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Understanding Your Cost
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Buying land in Texas is an exciting journey. If you're searching for a spot to build your dream home, for rural land, or for recreational property, this guide is just for you.
First, you need to know why you want to buy the land. Your reason will impact your decisions as you choose the right land.
Are you buying land to build a home? For investment? Or to raise cattle? Each purpose has different needs to think about.
Next, think about where you want to buy the land. The location affects property taxes, zoning laws, and how available utilities like water lines and natural gas are. To put this in practical terms, an acreage offers more privacy and space. But it might not have the same standard services you would find in urban areas.
Securing financing is the next step. You need a land loan or a construction loan if you plan to build. That means considering down payment requirements, monthly payments, and getting pre-approved to shows sellers you're serious.
Then you need to choose the actual plot of land to purchase. This involves more than just browsing listings online (although that's definitely part of the process, too). Work with a real estate agent or land agent who knows the area. They can use their experience to help you find land that fits your budget and lifestyle.
When you know what land you want to buy, you need to understand local land restrictions. You’ll need to check zoning rules, deed restrictions, and any conservation easements. These all affect how you can use the land. If you're not sure where to begin, a title search will help you find any issues with legal access or property lines.
Once you find the perfect property, it’s time to make an offer, which should reflect the land’s value based on market conditions.
Once the seller accepts your offer, you’ll sign a land contract and close. Closing on the land comes with closing costs, which include fees for the title company and title insurance. After closing, the land is yours.
This guide will cover each step in detail so you can shop for land with total confidence.
Understanding why you want to buy land in Texas is the first and most important step. It influences where you buy, the type of land you need, and which features you prioritize.
If you’re planning to build a home, think about the land's proximity to work, schools, and amenities. Think about what type of community you want to live in as well. The right community will make daily life much easier and more enjoyable.
The rest of this article will focus on buying land for home construction. But for agricultural use, soil quality, water availability, and climate are factors to look at. Land in a rural area with rich soil and reliable water sources will be ideal.
And if you’re looking for recreational land for activities like hunting, look for land with lots of wildlife and natural landscape features. Land with varied terrain, water sources, and forested areas will attract more game. Accessibility is also important to make sure you can reach your land easily.
Finally, for investment purposes, you would want to look at growth potential and development trends in the area. Land near expanding cities or infrastructure projects may offer a good investment. Researching market trends can help you identify areas with the best appreciation potential.
The bottom line is that knowing why you want the land helps you narrow your search. Choosing the land based on looks or location alone can leave you with more problems to solve, which means more budget to spend.
Whether it’s raw land for future development or a ready-to-build lot, understanding your goals will help you make decisions during the land-buying process.
Start by thinking about what matters most to you in a location. This choice will affect whether you buy land in an urban/suburban area or a rural property. Understanding your purpose, as mentioned earlier, helps you hone in on the perfect location.
If you're building a new house, focus on commute times and community. A convenient location with easy access to work or school can make daily life much smoother.
Look for areas with solid infrastructure and nearby amenities like restaurants, parks, and entertainment. If you can find land in a great community with supportive residents, that's even better. The living experience is always best when you and your neighbors get along.
As you gain an understanding of where you'd like to buy your land, don't forget to consider factors like flood plains and flood zones. These can impact land value and your ability to build. For example, you may need flood insurance if the land is in a flood-prone area.
It’s best to get financing before choosing the land you want to purchase. The market is competitive, and having your financing lined up can make your offer more attractive to sellers.
You may have time to secure financing after finding land, but sellers might see this as a risk. They may simply choose to move forward with another buyer who is ready to go.
There are several types of land loans available. Choosing the right one depends on the type of land you’re buying and your plans for it.
This loan is for undeveloped land with no improvements. It’s ideal for land buyers who want a blank slate. However, it can be harder to get and usually requires a larger down payment.
This type of loan is for land with some utilities but no significant structures. It’s a middle ground between raw land and improved land. Unimproved land loans offer a balance between flexibility and development potential.
Improved land loans are for land with infrastructure like roads, water, and electricity. This type is generally the best choice for people who want to build a home. It’s easier to get approval because lenders see it as less risky. Plus, having infrastructure already in place can save you tons of money and keeps your construction timeline short.
For building a home, an improved land loan is generally the best option. It includes key infrastructure like roads, water, electricity, and sewage systems. These features can be expensive to install, so having them already in place is a big advantage.
Lenders also view improved land as less risky, so it's often easier to get loan approval. Plus you can start building your home faster if the land already has the necessary utilities.
We explain below how getting your loan generally works. Ffor detailed steps, see our guide to securing a construction loan instead.
Before applying for a land loan, check your credit score. Lenders will use your credit score to assess your reliability as a borrower.
A higher score increases your chances of getting better financing options and lower interest rates.
Land loans require a larger down payment than traditional home mortgages. It's usually between 20% and 50% of the purchase price.
Make sure you have enough savings to cover the down payment and to manage monthly payments while building your home.
You’ll need to provide documents proving your identity, income, tax history, and employment history. Having these documents ready can speed up the application process and help you secure your loan faster.
You can get a land loan from a bank, credit union, or specialized lender.
We don't usually recommend working with large banks. They can be more expensive and harder to work with.
Instead, look for lenders who have experience with land loans and can offer competitive terms.
Getting pre-approved for a loan shows sellers that you’re a serious buyer. It gives you a clear idea of your budget and makes your offer more attractive. Pre-approval involves a preliminary assessment of your financial situation and creditworthiness.
Once you’ve chosen the best financing option and gathered all necessary documentation, apply for the loan. The lender will review your application and, if approved, you’ll get the funds needed to purchase the land.
Choosing the right land is a critical step in the land purchase process. Use online resources to find land in your desired area that’s available for purchase. Online search engines and listings can give you a good starting point. Some of our favorites include:
These sites let you browse listings and filter by location, price, and even land features. They'll help you narrow down your options and find potential properties that align with exactly what you need.
Working with a buyer’s agent or a land agent who knows the local market can be helpful, too. They can guide you through the land-buying process and help you perform your due diligence. An experienced listing agent has insights into how to choose the best land that you won't be able to find anywhere else.
If possible, you should definitely visit the land before making a decision as well.
Seeing the land in person can give you a better understanding of its features and potential. Walking on the land helps you see soil types and quality, its layout, and utility or water lines that already exist.
You may also notice things that aren't visible in photos but could be dealbreakers. Examples include elevation changes, water drainage issues, or neighboring properties.
Visiting the land also helps you get a feel for the community and see which amenities are nearby. Of course, these are important if you plan to build a home for your family.
Once you’ve found a plot of land you want to purchase, it’s essential to understand any land restrictions. These restrictions can affect how you use the property, so it’s crucial to know them before you commit to buying.
First, request a copy of the deed and review it carefully. The deed will include any restrictive covenants or easements. Restrictive covenants are rules that limit how you can use the land. For example, a covenant might restrict the height of buildings or prevent businesses from operating on the property.
If you can’t get a copy of the deed, check land use regulations with the City of Houston Planning & Development Department (or the relevant local authority).
They can provide information about zoning laws, land use regulations, and property restrictions that apply to your land purchase.
Additionally, check if the land is part of a Homeowners Association (HOA). HOAs enforce rules and regulations that can impact how you use and maintain your property. For instance, an HOA might have rules about the types of buildings you can construct or specific landscaping requirements.
Restrictive covenants are conditions in a property’s deed that limit how the owner can use the land. These covenants are often put in place by the developer or the HOA to maintain a standard within a neighborhood or community.
An Example: Imagine you buy land in a residential neighborhood. A restrictive covenant might stop you from building a commercial structure (like a store) on your property.
This means you couldn’t open a business on your land, even if it’s a small home-based business, because it violates the covenant.
Easements are legal rights that allow someone else to use part of your property for a specific purpose. These can affect how you use the land you own.
Easements can be for utility companies to run power lines, for neighbors to access their property, or for public use such as sidewalks.
An Example: An easement on your property for a utility company gives them the right to access your land to maintain utility and water lines. This means you can’t build structures that would block their access.
Now that you’ve been pre-approved for financing and figured out which land you want to purchase, it’s time to make an offer.
First, approach the realtor, seller, or legal representative listed on the property. They will be your primary contact and their job is to help guide you through the purchase process.
Offer a fair price based on market rates, land appraisals, and comparable properties. This makes sure you’re offering a competitive and reasonable amount. An agricultural appraisal can be especially useful if you're buying rural acreage with the potential for an agricultural exemption.
Also consider adding contingencies to your offer to protect yourself. Common contingencies include:
And if you want to make a strong impression, include a deposit with your offer. This is called an earnest money deposit. It's usually between 1% and 10% of the land’s purchase price, and it shows the seller you are serious about buying the property.
Once you’ve worked out the details of your offer, get it drawn up into a contract. This finalizes your agreement with the seller and officially moves you towards owning beautiful Texas land.
First, check that all terms and conditions you agreed to are included in the contract. These include purchase prices, contingencies, and any special agreements you made during negotiations.
Have a lawyer review all documents for discrepancies between your conditions and what’s in the actual contract. They'll find issues (like unclear terms) that could affect your land purchase. They can also help you make sure the contract protects your long-term interests.
Check for important things like the title policy, which guarantees that the title to the property is free from past claims or liens. This is non-negotiable if you’re buying investment property or land in a flood zone, since making sure the title is clear can save you from disputes in the future.
If you’re using seller financing, verify that the terms are clear in the contract. Check payment schedules, interest rates, and any penalties for late payments.
Finally, consider the deposit (or earnest money) you included in your offer. Make sure the contract states how to handle this money and whether it applies to the purchase price.
Once you’re satisfied with the contract, both you and the seller will sign it. This formalizes your agreement and sets the stage for closing the deal.
Closing on the land is the final step in the process. First, make sure you're prepared to pay the closing costs. These include title insurance and recording fees.
Title insurance protects you against any future claims or disputes over the property title, so you know your ownership is secure. Recording fees cover the cost of officially documenting the change of ownership with the county.
Next, you’ll sign closing documents like the deed, which transfers ownership of the land from the seller to you. Make sure to review these documents carefully. Your lawyer should also review them to ensure everything is in order and that there are no hidden clauses that could affect your claim to the land.
Once the documents are signed and the closing costs are paid, the land transfers to your name. You’ll receive the keys to your private property and the deed, making you the official land owner...Congratulations!
After closing, you might need to take extra steps if your land is eligible for an agricultural exemption (ag exemption). This can save you a lot of money on property taxes. Check with your local tax office for the required paperwork and deadlines to apply for the exemption.
Now, you can start making plans for your new property.
You’ve successfully gone through the process of buying and owning land in Texas. Now, you’re ready to work with a builder to bring your dream home vision to life!
Choosing the right builder is one of the most important steps to making sure your home is built to your standards. See this article for more information on how to choose which builder to work with. It covers what to look for and what to avoid when looking for a homebuilder.
When you’re ready to begin, schedule a free consultation with Dunn & Stone. We have extensive experience working with land buyers and can help you maximize the potential of your new property.
As one of the top home builders in Houston, our team is here to support you through every step of the process, from the initial design plans to the final walkthrough.
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