Land is real estate with no building on it, and buying it works differently than buying a house

When you buy land, you are purchasing a plot of ground with legal ownership and the right to build, farm, or use it however local rules allow. Unlike a house purchase, there is no structure to inspect, no mortgage lender to guide you through utilities, and no seller's disclosure about what the property can actually do. You are buying potential—and potential requires research that a house sale does not.

Land sales move slower than house sales. Financing is harder to find. The costs are less obvious. And what you can legally do with the land depends on zoning rules, environmental restrictions, and easements that may not be obvious when you first look at it. Most people who buy land without understanding these things end up with a piece of ground they cannot use the way they imagined.

Key Takeaways

  • Land financing is harder to find than home mortgages—many banks require 20 to 50 percent down and charge higher interest rates.
  • Zoning rules determine what you can build or do on the land, and they vary by city and county, so you must check before you buy.
  • A land survey shows the exact boundaries and any easements (rights others have to cross or use part of your land), and it costs $300 to $1,000.
  • Utilities like water, sewer, and electric may not reach the property, and connecting them can cost thousands of dollars.
  • A title search reveals whether anyone else has a legal claim to the land or the right to use it, and it typically costs $200 to $400.

How land financing differs from a home mortgage

Banks treat raw land as riskier than a house because there is no building to repossess and sell if you stop paying. Most lenders require a down payment of 20 to 50 percent instead of the 3 to 20 percent typical for homes. Interest rates are usually 1 to 3 percentage points higher. And many banks will not finance land at all—they only lend on land with a building already on it or a firm construction plan in place.

If you find a lender willing to finance raw land, the loan term is often shorter: 10 to 15 years instead of 30. That means higher monthly payments even with the larger down payment. Some lenders offer construction loans instead, which release money in stages as you build, but those require detailed plans and cost more to set up.

Cash purchases are common in land sales because financing is so difficult. If you cannot pay cash and cannot find a bank loan, a seller may offer to finance the sale themselves—you pay them directly over time instead of borrowing from a lender. This is faster to arrange but usually comes with a higher interest rate and shorter repayment period.

Zoning and what you are actually allowed to do

Zoning is a city or county rule that says what can happen on each piece of land. One zone might allow only single-family homes. Another might allow apartments, offices, and stores. A third might allow only farming or forestry. Before you buy land, you must check the zoning for that specific address, because zoning determines whether your plan is even legal.

You find zoning information by calling or visiting your city or county planning department—the name varies by location. They can tell you the zoning designation for an address and what uses are allowed. Some departments have searchable online maps. If the land is zoned for something other than what you want to do, you can sometimes request a zoning change or a variance (an exception to the rule), but this takes time, costs money, and is not may provide to succeed.

Zoning also includes setback requirements—rules about how far a building must be from the property line—and lot coverage limits, which cap how much of the land can be covered by a building. These rules can make a piece of land too small for what you planned, even if it looks large enough when you walk it.

The survey, the title search, and what they reveal

A land survey is a map created by a licensed surveyor that shows the exact boundaries of the property, the location of buildings or structures, and any easements. An easement is a legal right that someone else has to use part of your land—for example, a utility company might have the right to run a power line across it, or a neighbor might have the right to cross it to reach their property. Easements stay with the land even after you buy it, so you need to know about them before you commit.

A survey typically costs $300 to $1,000 depending on the size and shape of the land and how hard it is to find the original boundary markers. It is money well spent because it prevents disputes with neighbors and reveals surprises like a neighbor's fence sitting partly on your land. Some lenders require a survey before they will finance the purchase.

A title search is a records check that reveals whether anyone else has a legal claim to the land or a right to use it. It uncovers liens (claims by creditors), unpaid taxes, or other people's easements. A title search costs $200 to $400 and is usually done by a title company or attorney. Title insurance, which protects you if a claim shows up later, typically costs 0.5 to 1 percent of the purchase price and is a one-time payment.

Utilities and the cost of connecting them

Land in or near a city usually has water, sewer, and electric service available at or near the property line. Land in rural areas often does not. Before you buy, you need to know whether utilities reach the property and, if they do not, what it would cost to connect them.

If the land has no public water, you will need a well. A well can cost $3,000 to $15,000 to drill and install, depending on how deep the water table is. If there is no public sewer, you will need a septic system, which costs $3,000 to $25,000. If there is no electric service, connecting it from the nearest pole can cost $1,000 to $10,000 or more depending on distance. These are not optional costs if you plan to build—they are requirements in most places.

The local health department or county extension office can tell you whether a well and septic system are even allowed on the land. Some areas require public water and sewer. Some have rules about how close a well can be to a septic system or a property line. These rules vary widely, so you must check before you buy.

Environmental and soil issues that affect usability

Some land cannot be built on because of environmental restrictions. Wetlands, floodplains, and areas with endangered species habitat are often protected by state or federal law, and building on them is illegal or heavily restricted. A Phase I environmental assessment—a records review and site inspection by an environmental consultant—costs $500 to $2,000 and reveals whether the land has these kinds of restrictions.

Soil quality matters too. If you plan to build, the soil must be stable enough to support a foundation. If you plan to farm, the soil must be fertile. A soil test costs $200 to $500 and tells you what you are working with. In some areas, soil is contaminated by old industrial use or agricultural chemicals, which can make the land unusable or require expensive cleanup.

Flood risk is another factor. Land in a flood zone costs more to insure and may be harder to finance. You can check flood risk using FEMA's flood map tool online by entering the address. If the land is in a flood zone, flood insurance is required by most lenders and costs hundreds of dollars per year.

What happens after you make an offer

A land purchase typically includes a period called due diligence, usually 30 to 60 days, during which you can inspect the property, order a survey and title search, check zoning and utilities, and back out if you discover problems. This period is your protection—use it. Order the survey and title search early so you have time to address any issues before the important date.

Once due diligence ends, you move toward closing. The title company or attorney handles the paperwork, records the deed, and transfers the money. Closing costs for land are typically 2 to 5 percent of the purchase price and include the title search, title insurance, survey, attorney fees, and recording fees. These costs are separate from the down payment and should be factored into your budget.

After closing, the land is yours. You own it outright (if you paid cash) or you owe the lender or seller the remaining balance. You are responsible for property taxes, which vary by location but are typically 0.5 to 2 percent of the land's value per year.

Frequently Asked Questions

Can I build on land right away after I buy it?

Not necessarily. You need a building permit from your city or county, which requires approved plans, proof that utilities are available or will be connected, and proof that the land meets zoning and setback rules. The permit process typically takes 4 to 12 weeks. Some jurisdictions require environmental review or neighbor notification, which adds time.

What if the land has no road access?

Landlocked property (land with no legal access to a public road) is very difficult to use or sell. Before you buy, confirm that there is a legal right of way—a documented easement allowing you to cross someone else's land to reach a public road. Without it, the land may be worthless.

How do I know if the price is fair?

Compare recent sales of similar land in the same area. Your real estate agent can provide comparable sales data. Land value depends heavily on location, zoning, utilities, and development potential, so two pieces of land that look similar can have very different prices. A professional appraisal costs $300 to $600 and gives you an independent opinion.

What if I discover a problem during due diligence?

You can renegotiate the price, ask the seller to fix the problem, or back out of the purchase without penalty if the due diligence period allows it. This is why the due diligence period exists—use it to investigate thoroughly before you commit.

Do I need a real estate agent to buy land?

No, but an agent familiar with land sales can help you find properties, understand local zoning and development rules, and negotiate. Agents are paid by commission from the seller, so their service is free to you. However, you can also buy land directly from the owner or through online listings.