At this point in your life, you may already be looking to make real estate investments and purchase a property you can call home. While most people take the route of investing in properties already built and ready for occupancy, some prefer to build their homes instead and are in the market for parcels of land.
You might be aware of the process involved in buying a house, but when it comes to vacant land, it’s a whole different ball game. If you’re planning to buy land with cash, you’ve come to the right place. We give you a step-by-step guide prepared by our experienced land specialists on completing the land buying process with cash payments.
Buying Land With Cash: A Step-By-Step Guide
1. Scour Land for Sale
There is a wide market of land available for sale — you just need to look for them. Drive-bys can be helpful if you’re looking for land in a particular area, but it won’t always be a fruitful endeavor. You can expand your search to land listing sites online where you can access a broad variety of different types of land, such as home sites, development sites, as well as farmland and ranches.
2. Identify the Best Listings
Because land tends to be limited in availability, finding available land for sale is a tad more challenging than finding an already-built house in the market. That’s why it’s easy to get tempted to snatch just about any parcel of land you find online.
However, you need to dig into the details and inspect the particulars. Consider zoning laws, local restrictions, permits, road access, utilities, etc. Create a criterion that reflects your goals and priorities and filter out listings that don’t meet them.
3. Get Documents in Order
Buying land with cash would require you to prepare some documents that the seller may ask for. One of the most common things that they request is proof of funds — and it’s not as easy as showing the balance of your bank account. A formal proof of funds document needs the official letterhead of your banking institution and can come in the form of a bank statement or equity line of credit, among others.
4. Make an Offer in Writing
When you’ve decided on a particular parcel of land that you want to purchase, you can begin the transaction by making an offer in writing. This is often done in the form of a bid offer, which is a contract that includes the land’s details, price, location, parcel number, and contingencies.
If the seller accepts your offer, you will need to accomplish a sales and purchase agreement (SPA), which is a binding contract that governs the sale of the land.
5. Make a Deposit
Most sellers will require a percentage of the purchase price to be paid at the beginning. This is a form of earnest money, which signifies that you are a serious buyer. The deposit protects the deal and in case you decide not to move forward with the transaction, the seller keeps the earnest money.
6. Conduct Environmental Tests & Land Surveying
Environmental tests and land surveying reveal important information about the quality of the land and how suitable it is to be used for your intended purpose. An environmental test lets you know if the soil is contaminated, any earthquake damage, sinkhole risks, moisture content of the soil, etc.
On the other hand, land surveying gives you a detailed report of boundaries, the location of any buried pipes, the total usable acreage, etc. This prevents any surprises when you start building on the land.
7. Inspect the Title
Parcels of land can also be subject to liens, easements, and restrictions. It’s crucial that you check and make sure that the land has a clear title so that you don’t run into problems down the line.
8. Inspect the Land in Person
It may seem like there’s nothing to walk through when it comes to vacant plots of land. But even so, you should conduct a final inspection in person. This can give you insights into the shape and boundaries of the property and confirm the findings of the land survey. Plus, it’s an opportunity for you to envision how you want to build your house on the land.
9. Settle Your Payment
When you’re satisfied with your inspections, title checks, and tests, you’re all set to settle your payment. When dealing with cash transactions, you can pay by means of a cashier’s check to prevent legitimacy issues with paying huge sums of money.
10. Close the Sale
After the seller receives your payment, he or she will provide you with the deed to the property. You can opt to close the sale at the registry office or at a title company. But before closing the transaction, it’s well worth it to have the contract reviewed by a real estate agent or attorney to ensure that all the terms are correct and meet your best interests.
Make Smart Investment Decisions
Buying land is a huge investment, which is why it’s important to prepare for it. Do your research and due diligence beforehand to ensure that you get your money’s worth and protect your interests throughout the process.