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Whether you envision building your dream home or seeking a long-term investment opportunity, closing on land represents the first official step in realizing your aspirations. However, land-closing can feel like a daunting process, and just like any other big-ticket purchase, it comes with its fair share of intricacies.
Want to learn more about the land-closing process so you can navigate your purchase like a pro? We’ve got you covered with this handy guide.
What Does It Take to Buy Land?
Closing on a land purchase is slightly different from a traditional purchase for a pre-built property. Sure, some similarities exist regarding negotiations and the legal formalities involved in the final stages. However, a few additional nuances in the land-closing process require specific attention before you get to that. Here’s a list of considerations you’ll need to reflect on before kickstarting formal procedures:
- Needs and objectives: It’s helpful to narrow down your overarching goal. Are you looking for agricultural land, residential plots, or commercial acreage?
- Research criteria: Decide what aspects are most important to you and your preferences for each. Primary considerations include location, zoning regulations, soil quality, accessibility, and potential for development.
- Due diligence: It’s important to cover all your bases. This includes verifying property boundaries, conducting environmental assessments, checking for liens or easements, and ensuring compliance with local regulations.
How Long Does It Take to Close on Land?
Officially, the land-closing process may only take a day or two. This typically includes signing the final documents, transferring funds, and formally taking ownership. However, the preparation leading up to that can span several weeks.
As a general guideline, you should expect the entire purchase journey to take 30 to 90 days after an offer has been accepted, depending on how smoothly all the checkpoints go in the process. These are typically the lengthiest situations during the land-closing journey:
- Due diligence and negotiation: Liaising with the seller regarding price, terms, and contingencies usually involves a timeframe of 1-2 months.
- Financing approval (if needed): Submitting financial documents, appraisals, and undergoing underwriting can also take 1-2 months. This can be conducted simultaneously with due diligence and negotiations.
- Closing preparation: Finalizing legal documents, coordinating with escrow or title companies, and ensuring all necessary paperwork is in order typically takes 2-4 weeks.
The Land-Closing Process in 8 Steps
A series of critical steps must be followed in the correct order during the land-closing process to ensure a mutually agreeable and legally sound transaction. Here's a breakdown of each stage:
Step 1: Title Search
Conducting a thorough title search is essential to securing clear ownership. The process involves examining public records to verify the seller's legal right to transfer ownership. It’s useful for uncovering any existing liens, encumbrances, or other legal issues that may affect the property's title. Hiring a professional title company or real estate attorney is recommended.
Step 2: Title Examination
Once the title search is complete, a detailed review identifies potential issues affecting ownership, such as:
- Undisclosed easements
- Boundary disputes
- Unpaid taxes
- Claims of ownership by third parties (wills, divorce settlements, etc.)
Resolving issues before closing ensures a smooth transaction.
Step 3: Inspection and Surveys
Professional inspections assess existing structures and identify environmental concerns. Licensed land surveyors will determine boundaries, helping you avoid future disputes or encroachments. You’ll receive detailed reports, maps, and supporting evidence.
Step 4: Negotiations and Contingencies
Begin negotiations once inspections and surveys are underway. Common contingencies include transparent title verification, inspection results, financing approval, utility access, and land-use permits.
Step 5: Calculating Closing Costs
To calculate closing costs, factor in attorney fees, title insurance, property taxes, transfer taxes, and recording fees. Allocate 2-5% of the purchase price for closing expenses.
Step 6: Securing Financing
Prepare for rigorous financial verification including credit checks, income verification, employment history, asset verification, and documentation for down payments. Owner financing is also an alternative to traditional mortgages.
Step 7: Final Walk-Through
A final walk-through ensures the land is as agreed upon. Verify completed improvements and check for any new damage.
Step 8: Settlement
The final step involves signing legal documents, transferring funds, and formally taking ownership. This usually occurs with a settlement agent overseeing the signing of the deed and closing affidavit. Ensure copies are stored in county records, title insurance policies are issued, and all payments to involved parties are finalized.
Find Owner-Financed Land through Landmodo
At Landmodo, we offer convenient solutions to help buyers find owner-financed land, connecting directly with sellers. Browse properties available in Arizona, Colorado, Florida, Texas, and more to discover your next real estate investment.
