The Land of Opportunity: Bare Land 101


by Jessica Hale


We are all growing tired of hearing that housing inventory in Portland Metro is low, offers over list price are the new norm, and competition is super fierce for home buyers.  Have you considered taking control of the home buying process by purchasing bare land and building your customized new home?  It just takes knowing the right people, understanding the process, and taking the time for due diligence.  Here are 8 tips to get you started: 

1) Build Your Team: Purchasing bare land in hopes to build a home can be complex process and it takes a team of people to get the job done.  (1) You will need a savvy real estate broker that knows the ins and outs of land acquisition; (2) an experienced lender that deals with land and/or construction loan financing; (3) and a strong builder that assists with everything from pre-development site issues to picking fixtures and colors. In special cases, you might hire a planning consultant if the project has challenges such as a zoning change, divisions of the property, or special zoning approval for homesite. 


2)     Hire a specialized real estate broker.  Real estate brokers that deal with lot and land transactions will have a pair of boots in their car, be able to read aerial, survey, topographic, zoning, and soil maps, should understand title reports, follow the due diligence process carefully, and know which municipalities govern each prospective property.  Your real estate broker also has access to the Multiple List Service that allows for listings to be sent your way the moment they hit the market.  This is yet another great reason to hire a real estate broker when buying property.


3)     Connect with a builder sooner than later.  From the very beginning, seek out a builder who shares your aesthetics. Interview several, visit websites, see example of recent projects, understand their pricing structure, and make sure you can work with them for the next year or so.  Once you nail down a builder that meets your criteria, they will help you so much in the land acquisition process and work directly with the construction loan officer.  This provides a unification among all parties and streamlines your building process. 


4)     Cash is not the only option.  If you are fortunate enough to have cash in the bank for a land purchase, with the right real estate broker, you will get, by far, the best deal.  Here’s why: land owners know that cash equals a quicker, smoother, and easier transaction.  This example begs the famous phrase, “time is money” and sellers would prefer their money fast.  If you are like many of us, that don’t have money stashed away, there are other ways to buy bare land.  Two options to consider are Land Loans and Construction Loans.  Land Loans are a great option if you want to snag the land before anyone else, but do not have building plans yet.  Although these loans require a 30% down payment, they do provide a stepping stone process for purchasing raw land.  The best part is this: any increase in value between the time you purchased the land and the time that you build your home will add instant equity to the property as a whole.  Construction Loans are another wonderful option that bundles the land purchase, pre-development costs, and the build into one easy loan.  The construction loan takes into account the “after improved value”, the cost for these loans are not excessive and this is a great option in the event that you only have 10% or 20% to put down on the acquisition costs. There are a handful of financial institutions out there with construction loan capabilities, so choose wisely. It is best to meet with a loan officer to determine how much you can be approved for, prior to shopping for your dream lot.  


5)     Utilize your title/escrow company.  A good title and escrow company will be able to get useful documents for you about a prospective property.  If there is a property you are seriously considering, ask your real estate broker, builder, and/or lender to order a “Developer’s Packet” from customer service.  This packet will include a trio report, utility information, zoning, and other pertinent information regarding the property.


6)     Location, location, location! Choosing the location of your buildable lot may take a while to find, or it might fall in your lap, that is why you want to be ready.  Having your team already assembled will be very helpful.  Let’s say your real estate broker finds you a vacant urban lot in a hot Portland neighborhood, if you already have a builder vetted and are pre-approved from a lender, you will be ready to make an offer fast.


7)     Due Diligence.  With each property you investigate your due diligence should always start with finding out which jurisdiction you are in. For example, if you are buying a property in Oregon City, you need to find out if you are dealing with City of Oregon City or Clackamas County?  Don’t be fooled by an address either, for example, many Portland addresses are not actually in Multnomah County.  Once you figure out the jurisdiction entity, confirm its buildability and what you can do on the property.  Be sure to find out what the zoning is and what does that zooming allow you to do.  The zoning dictates everything from how big your house can be to how far away it can be from a property line.  The more rural you go; the more restrictive zoning can be. Planning consultants are a great resource if you need help.  


8)     Don’t Be Afraid to Make an Offer.  If you love a piece of property, make an offer.  Your real estate broker should write a detailed offer that has several contingencies and due diligence requirements with a longer than normal inspection period that protects you as the buyer and your earnest money. Make an offer and do you research and see if it’s the right property for you.  You might kick yourself later if you let it pass by.  



Jessica Hale is a licensed real estate broker with Portland Digs Real Estate.  Although she handles all types of real estate transactions, Jessica specializes in bare land property transactions, the home building process, and rural development.  Jessica’s instinct is to be detailed, organized, efficient, and helpful.  With these qualities, Jessica utilizes her entire skill set to provide clients with A+ service by helping with every aspect of transaction.  In her “free” time she is the mom of two darling kids and a wife to an amazing husband.   

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