THIS Is How You Can Buy a Great Piece of Undeveloped Land, According to Real Estate Pros

For homebuyers interested in new construction, common options range from customizing a builder’s model to working with a design-build firm to create a one-of-a-kind home. But in recent years, a quieter trend has emerged: Some buyers are skipping the blueprints and starting with a blank canvas by purchasing undeveloped, or “raw” land.

While the pace of land sales has cooled slightly, a Realtor.com analysis still shows a 1.2% increase in transactions in 2023. The data coincides with broader real estate trends, from housing inventory shortages to a rising interest in multigenerational living. The top land markets, according to Realtor.com, are California, Texas, Georgia, Florida, and Colorado.

“For many of my clients, [buying undeveloped land] comes down to freedom, creativity, and privacy,” says Harley Bush, a real estate agent with Caughman Realty in Midlands, South Carolina. “They want the ability to design every inch of their home, not just pick from a builder’s limited models. They want space to grow, the ability to orient their home around a lake view or sunset, or even create a small family compound.”

That said, buying land to develop and build a house on comes with significantly more considerations than purchasing a home or building one in an existing neighborhood. Ahead, some tips from real estate pros on how to buy undeveloped land, including the steps you need to take and the hidden costs and hurdles that can pop up.

Is it Worth it to Buy Undeveloped Land?

Buying undeveloped land is attractive to buyers who want customization that it allows for, but there is a unique set of risks and some extra due diligence that comes with going this route, says Matthew Coates, president and principal of Coates Design Architects.

In addition to design freedom, those who buy raw land generally get more acreage, more mature landscaping, better views, and fewer neighbors, he points out. Buyers can also create a more sustainable and energy-efficient home, something that’s more difficult to retrofit into an old house.

“The most successful buyers I deal with see it as a long-term project right from the start, rather than thinking it will be a quick endeavor,” Coates says. “They ask the right questions, assemble the correct team, and go in eyes wide open.”

That long-term mindset is especially important when it comes to infrastructure. Buyers should be prepared for some logistical hurdles. The big four are water, power, sewage, and road access, says Elena Novak, the lead real estate analyst and researcher at PropertyChecker.com, a property records search site.

“In rural areas, you may need to drill a well, install a septic system, and build a road to reach the site,” Novak says. “If electrical service is far away, utility companies may charge thousands to bring in a new line.” Some buyers also forget about internet and cell service, and may need to explore alternative options like satellite.

How to Buy Undeveloped Land

Because buying undeveloped land is a more technical process than purchasing or building in a pre-existing neighborhood, you’ll want to assemble a team of professionals that can help you navigate the process. Work with a real estate agent who has experience with land deals and can help guide you through the many steps, like zoning research, soil testing, and well and septic planning, Bush recommends.

Experts also recommend working closely with surveyors, builders, a real estate or land-use attorney—and, in some cases, a local planner or civil engineer—to help ensure there are no surprises leading up to closing.

Here’s some key steps to take when buying undeveloped land with the intention of building a home on it, according to Novak.

1. Understand zoning and land use regulations. 

Start by confirming the property is zoned for residential use and investigating any limitations that could affect your building plans. “Not all residential-looking land is buildable,” Novak says. “A buyer should visit the local planning department to verify what can legally be built, whether permits are available, and if there are restrictions like easements, flood zones, or conservation overlays.” A land survey can also help you confirm property boundaries and flag any encroachments or easements.

2. Coordinate soil and percolation tests.

This is especially important in rural areas where a septic system may be needed. 

3. Consult with an architect and builder

Bring in professionals to assess the land’s buildability based on slope, layout, and access. “Land might appear perfect on the surface, but hidden challenges can be expensive,” Novak says. “For example, steep slopes may require retaining walls, and wetlands or protected species on-site can limit where and how you build.”

4. Have a title search and legal review performed

This step helps uncover any liens, boundary disputes, or rights-of-way that could delay or derail your project, Novak says. It’s also worth noting that fraudulent listings of vacant land have become a common scam tactic. A proper title review can help protect you from being caught in one of these “title pirate” schemes.

“Land deals are more technical than buying a home,” Novak says. “But with the right team, the right checks, and a bit of patience, it’s one of the most rewarding ways to create a home that truly reflects your values and lifestyle.”

How to Finance Undeveloped Land

The most common path to financing undeveloped land is securing a lot loan, which typically requires a larger down payment and carries higher interest rates due to the lack of collateral, since nothing has been built yet.

You’ll start by going through a pre-approval process, says Loren Fellows, Vice President, Mortgage Production Manager at Johnson Financial Group. The last thing you want is to sell your current home or be in the middle of drawing up plans before learning that you don’t qualify for the loan.

Once you’re ready to build, your lot loan can often be rolled into the financing of the construction loan, she says. If you already own the land, you may be able to use the existing equity in your lot toward the down payment required on the construction loan.

Construction financing usually happens in two phases. First, there’s short-term financing that covers the cost of building the home. During this phase, borrowers typically make interest-only payments based on the amount the builder has drawn so far. Once the home is complete and the final draw is made, the loan can then be converted into a long-term, fixed-rate mortgage.

As seen in HouseBeautiful.com