10 Things To Look For When Buying Land to Build

I work with a lot of buyers who are in the process of living out their dream of buying a piece of land and either building a custom home or buying a pre-fab home. On the flip side, I also have a couple of clients who started down the road of building a home and their life plans changed so they ended up selling the lot before they had chance to realize their vision.

I have recently taken on selling this lot in Healdsburg (2476 Wright Ranch Lane) which is probably one of the best lots I have ever seen. If I had to compile a 'Buying Land Checklist' this lot pretty much has everything I would advise someone to look for when buying land to build. 

It is in an amazing location with killer views, has all the infrastructure needed for a 7-bed house, perfectly flat building bad, zoning perfect for building a house and also for growing vines and it even has the sought after Williamson Act, Open Space classification for favorable tax treatment. Let's consider the 10 things to look for when buying land to build.

What to Look for When Buying Land?

1) Location, Location, Location

While this is top of the list, there is no point having a great location if you can't build the house you want or if you pay so much for the land you can't afford to finish building the house. Building on a slope is considerably more expensive than a flat lot. 

You can also use resources such as the Sonoma County GIS site to identify if a lot is in a flood zone and see specific zoning information.

Given the last four year's fire history in Sonoma County it is also important to look at the fire maps to see the relative fire risk of an area. 

2) Zoning

Understanding what you want to use the land for and/or the finished property. For example if you want to have the flexibility to rent out the property as a vacation rental once you have built it, the lot has to have a specific zoning. Whether you want to grow vines, keep livestock or erect some Yurts, all these activities have specific zoning requirements. Here is a link to the Sonoma County zoning look-up site and here is the page that explains the permitted uses for specific zoning classifications.

3) Survey

When a lot is listed for sale, there will often be a lot map provided. If it isn't it is easy to pull a lot map from the county website by putting the APN number into the Sonoma County GIS site, active viewer.

You can also get a hold of the Prelim Title report from a title company such as Fidelity National Title or First American Title which will provide specific co-ordinates of the lot.

However, in some instances, it will be necessary to conduct a site survey using a professional Land Surveyor firm such as Curtis and Associates. For a cost of approximately $3000, they will conduct an initial desk-based search to identify if the lot has been surveyed and then will visit the subject property and identify and mark the four corners of a lot. If you are in any doubt, and you can get an offer accepted, subject to a survey, it is worth carrying one out if the position of the lot lines will interfere with your intended use. 

4) Easements

With rural property, easements are very common particularly for access or for utilities

Right of Way Easement: The right to walk or drive over someone's land to gain access to your property

Utility Easement: The right to run overhead or underground power cables, telephone lines, water and sewage pipes across someone's land in order to reach another property

In the case of a well shared by two properties, there would be a requirement for a permanent well easement which allows access to the well for the purposes of maintenance and repair. When a well is shared there also needs to be a well-sharing agreement put in place which defines the terms under which the water is shared and also makes provisions for maintenance and repair of the system and the sharing of these costs. 

5) Water

To build a residential property, a piece of land must have access to water either public water, a well or a spring. In Sonoma County, according to the county website, a well test on a lot must demonstrate a sustained yield of one gallon per minute per dwelling from a well, spring, or multiple wells or springs combined. If you are looking to grow vines then water requirements start to increase sharply. To put it in context, one glass of wine requires 16 liters of water to produce! 

6) Sewer System

If a lot is not on public sewer then it will need to have a septic system installed in order to be eligible to get a building permit. A lot of lots are sold with "a perc test for x bedrooms". But what does this mean? This essentially means that the necessary work has been done by a civil/septic engineer, such as Munselle Civil Engineering, to determine that the soil type and size of available land will support a septic design, and most importantly, a leach field, for a system rated up to a certain number of bedrooms. 

The process to get a permitted septic system is a four step process:

Step 1: Soil investigation

- The engineer will dig pits and look at quality of the soil and get the county out to confirm the type of septic system the lot will support (typically $2000)

Step 2: Groundwater Test

- The engineer then needs to conduct a wet weather ground water test to determine the level of groundwater. This test can only be done after half the average annual rainfall (40in) has fallen. Once 20 inches has fallen, the window for a groundwater test opens up for 10 days after 0.8 inches of water has fallen in a 48 hour window. This window is typically in the period from Jan to April. (Typically $1000)

Step 3: Perc Test

The next step is to do the Perc test itself which involves putting pipes in the ground and see how much the water level drops per hour. This determines a Perc rate (typically $2500).

Step 4: Septic Design

- Finally with the perc rate determined, the engineer can design a system and determine the largest septic system the land will supprt. This will indicate the largest bedroom count for the house.  (The design fee is typically $3000 but there is also a county fee of approximately $1700)

Once the system has been designed and approved by Sonoma County it is approved, or vested,  for a period of 3 years. This protects against changes in the regulations. If a septic system has been installed it is can only be vested for 2 years. 

This lot in Guerneville, I am selling takes it one step further, as it already has a brand new septic system installed (as well as a substantial foundation).

7) Electricity

Access to power is an important consideration that needs to be taken into account. That being said with the developments in solar and battery technology it is increasingly realistic, and affordable to set up a property off the grid. However, in order to do this you need to make sure you get access to enough sun but also that you manage the power output of the property to minimize the requirement for energy storage. 

If you require PG&E to run power to the property you will need to get a separate quote for that. According to the PG&E project estimator on their website the cost will vary from $1000 to $20,000 for the top 5% of projects. The distance from the nearest power to the building lot is clearly the key factor.

8) Financing

There are two components to financing the building of your dream home. The purchase of the lot and then the financing of the construction itself.

Lot financing

There are a limited number of banks and credit unions that will finance a lot. For example, in Sonoma County,  Community First Credit Union will finance a lot. 

According to Hally Swan, of Community First Credit Union, the typical rate for a lot is 1.25% over the 30 year fixed rate which at the moment is 4.125% while the minimum downpayment is typically 25% and the maximum loan value is $1.5m. It is worth noting that while the loan is a 30 year loan, there is a 15 year balloon payment designed to incentivize the owner to build and then refinance or sell the lot if they aren't going to build.

There are generally other conditions attached to a lot such as having basic infrastructure such as access to water, electricty, gas and sewer/septic as well has having access (via permanent easements if required).

Construction Loans

Construction loans are generally easier to find than a lot loan. Again Credit unions that have a bricks and mortar presence are often a good source. Alternatively, there are mainstream banks such as US Bank, Umpqua Bank who will provide construction loans.

For higher end projects, private banks such as First Republic offer a competitive product to clients. The benefit of using a local institution is that the periodic inspection and draw process is generally easier because money is only released on hitting certain pre-agreed construction goals.

9)Build costs

This is the million dollar question. Over the past few years, since the first major fires in Sonoma County in 2017, the cost of building has increased substantially. Partly because of the basic economics of supply and demand on labor but also because materials such as concrete and steel have got so expensive. 

You will hear people talk about the cost of building based on a dollar amount per square foot. The build cost per sq ft in northern California varies hugely from $400 per sq ft to well over a $1000 per sq ft for a high end custom home. In this post I go into a lot more detail about the different cost components of building a home. 

There are clearly a lot of variables that go into that number but it is important to understand does the quoted number include the garage, the pool, the driveway, the demolition, the grading, the solar and the landscaping.

The dollar per sq ft number will often include a garage and the main hardscaping immediately next to the house but it will not include all the other elements. Other times it will only include the four walls of the house and everything within them. The actually type of construction will also make a big difference to the final cost of construction.

One alternative that is becoming a more popular cost effective alternative is pre-fab home. They vary hugely in build quality, and price, but there are now some good options, such as Method Homes, which cost from $300-$400 per sq ft. This post outlines some good pre-fab options for someone considering that route.

10) Expertise

Last but not least, make sure you surround yourself with experts every step along the way. There are too many people, myself included on my own build project before I know what I now now, who go into it without having asked, and got answers to, all the right questions at the outset. 

This extends all the way from identifying a lot at the outset where it pays to work with a realtor who understand what's involved and knows how to uncover potential issues with a lot, through to getting engineers on board to do the site plans and designs, all the way through to managing the contractor bid process so that you minimize surprises down the line. 

The Perfect Lot

So here is the Buying Land Checklist for 2476 Wright Ranch road:

1) Location - Views and privacy in abundance

2) Zoning - Zoned LIA but with the huge advantage of the Williamson Act Open Space classification

3) Easements - All necessary easements in place

4) Well - 40 Gallons per minute

5) Septic - 7-bed perc test

6) Survey - Completed

7) Build cost - a contractor has bid the project at $577 per sq ft

7) Electricty - power to the site

8) Designs - it even has designs and all the soil reports done

What more could you want? If you are interested in purchasing a lot to build your dream home, please get in touch and I'd be happy to chat you through what I have learnt going through the process.