The Lot Offer and Negotiations
“The better you are at communicating, negotiating, and handling your fear of rejection, the easier life is.”
-If a septic system is required, write the offer contingent upon a satisfactory soil sample by a soil scientiest within 21 days (or however long a soil scientiest says he needs to conduct the test and provide the results). The county health department can provide you with an approved list of soil scientiests. No one wants to buy property that they can’t legally POOP on. If you aren’t able to install a septic system, it will be hard to re-sell this lot to another interested party (Unless they have a tiny house with a composting toilet? I’ve only ever seen this on TV, but no thanks!)
-If you are wanting a basement, write the offer contingent upon being able to build on a basement, which can be determined by the soil test results and consulting with a general contractor/surveyor who can evaluate elevation differences and drainage on the lot.
-If the developer must approve your house plans, make the closing about three months out, or however long you conclude it will take to work with an architect or designer to get plans that can be presented (and hopefully approved) to the developer.
-If in a subdivision (or any property that has restrictions), get a copy of the covenants and restrictions to make sure you will be able to use the property in the manner in which you desire (having a detached structure, etc.). If the property is outside of a subdivision, check with the county regarding the zoning of the property and any limitations this could present. It could be disappointing if you had your heart set on chickens and learn after purchasing that they aren’t allowed.
Before writing our offer, Michelle and I had to consider financing options. Unfortunately, I’ve yet to accumulate infinite amounts of wealth which would have prevented this step entirely. As with anyone purchasing a home, no one likes to have to have to pursue temporary housing between selling their current home and purchasing their new one. Who wants to have to move twice and put the majority of their belonging in storage unless there is no other option?!? We looked into a variety of options, some of which consisted of pulling the equity from our current home, selling our current home and finding temporary housing indefinitely, pulling funds from investment accounts, etc.. After consulting the advice of a local lender, we discovered some descent options that I haven’t had to consider with the other real estate transactions with which I’ve been involved. Lot loans and construction loans are a completely different beast compared to the traditional Conventional, FHA, VA loans so do your homework ahead of time.
After deciding how to finance the loan, we were ready to proceed with our offer. We researched the lots in the neighborhood that were currently active, pending, and sold, as well as similar properties in the general area. We wrote our offer for “Unimproved Property” and included some additional contingencies/stipulations. These are contingencies I would highly recommend for anyone purchasing a lot on which to build. Our contingencies included: offer is contingent upon a satisfactory soil sample by an approved soil scientist with the results being returned within 21 days, the offer is contingent upon satisfactory investigation that a basement will be possible, and the offer is contingent upon the developer’s approval of our proposed house plans prior to closing. We proposed a closing date three months from the time of the offer to provide us with plenty of time to develop our plans. Other items that can be negotiated with the owner is the type of survey to be completed (and at who’s expense), who selects the title company, amount of earnest money, and other common items.
Once we slugged it out through four rounds of counter offers, we were satisfied with the terms and were officially under contract. The last item we had to satisfy was to turn in our earnest money check to the listing brokerage. Signed, sealed, and delivered!