius curve, concave Southwesterly; thence Northwesterly along the arc of said curve, through a central angle of 22° 07’ 00” a distance of 115.80 feet; thence North 51° 09’ 45” West 168.16 feet to an intersection with the Westerly line of said Section 11 distant thereon South 03° 25’ 35” East 194.19 feet from the Southwest corner of the Northwest Quarter of the Northwest Quarter of said Section 11; thence continuing along the last described course North 51° 09’ 45” West 122.20 feet; thence North 14° 09’ 45” West to an intersection with the Southerly line of the Northeast Quarter of the Northeast Quarter of Section 10, Township 9 South, Range 2 West.

As you can see, you will need to hire a surveyor to write a proper legal description of the location of the easement.  The surveyor will also prepare documents for you and your neighbor to sign.  After you sign, go to the county and record the easement.

Step 8:  Hire an Attorney

If the neighbor refuses to allow an easement, hire an attorney.  You might also consider hiring an attorney long before this stage to help you with steps 1-7.

Super Attorney

Choose an attorney who specializes in real estate.  To find one, Google the American Bar Association for the county where the land is located.  Call and ask for a referral to a local real estate attorney.

Your attorney will help you negotiate with the neighbor.  They can also draft your agreement with the neighbor regarding things like who is responsible for the maintenance and improvement of the easement.

If the neighbor is uncooperative, your lawyer can advise you on whether the specific circumstances of your situation mean that you have a legal right to an easement.  Then your attorney can make this case in court, if necessary.

Alternative Approaches

You might be wondering if there are things you can do to address the lack of access without seeking an easement and without the expense of hiring an attorney.  Here are some possibilities:

  • Offer to buy the neighbor’s property outright. Once you own it you will have the control and can create an easement on your own land!
  • Offer to buy a portion of the neighbor’s property, enough to get you to a road. This would require subdividing the parcel or a lot-line adjustment.  Sometimes the city/county will allow this and sometimes they won’t.  Before suggesting this to the neighbor, check with the Planning office to see if it’s allowed.
  • Ask the neighbor’s family member to convince the neighbor to give you an easement. This has worked for me.
  • If you’re not vibing with the neighbor for personality reasons, ask your spouse, significant other, family member, friend, or attorney to negotiate on your behalf. They may have better luck.
  • Offer something of value to the neighbor. Examples include: a) more money than you originally offered, b) “first right of refusal” so that he can be first in line if you ever sell your land in the future, c) a gate/road that you will install at your expense, d) fencing between your properties that you will install at your expense, or e) that chain saw he keeps borrowing, etc.  You get the idea.  This is the “carrot” approach.
  • Explain to the neighbor what your next steps will be if he declines the easement, e.g., you will hire an attorney so he will probably have to hire an attorney. This will cost him money and there will be a long drawn out court fight, etc.  This is the “stick” approach and not recommended unless you’re ready to burn all other bridges.
  • Offer to pay for a professional mediator to assist both parties in negotiating the easement.
  • Offer to sell your property to the neighbor. This will not achieve your goal of getting an easement, but it will get you out of the situation.
  • Wait for the neighbor to sell their property or pass their property on to their heirs. Statistically, houses turn over on average every 7 years.  Maybe the next owner will be more accommodating.
  • Wait for the neighbor to put their property on the market for sale. List your land at the same time, possibly with the same Realtor. If the buyer purchases both properties, they’re not going to be too concerned about your lack of access because they will own the neighboring land.
  • Ask the neighbor for a “personal permission” to cross. This is different from an “easement”. It applies only to you personally (and possible your family, guests etc.) and does not “run with the land”.  This means that when you transfer the property, or the neighbor transfers his property, the permission will disappear.  It will not allow you to build and will not increase the value of your property when you sell it, but it will allow you to put your feet on your land for now.
  • Sell your land on the open market in its current landlocked state for whatever price you can get for it. Be sure to disclose the lack of access to the next buyer.
  • Try getting an easement in a different direction, across a different neighbor’s land, if possible.

Conclusion

Buyers purchase landlocked parcels every day.  It is very common because parcels that lack access are offered at a bargain price.  By studying this basic outline of the steps that would have to be followed to create an easement, buyers who are unfamiliar with the process can assess whether or not buying a landlocked parcel is something that makes sense for them.

Due diligence when purchasing vacant land: buyer’s frequently asked questions

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What is Due Diligence?

Due diligence means taking precautions and doing your homework on property before you make the purchase.  If you find too many issues with the property — too much potential risk or cost — then you can look for a better parcel of land.

Who is Responsible for Due Diligence?

Vacant land buyers are responsible for conducting their own independent due diligence on any parcel they are considering purchasing.

Won’t the Seller or Agent Just Tell Me Everything I Need to Know About Land?

The answer is no.  The seller and agent do not know everything about the land that might interest you.

Further, while sellers and agents have the legal responsibility is to disclose material facts that they are aware of it is not possible for them to disclose facts that they are not aware of.

The seller will complete disclosure forms where they write down everything that they know about the land that they consider a “material fact”.  The agent will provide a copy to you.  If the seller has relevant documents in their file such as a well report or survey, they will provide those too.  In California, but not in other states, the seller will also provide a natural hazard report.  This is a report produced by a company such as Property ID or PDQ who charge a small fee, under $100. The report discloses things such as whether the land is in an earthquake fault zone, a flood area, or a location prone to wildfires.  The agent will tell you what they know about the land.  The title company will provide a report so that you will know if title is clear.  Upon request, the title company can also provide a map of plotted easements.

That’s it!  That’s all you get!

The information provided by the seller, agents and title company will usually not address everything that you might want to know about the land and may not be sufficient for you to decide whether or not you want to buy the land.  The agent and seller will tell you what they already know, but beyond that it is your responsibility to do whatever additional research is needed.

For example, if the corners are unmarked, it is not the seller’s responsibility to mark the corners of the land unless you explicitly wrote a survey into your offer and the seller agreed to do it.  It is not your Realtor’s responsibility to perform detailed research on building requirements.  It is not the title company’s responsibility to plot easements on adjacent land unless you explicitly ask them to do that.

Dear buyer, you must do your own independent due diligence.

Won’t My Agent Do All This Research For Me?

You agent’s role is to help you by advising you on where to get the information you need as you move down the path of doing your own independent due diligence.

A key point here is that your agent, who has your back, knows that it is in your best interest for you to do your own due diligence.  The information you will receive will be more accurate and helpful if you get it straight from the information-provider, not filtered through a Realtor as an intermediary.

Did you ever play the telephone game as a child?  Here’s how the game goes:  One child whispers a word or phrase to another child.  That kid whispers it to the next kid, and so on.  At the end of the chain, the last child says the word aloud.  It’s funny to see how convoluted the word or phrase becomes.

Don’t play the “telephone game” with your Realtor in the middle.  Eliminate the middle-man.  Go straight to the electric company, water company, planning office, etc. and let them put the information directly in your ear!

Another benefit of talking to information-providers directly is that you can have an entire conversation with that person.  You can ask additional follow-up questions if you need to.  You may even learn things “you didn’t know you didn’t know”.  For example, when you’re talking to the water company, they may say that yes, district water is available, but sewer is not.  Wow, you might think. That was something that didn’t even occur to you to ask because you were assuming that water and sewer always go together!  Or, when you’re meeting with the county Planner to discuss the allowability of a mother-in-law apartment next to the house you are planning on 5 acres, you might discover that the zoning allows you to subdivide and build two houses on two separate 2.5-acre parcels.  Wow, that’s awesome, you didn’t know that and it would be a better fit for your family!  One question will lead to other questions which will lead to more answers and more insight and the entire conversation will be very helpful to you.

Your Realtor knows that it is in your best interest for you to get information “straight from the horse’s mouth”.  That’s why they are telling you to “go direct” to each information-provider get your questions answered.

What if I Don’t Want to Do My Own Due Diligence?

Um, then maybe now is not the right time to be buying land?

Of course, you do have the option of buying land without conducting a thorough evaluation.  In rare instances this can make sense.  For example, if the land is a $5000, one-acre parcel, in the middle of the desert, and you can see in aerial maps that there are no houses nearby and you’re pretty sure there are no utilities there, and you’re just buying it for investment, not to build, then doing extensive research may not be essential.

When Should I Do My Due Diligence?

Do as much research as you can before even submitting an offer.  That way, if you get bad news, you can avoid the time and effort it takes to submit an offer and negotiate with the seller.  Plus, you can avoid sending a deposit to escrow.

Another advantage of doing your research before submitting an offer is that if you find something negative, and you want the land anyway, you can use it to negotiate a good price.  For example, you can say “Hey seller, I see that your land is priced at $100,000, but I found out that it is in a flood zone and will be more expensive to build, so will you take $80,000?”  That kind of thing.

With houses it is common to go into escrow, get an inspection, and then negotiate the price down or get the seller to make repairs.  That tactic is exceedingly rare with vacant land and will not be well-received by the seller or listing agent, so I recommend that you not try it, or you might get kicked to the curb.  However, it is common and acceptable to negotiate price at the time your offer is submitted so feel free to any use negative information that you find to your advantage up front.

Also, include a contingency period in your offer so that you can continue your research during the escrow period.  The clock on your contingency period starts ticking “upon acceptance” which means the date that the last signature appears on the contract.  So, for example, if your offer was accepted by the seller on January 1 and you have a 17-day contingency period inside a 30-day escrow period, that means that you will want to complete all due diligence by January 18th.

At the end of the contingency period the Realtor will ask you to “remove your contingencies”.  After you remove your contingencies, your deposit is non-refundable.  So, for this reason, you will want to be sure to finish all research prior to the end of your due diligence period.  This period usually ends well in advance of the escrow closing date, so don’t get those two dates confused.

In What Situations Would It Be Especially Dumb to Skip My Due Diligence?

It’s especially unwise to skip due diligence when:  1) The parcel is expensive, 2) the price is so low it seems “too good to be true”, 3) you want to build on the land, 4) you have a particular use in mind for the land and don’t know if that use is allowed, or 5) you’re not familiar with the area.

What Due Diligence Can I Do at Home in My Pajamas?

Fortunately, a lot of research can be done from the comfort of your sofa!

You can review zoning descriptions on the city/county Planning Department website.  You can also get tons of interesting information from the city/county Geographic Information System (GIS).  You can email the city/county Planner to ask questions (this works best when the county is small).  You can study Google or Bing aerial maps to get a sense of boundaries.  You can review the title report, seller’s disclosures, and the natural hazard report that your agent or escrow officer will give you during the escrow period.  You can search Google to learn about crime statistics in the area.

You can phone the electric company, water district, local well drillers, and septic providers.  You can also try phoning the City or County Planning department to ask questions.

What Due Diligence Would Require Me to Drive Somewhere?

Make sure you go see the land in person.  If you can’t do that, e.g., because you’re in another state, hire a service like We Go Look to take additional photos or video.

If the land is in a big city or county, it may be hard to reach someone in the Planning Department by phone or email.  In that case, you will have to get in your car and go speak to the Planner in person.  Just walk in.  Usually no appointment is needed.

What Due Diligence Will Cost Me Money?

Most of it is free.  However, if you want to do any of the following, you will have to pay for it:

  • Order a perc test for septic
  • Hire a well driller to inspect the well
  • Have a surveyor mark the corners so that you can understand boundaries
  • Order a phase I environmental review (needed only in rare instances, e.g., when buying an abandoned gas station);
  • Hire an engineer to investigate developing the land
  • Ask a contractor to advise you on whether a parcel is buildable

What Information Do I Need to Have at My Fingertips Before Starting My Research?

Get out a piece of paper.  Write down the assessor’s parcel number (APN), also called the tax id number.  If there is an actual address, write that down as well.  If there is no address (common for vacant land) write down the street the parcel is on plus the nearest cross street.  Find out if the parcel is inside city limits or outside city limits so in the county.  If it’s in the city, write down the name of the city.  If not in an incorporated city, write down the name of the county.  If there is a Homeowners Association (HOA), write down the name of the HOA.  If you know the name(s) of the current legal owners, write those down as well.

Now you have all the information you will need at your fingertips to identify the parcel to the information-providers that you will speak to.  You can start making those calls!

How Do I Even Know If There are Building Restrictions on the Land?

If it’s dirt, there are building restrictions!  In other words, every parcel of land has building restrictions:

  • Restrictions may be imposed by the City
  • Restrictions may be imposed by the County
  • Restrictions may be imposed by the Homeowner’s Association
  • Restrictions may be imposed by other entities such as the Coastal Commission or Historic District

Who Governs Building Restrictions on the Land?

I answered that in a previous blog post here.

How Can I find Out if Electric or Water Meters Are Already Installed?

The chance that there are meters already installed on vacant land is virtually zero.

The only situation in which I have ever seen an electric meter was in a rural area on land used to park a recreational vehicle (RV) or trailer that someone was staying in.

On vacant, land, I find water meters less than 1% of the time.  If there is a water meter, it could be installed, or it could be paid for but not yet installed and “on the shelf” at the water company.  To find out, you can call the water company and ask if there is a paid meter.

Your question should really be about how close utilities are to the land and what the cost of getting utilities might be.  Read on.

How Can I Research the Availability of Electricity?

Get in your car and drive to the land.  Look for the nearest electric wires and poles.  Plot their location on a map.

Find out the name of the electric company that covers that area.  To do that, Google this:  Electric Company <city or county name>.

Phone the electric company and give them the parcel number (APN), address, or whatever they ask for.  Inquire about the availability and cost of electricity.

How Can I Research Water?

To find out if district water is available, look around the neighborhood for water meter covers.  Also look for fire hydrants.  These offer evidence that district water may be available in the street.

If you don’t see evidence of district water, then start looking for evidence of wells.  Walk around the land and look for a large round pipe poking up out of the ground.  It could be a capped well.  From the street, look at the neighbor’s properties to see if you see tiny buildings that could be well houses.  Or just ask a neighbor if they have a well.

Based on your preliminary in-person research, if you think there’s district water you will want to phone the water company to ask more questions.

To find out the name of the water company, Google this:  Water Company <city or county name>.  Phone the water company and give them the parcel number (APN) and/or address, or whatever they ask for.  Inquire about the availability of water and the cost of a water meter.

If the neighbors seem to be using wells and there is no well on the land, phone a local well driller to learn more.  To find a local well driller Google this:  Well driller <city or county name>.  When you talk to the driller, or his staff, describe the general location of the land and ask questions about the viability of wells in that area, depth that may be needed, cost, etc.  Well drillers are reluctant to offer estimates of depth and cost over the phone because every parcel is different.  If they express reluctance, ask for a range or a general sense.

How Can I Research Sewer/Septic?

Just because water is available, this does not mean that sewer is also available.  So, when talking to the water company, be sure to ask if sewer is also available in that area.

If sewer is not available, a septic system will be needed for waste.  It is very very rare for a septic system to already be installed on vacant land.  The only time I have seen that is when there was a house there previously that was demolished or burned down.

You will want to figure out if the land can support a septic system because not all land can do that.  To find out if a septic system is viable on your land, a percolation test or “perc test” is needed.  Sometimes you will see “perc” spelled “perk”.

To get a rough sense of septic viability without performing an expensive perc test, you can ask neighbors if they had any trouble perc’ing for septic.  You can contact a local septic installer to ask if he has ever had a home in this area not perc.  Finally, you can visit the county and find out if there is an historic perc test already on file.  If a successful perc test has been recorded, ask the County if the test would have to be updated due to age.  Also check to see if a failed perc test might have been recorded.

You might want to arrange your own perc test.  If you plan to do this, be sure to write your intent into your offer to get the seller’s approval.  This is because it involves digging big holes in the ground and you need seller permission to do that.  Before submitting an offer to the seller, ask a septic professional how long the perc test will take and what their schedule is.  Include the amount of time you need for the perc test in your offer and make your offer contingent on a successful perc test.  For example, if the septic professional says it will take 4 weeks to do a perc test then include a 30 day contingency period in your offer.

How Can I Research Zoning?

The first step in researching zoning is to figure out whether a parcel is in the city or the county.  This will dictate which Planning Office you go to for zoning information.

Start your zoning research online.  Instead of going to the city or county website and poking around there to find the right department, it is faster to just search Google like this:  Zoning <city or county name>.  The zoning section of the official city or county website should pop up.

If it’s a common city or county name, be sure to also specify the state in your Google search.  This is because you don’t want to end up spending an hour looking at a zoning website for Portland Maine when you thought you were looking at the site for Portland Oregon.

To find a zoning map fast, go to Google and type:  Zoning map <city or county name>.  Sometimes, searching Google Images rather than just basic Google is a more direct way to find a map.  This is because a map, after all, is an image.

Another really good way to research zoning is to use one of the free Geographic Information Systems (GIS) provided by most counties and cities.  You can enter the parcel number or address into those systems and uncover a wealth of information, including helpful maps and zoning.  To find a GIS system for your land search Google like this:  GIS <city or county name>.  When searching a GIS system using the assessor’s parcel number (APN), a helpful tip is to omit the dashes.  For example, do not enter APN 1234-567-89.  Instead, enter 123456789.  If that doesn’t work try adding zeros at the end, e.g., 1234567890000.

A final way to figure out the zoning is to just to ask the Planning office.  Email, call or go in person.  Give them the APN.  I find that if it’s a small office they will usually be happy to respond to my email requests for information.  If they are a large busy office, it will be almost impossible to get an answer by email or phone. In that case, you will have to go in person.

One last tip is to be sure to research both “zoning” and “land use”.  They might conflict.

How Can I Research Building Requirements?

If you’re interested in building, the first step is to research zoning to see what kind of structure is allowed, if any.  For example, if the zoning allows only single-family homes, then you cannot build a commercial office.  Then, get in your car and drive to the City or County offices to learn what you can about building restrictions.  If you still have questions, pay a licensed contractor a consulting fee to assist you.  Remember, your Realtor is an expert in real estate sales, not building.

How Can I Research Property Boundaries?

Walk around the land near where you think the corners might be.  Look in the dirt for markers.  Markers might be anything.  They could be vertical white PVC pipe, wood sticks poking up out of the ground, unusual piles of rocks, florescent pink tape hanging from a tree, or the remnants of fence or old wood post.  Just look for something unusual that looks like it was put there by a human and not by mother nature.  Note, however, that humans make mistakes so any corner markers you find may not be accurate.

If you really want the corners marked accurately, hire a surveyor.  To find one, go to Google and type in:  Surveyor <city or county name>.

How Can I Research Easements on the Land?

Any easements recorded on the land that you are buying will restrict the ways you can use it.  One example is a utility easement (no you can’t build your garage under those tall utility wires).  Another example is a conservation easement which often blankets the whole parcel, restricting building everywhere on the land (yikes!).  If there are easements, they will almost always be mentioned in the title report that will be provided during the escrow period.  However, in the title report their location will be described in some gobbledygook way, so if you see easements mentioned, ask the title company for a map of plotted easements so that you can see just where they are.

How Can I Research Access?

Remember, there’s physical access and legal access and they’re not necessarily the same thing.

To research physical access, study aerial maps or get in your car and see if you can drive to the land.

To research legal access, the easiest way is to just order a title report.  If the title company says they will insure for title and access, there’s a good chance that there is legal access.  If the title company says they will insure title, but will not insure specifically for access, that’s usually because there is no legal access.

Note that easements on the land are different than easements used to access the land.  The former will be recorded on the land you are buying while the latter will be recorded on the neighbor’s parcel.  Easements recorded on the neighbor’s parcel for ingress/egress to your parcel will not appear in the title report for the parcel you are buying.  So, you will want to explicitly ask the title company to research those easements on the neighboring parcel.  If the title company discovers an easement to reach the land, ask the title company for a map of plotted easements showing the ingress/egress route.

How Can I Research Environmental Problems or Endangered Species?

If you have concerns about possible environmental pollution you can pay an environmental firm to do a Phase I Environmental Site Assessment.  Generally, this is only needed if you are purchasing something like an abandoned gas station, junk yard, auto repair site, or if you see evidence of pollution such as leaking oil drums:

To find a local firm that does environmental assessments, Google:  Phase I Environmental <city or county name>.

How Can I Research Neighbors?

Get a crime statistics report for the City or County.  To do this, Google:  Crime Statistics <city or county name>.  You can also research predators living near the land at the Sex Offender Registry.

However, don’t get freaked out thinking that the land is in a bad area because you find a certain number of burglaries and pedophiles.  Sorry to be the bearer of bad news but virtually every neighborhood has crime.  The best way to realize that is to research the neighborhood you are living in now and you will see what I mean.  Evil-doers are everywhere!  Bleh!

Another way to research neighbors is to stop and talk to them.  Say “hi” to the guy bringing in his groceries or the lady working on her car in the driveway.  See if they’re the kind of people you want to have as neighbors.

How Can I Research Local Amenities?

In Google Maps locate the property you are buying.  Then click on “nearby”.  Several options will pop up such as Restaurants nearby, Hotels nearby, Bars and pubs nearby, etc.  Choose one of those or type in what you’re interested in, e.g., grocery stores, hospitals, schools, etc.  Google will map them for you.

How Can I Research Climate?

One of my favorite places to research climate is BestPlaces.  I like to compare two cities.

What pops up is helpful information for two cities on climate, crime, economy, housing, health, education, people, transportation, religion, voting, jobs, etc.

How Can I Research Real Estate or Rental Prices?

Search Zillow or ApartmentList.

How Can I Research Whether Title is Clean?

During the escrow period, the escrow officer will order a title report.  You can review that.  The title company will not insure the title unless it is “clean”.  So, if they say they will insure, that’s your best indicator of clean title.

If there are blemishes on the title report, the seller will often be able to correct those during the escrow period.  So if the preliminary title report is not clear, don’t assume that’s the end of it.  Wait to see what the final title report shows after the seller and escrow officer have worked to address any questionable items.  As one example, if there is a judgment or lien in the report, the seller can pay that off making it disappear from the title report.

How Can I Avoid Making A Mistake on My Due Diligence?

One way to avoid error is to sit down with your Realtor and develop a list of all the issues that you as a buyer will need to research.  That way you won’t forget anything.  Another way to minimize error is to get all critical information directly from various information-providers, not second hand from Realtors or sellers.  A final way to reduce error is by practicing redundancy:  Get the same question answered in multiple different ways, or by several different people.  For example, if you are trying to figure out if the land is likely to perc for septic you can: 1) ask a neighbor if they had any trouble with their perc test, 2) check with the county to see if an historic perc test is already a matter of public record, 3) call a local septic installer to ask about the viability of septic in that area, and/or, 4) pay for an actual perc test.  That is, do several of these things, not just one.

Story time: One time I phoned a county planning office to ask about the zoning for a parcel I was selling.  The planner I spoke to said it was zoned commercial.  A few days later I called again to get some clarification on what commercial uses were allowed.  I spoke to a different planner.  That planner said it was actually zoned residential.  So, I went to the planning office in person.  The third planner walked me over to a large zoning map hanging on the wall.  That map showed that it was zoned commercial along the street and residential in the back.  That made sense and I could see from the map that it was the correct answer.  Finally!  Making several phone calls AND going in person AND looking at maps was the key to getting the right information at the end of the day.  Redundancy rules!

What if I Mess Up on My Due Diligence?

One time I was selling a piece of land and the buyer didn’t do any due diligence prior to purchase.  He then asked to “rescind” a sale after closing escrow.

Um, that’s a “no”.

There is no way to rescind a sale after escrow has closed and a change of ownership has been recorded with the county.  Buying real estate is not like shopping in a retail store.  You can’t just walk up the return counter with a copy of your receipt and get your money back.

With that said, if, after purchasing land, you decide that you don’t want to own it for any reason, you can always resell it.  Just be sure to disclose to the next buyer all material facts, especially negative facts that you may have discovered, as required by law.

It’s All Very Overwhelming.  What Strategies Will Make it Easier?

Well, remember all you’re trying to do now is decide if you want to buy the land or not.  You’re not going to be building a house next week – that’s in the future.  So, focus in on just the mission-critical items, i.e., the things that really affect whether or not you even want to buy the land to begin with.

If you ponder it, you will realize that some things are not mission-critical.  For example, do you really need to hire a surveyor to market the exact-exact-exact corners on that 40-acre piece or will studying an aerial map do for now?  I mean, if you were to discover that the property line is 10 feet from where you thought it was, would that really affect your decision to purchase?  If so, hire a surveyor.  If not, it can wait until after you buy the land.

Or if you’re buying an infill lot in a densely populated neighborhood, and you observe a fire hydrant at the nearest intersection, and the neighbor on the left has water, and the neighbor on the right has water, do you really need to research the cost of a water meter right now?  After verifying that there is no moratorium on issuing new water meters in that area, you might just put that item on the back burner until you’re ready to build.  All you’re trying to do right now is figure out if there are any bad-news-deal-breakers when it comes to purchasing the land.  The rest can be put off ‘till later.

If you will think along these lines you might be able to temporarily cross some things off your To Do list and tackle them after you buy the land.  For now, focus on the things that affect your decision to buy or not buy.

Summary

When buying land, yes, you truly do have to do your own independent due diligence.  Further, there is no “one stop shopping” for all of the information that you might need.  No single person will provide all of the answers for you:  not the seller, not the Realtor, not the escrow officer, and not the title company.  Savvy land buyers will want to make a list, roll up their sleeves, and gather separate pieces of information directly from various information-providers before purchasing a parcel of land.

10 reasons land sellers sometimes have so little knowledge about what they’re selling

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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?”

Um, no.

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:

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

Conclusion

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.