How to Buy Land and Build a House

Introduction

• Presenter: Rhonda Burgess, Real Estate Broker and Mortgage Underwriter in Nashville, TN
• Company: Southern Living Realty Partners
• Topic: Buying land and building a house

Current Real Estate Market Challenges

• Existing homes are receiving multiple offers (10-20 offers per house)
• Builders are often sold out with no available lots
• Frustration among buyers due to seller's market conditions

Buying Land as a First-Time Buyer

• Recommendation: Not advisable for first-time home buyers
• Types of Land: Various types exist, often raw land is listed online

Challenges with Buying Raw Land

• Bank Financing:
  • Banks do not favor lending on raw land due to speculative nature
  • Typically, banks lend only up to 30% of the value of raw land
  • Example: $100,000 land, bank may lend $30,000; buyer needs $70,000

Necessary Considerations for Raw Land

• Utilities:

  • Location and cost of water and electricity access
  • Additional costs for placing utility infrastructure (e.g., electric poles)

• Land Characteristics:

  • Terrain (e.g., slope, rock, limestone)
  • Need for excavation and leveling

• Additional Costs:

  • Surveying costs and time (6 months waiting period)
  • Perk test for septic systems

Zoning and Land Restrictions

• Zoning: Check if the land is zoned as agricultural or unrestricted
• Neighboring Land Uses: Be aware of potential farm animals or agricultural activities

Subdivisions and Lots

• Development Process:

  • Raw land is developed, utilities set up, and lots subdivided
  • Developers sell to builders who construct homes

• Costs:

  • Building costs are high ($200-$225 per sq ft for a moderate home)
  • Additional subdivision covenants and restrictions

Financing and Builders

• Construction to Permanent Loan: Typically through local banks
• Builder's Track Record: Important for bank's risk assessment

Conclusion

• Buying land is often more expensive and complex than buying an existing home
• Suggested to consider existing homes or work directly with a builder for new construction

Contact Information

• Help with Buying/Selling Homes:
  • Rhonda Burgess, Southern Living Realty Partners
  • Phone: 615-554-0832

"Buying land and building a house is more than likely more expensive and is 10 times the headache than if you just went and bought an existing home."