CityMelt Blog Data beyond just cities.

July 3, 2010

How to buy land to build your own home

Filed under: Home Buyers — steve @ 11:56 AM

My wife and I wanted to build a Victorian home on a few acres of land and spent several months reading about how to build using a general contractor.  We learned a lot about how a house is built and how to buy land.

Here is a checklist I created on how to buy land. I’m not an expert but hopefully you can find a few nuggets of information that will help you to build your own dream home.  Someday we hope to build when we have more time to dedicate to the project.

Legal

  • Ask attorney if open space can revert back to some other zoning someday
  • Ask current land owner for professional survey of property to determine boundary lines
  • Buy land contingent on ability to install septic for number of bedrooms needed
  • Does site have water rights and does it convey with land?
  • Should I get new boundary survey?
  • Get 90 day contingency to inspect land
  • Get title search to show easements & restrictive covenants
  • Study deed carefully

Location

  • Research the property history at property records office
  • Drainage. Pooling of water from slope? Visit after heavy rain
  • Trees need to be removed to make way for house?
  • 8 degree slope should be limit to build due to expense
  • Be sure you buy site on public road not a private road unless you have easement
  • Can septic be installed so you can built house in best location and far enough from well?
  • Check light on site at different times of day
  • Do you need to power lot – cost to bring in polls – could be $10/foot
  • Easy to put well & septic in or is it costly?
  • Energy surcharges to ship building supplies to site?
  • High water table or bare rock is bad
  • How hard to excavate and how hard to put in basement?
  • Know what technically is required to place home correctly
  • Loamy soil is best (balance of clay, sand, organic matter that appears rich and dark in color)
  • Look for “future” utilities on your easements – big electrical towers, etc.
  • Are junky yards adjacent to yours or too many animals, etc.
  • Should have survey, especially if land is irregular – walk land to see property line problems
  • Site above 100 year flood plain?
  • Size is not always important – shape of property is important too
  • Trees, view, rectangular shape, gently slope or none, good location, streams are all good
  • Ask county or town time to clear snow with plow – ask neighbors
  • Ask neighbors about power fluctuations and road condition problems
  • Talk to neighbors about power fluctuations and road condition problems
  • Talk to neighbors around lot – what don’t they like about area?
  • Cable, electric, phone, cell phone
  • Fire department nearby? Do I need a pond for emergencies?
  • How far is hospital, police, ambulance, fire station
  • Trash pickup available?
  • Will propane service deliver and trench lines?

Price

  • Negotiate land by pointing out negatives that really don’t matter to you
  • Get an appraisal – not much land is sold asfmra.org
  • How much land in excess of surplus – less value then what is required

Soil

  • Bare land can suffer from over erosion
  • Do I need an environmental audit? Rural trash pits used to be normal
  • Don’t want hard cracking ground when dry and sticky soil when wet – expansive soils
  • Farm land contain pesticides or leaking storage tanks?
  • Fill brought in for some reason?
  • Natural hazards or soil problems?
  • Noxious weeds / plant disease
  • Old buried oil and gas tanks? Past overgrazing problems?
  • Test soil for residual contamination and disease
  • U.S. Geological survey to learn about terrain & features of land

Well/Septic

  • Does water taste sulfurous? Need filter system – cost?
  • Find out depth of water table to determine difficulty of digging
  • Find out average depth to water from county
  • Wells on neighboring properties can be good indicator of easily finding water
  • How deep does well need to be – affects drilling costs
  • Top of watershed is better so less chance of toxins, etc. in water
  • Ask local septic enforcement officer about type of septic needed
  • Check date of septic peculation test – may be too old

Zoning

  • Deed restriction or town restriction on your home type
  • Frontage improvements needed – drainage, etc?
  • Maps of existing development, planned roads, utility extensions, locations of planned dumps
  • Trees can easily be removed or need special permission?
  • What could be built around your property? Also, where is local landfill, mine, etc.
  • Zoning of site? Open land or nature reserve could become a shopping mall someday
  • What is county long range plan? Garbage dump, prison, 6 lane freeway?

Tips

  • Ask new property owners for contractor references
  • Always buy land that is located as close to those amenities that an area is known for
  • Be very afraid of unrestricted land use. Restrictions sometimes are good
  • Be wary of odors and noise
  • Call owner if land has back taxes due – find info. From tax collector
  • Junked cars on land is in a way good – they don’t cause problems and can lower land value
  • Land should be 25% – 30% of total project cost
  • Narrow lot in populated area is less expensive and good for social
  • Many builders have land/build packages which can eliminate much research on land
  • May have to fence property to keep hunters and illegal dumpers out
  • Reselling a country home is harder than populated area

June 9, 2010

New Home Purchased

Filed under: Home Buyers — admin @ 5:57 PM

Last month I finally took the plunge and purchased a home for our family. We do not like stucco so unfortunately finding the right home took forever since most homes in Southeastern PA are made of stucco. In my opinion, stucco just seems out of place except in the Southwestern part of the United States. When we lived in Leesburg, VA for part of 2008 and 2009 I noticed that most newer homes were built with brick and vinyl siding which can be nice looking. However, brick looks horrible when all of the homes look the same, in fact, most subdivisions look horrible due to lack of variety. Beautiful large lots being destroyed by over sized boxes without interesting architecture.

I am attracted to subdivisions with the classical 1940s look where houses have a bit of a Victorian design element to them – these particular subdivisions are often called “village” developments. The problem with these sort of subdivisions are the tiny lots that come with these beautiful homes. We looked in vain for 2 years in Virginia/Pennsylvania for an interesting home design and larger lots that allowed our kids to play. We even spent 3 months learning how to build our own home using a general contractor. The problem with building your own home is time – perhaps in the future we will build our dream Victorian home of about 3,200 square feet on a 1 plus acre lot.

We finally gave in and bought a home when our landlord put a virtual gun to our heads and demanded we sign another one year lease or get out. We wanted a 60 day notice lease. He was actually a nice landlord and wanted to find a new tenant before the new school year started. I think he made a bad business judgment though since we paid our rent ahead of time and fixed things for free. We were so picky in choosing a home to buy that we might have stayed for another year. Now he still has no tenant after searching for several months. We could have easily found another rental but were tired of moving so we accelerated our new home search. We were married 5 years ago and have moved from one San Diego house to another house in San Diego, CA, then to Burbank, CA, then to Leesburg, VA, then to Sellersville, PA and lastly to our current home. That’s 5 homes rented in 5 years! This is not including all of the times I moved when I was single. I calculated that I moved my candy business and home locations 20 times in 17 years. Enough is enough – time to set down roots.

So what type of home did we buy? We went with a large house on a large lot. We really only wanted something like 3,000 – 3,400 square feet on a large lot but we bought a 4,650 square foot home. I am embarrassed to even admit that I own such a home (see my last blog entry). There is no need for such a large home plus the utility bills will be higher – not to mention I will be uncool because I am not a “green” person. Still, we love the place for reasons that are too numerous to mention. Most importantly, the deal we were able to negotiate was too good to pass up and time was not on our side. The back of the home is pleasing to look at and is not just flat which is important to us since we spend a lot of time in our backyard. There is plenty of private space since we back up to land that is not allowed to be developed, in addition, the development has open space land throughout. Private, quiet and perfect for our needs. We will see how this house suits us and can finally after 40 years stop being tenants.

We were able to get the new home buyer tax credit literally on the last day that it was available. We did not buy because of the tax credit but it happened to fall in the month we wanted to buy. In future blog entries I’ll tell you why I am dissatisfied with government intervention and how the media is biased against home buyers. Everyone feels sorry for home sellers even though on average anyone who bought a home before 2003, in most markets, is still above break even. I have no sympathy for home buyers after 2003 since I had to rent for 20 years – what’s the big deal about renting if you lose your home? The government along with real estate agents, home appraisers, and greedy home buyers themselves (most but not all – some good people were fooled) are responsible for the home price meltdown. Again, what is wrong with renting if you cannot own a house? I was responsible and would have bought a home in 2001 if home prices did not go up drastically. I lived in San Diego and around 2001 the prices started skyrocketing. I decided not to buy because I could see a bubble forming. Who knew that it would last for 6 years! Ugh.

April 9, 2010

Homes not to brag about

Filed under: Home Buyers — steve @ 5:49 PM

mansion

We have searched high and low for a home to buy for our family.  Why must the majority of newer homes have massive 2 story foyers and unnecessary great rooms?  In my opinion, these homes waste energy, waste space, and look ugly.  Perhaps people want to impress their friends and neighbors with these over sized eye sores?

What I find quite humorous and depressing at the same time are homes that look like Hollywood sets.  The front of the house is decorated to look like an expensive castle and then the back of the house is essentially a square box with tiny little windows and cheap siding.

There are numerous architecturally pleasing home designs that could better compliment the land where these homes are built.  We continue our search for such a home.

February 15, 2010

Pennsylvania New Homeowners Beware

Filed under: Home Buyers — steve @ 8:51 PM

Legal disclaimer: Please understand that I’m not an attorney and am not offering legal advice. I am only stating what I have learned about mechanic’s liens and title insurance. My information may be totally wrong, so please conduct your own research to verify what I say below. Furthermore, you may want to consult with an attorney before proceeding with the purchase of a new home.

You found the perfect home and are already dreaming of how you will decorate. The inspections go well and you have closed the deal paying for your house in full. A few days pass, then out of the blue you discover there is something called a “mechanic lien” posted on your front door. A mechanics lien allows a subcontractor who does work for the builder of your home to put a lien, or security interest, on your house until they are paid for their work.

How dare a subcontractor threaten you with a lien on your home! You get all worked up and contact the subcontractors.  You hastily tell them that the law will be on your side because it’s only right that you should only pay once. You dutifully paid the builder and were honest so the law should protect you right? Wrong. You hire an attorney and at your first meeting tell her to destroy the subcontractor’s liens. Then the attorney delicately tells you about Pennsylvania’s poorly conceived mechanic’s lien law. In short, when a builder does not pay the subcontractors who helped build your home then the home must be used to pay the subcontractors. If you refuse to pay the subcontractors they can force the sale of the home to repay the builder’s debts. So, you are out of luck because you did not get a release of liens from the subcontractors before you closed on your new home.

You would be correct in thinking that title insurance protects you from liens that are placed on your home before you buy it. However, a subcontractor has up to six months to file a mechanic’s lien on your new home and title insurance will not protect you from this gap in coverage. For example, if a subcontractor starts work two months before close and it takes the subcontractor one month to finish the job, then the subcontractor should be paid by the builder upon completion of work.  The builder may ignore his demands for payment for one month and then twenty days after close the subcontractor may become fed up and file a lien to protect his right to payment. Unfortunately, if the builder refuses to pay the subcontractor this will not show up on your title search because there is not yet a recorded lien. The subcontractor has plenty of time, up to six months, to file a mechanic’s lien against your newly acquired property for which you honestly paid. When the builder does not repay debt, the subcontractor will place a lien against the property that he worked on to recover his rightful money.

Luckily, I found out about mechanic’s liens when reading the title insurance policy I was about to purchase. In schedule B of the policy it stated that they were not responsible for mechanic’s liens. There is such a thing as mechanic’s lien insurance but it is extremely difficult, if not impossible, to obtain these days. As mandated by law, title insurance companies cannot charge higher than state regulated rates for title policy endorsements such as mechanic’s lien insurance. The procedures that title insurance companies must go through to protect themselves would be too burdensome and cost ineffective to offer mechanic’s lien endorsements to their policies. What must they do to protect themselves from having to payout on a mechanic’s lien claim? They must do exactly what new owners must do to protect themselves in the absence of mechanic’s lien insurance.

To protect against possible future liens you should first ask the builder for an indemnification letter which states that the builder will stand in front of you and pay for any liens. You should also obtain a “Waiver of Liens” from all subcontractors before they start work on the house. Why would anybody waive their right against a lien is beyond me but perhaps they really need the work and will take a chance. Subcontractors waive their right against liens for residential houses under a million all of the time. For houses over one million they are not allowed to waive this right. A less messy and easier way to structure your deal is to get a “Release of Liens” from all of the subcontractors before you close on the house. You could build a clause into your purchase contract to protect your home from future liens. The wording in the contract would state that you refuse to close on the house unless all of the builders subcontractors working on the house for the past six months grant you a release of liens. When the contractor is paid they sign the release of liens statement at the same time. A potential problem would be getting a list of subcontractors from the builder which is honestly compiled and complete.

The way the present mechanic’s lien law was written is absolutely crazy. This is a gigantic hole in the law that prevented me from obtaining my dream home. The builder I was dealing with refused to get a release of liens from his subcontractors. The purchase contract was already signed and I spent $1,000 on inspections before I discovered this home buying pitfall. Although, I’m thankful that I discovered the problem before close and was able to get my deposit money back. This hole in the law does not change my level of frustration with the Pennsylvania state legislature. Why is there still no law protecting the new home buyer in Pennsylvania?  I’m happy to see subcontractors have a way to collect their money through mechanic’s liens but to make a new home buyer liable is quite unfair.

State legislature member Don Walko introduced House Bill No. 1822 on July 2, 2009 with 28 other members and the bill was referred to the Committee on Labor Relations. Unfortunately, the bill has not seen the light of day since being introduced last July. Don Walko left office in December of 2009 to become a judge so the original champion of this bill is now gone. What is holding back the other supporters of the bill and why is the labor relations committee dragging their feet?  The mechanic’s lien problem can be easily remedied by my state representatives.  Why do they not care about this issue enough to finish the job?  What else are our legislators doing? Let me guess. Playing golf and attending worthless conventions learning about how to be better legislators.

Legal disclaimer: Please understand that I’m not an attorney and am not offering legal advice. I am only stating what I have learned about mechanic’s liens and title insurance. My information may be totally wrong, so please conduct your own research to verify what I say above. Furthermore, you may want to consult with an attorney before proceeding with the purchase of a new home.

– Steve

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