How to do due diligence for land purchase
Due diligence for land purchase is not an easy task apart from needing a sizeable amount of investment, buying a land also requires a person to take some extra steps and precautions to ensure their personal safety. These precautions and steps are over and above what is taken when you buy a house or any other real estate property.
Owning a parcel of land is the dream of many. Whether it’s ten acres or several thousand, land ownership represents an investment in a solid, tangible asset – one that holds intrinsic value to the owner and signifies means and permanence in society.
In order to ensure that the land for sale provides the enjoyment and utility that the buyer is seeking, it is critical to thoroughly research the property before entering negotiations to purchase. We call this due diligence – that is, ensuring the property satisfies all of the buyer’s criteria.
In real estate transactions, due diligence is a vital step in the home-buying experience. Due diligence in real estate transactions refers to reasonable measures which every individual should adopt before executing an agreement in relation to the real estate and immovable property.
One of the most significant aspects of purchasing land is to verify that the title is clear. You must confirm whether the person selling the property owns it and has all the necessary rights to transfer ownership of the property to you. It is always advisable to consult a lawyer/advocate to carefully review the title documents such as sale deed and property tax receipts and obtain a certificate confirming the title of the seller.
This is perhaps the most critical characteristic influencing value. The nature and extent of access dictate the type of uses the parcel can offer. Does the parcel front a publicly-maintained road with power and utilities? Does the parcel have a deeded right-of-way across an adjacent landowner? Does the condition of the road surface (e.g. gravel vs. pavement) relegate it to seasonal or year-round use? Research the access thoroughly and understand all the associated benefits and limitations to be sure you can use the parcel as you envision.
- Find out What the Market Offers:
The state of the market usually affects the pricing of property. When there is a high demand for property with a lack of supply of good quality property, then prices of houses tend to rise and vice versa. However, a large supply of housing that is in high demand translates to higher pricing as there might be buyers in the market who are willing to pay whatever it takes to acquire the property.
- Appraise & Valuate Property:
An appraisal is an estimate of the value of a property, also defined as the opinion of the market value for a property. A valuation, on the other hand, is done to establish “exactly how much a property is worth”. Property appraisal and valuation are necessities for successful real estate purchase. A valuation report usually includes details like its location, legal description, value, improvements, land use as well as information on comparative sales in the area. This information will help you review the future performance of your property, therefore lets you know if the particular property is a good investment opportunity or not.
- Check for Government Regulations/Zoning Issues:
Check for issues that could have an impact on the property you want to acquire or a building you want to put up. Find out things like whether your home will lie in a flood zone are or if the renovations you plan to do, if any, will cause some environmental hazard to your future neighbors.
Bottom line, when purchasing real estate, it is up to you to ensure that you get the asset that you are paying for, given the risks involved in real estate purchase could be as high as the perceived benefits. A good practice would then be to have a due diligence checklist to guide you through the process.
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You can contact us for any property needs and will help you get the best property and investment for you. Because there is no “one size fits all.”
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