Buying Land to Build a House Later: The Pros and Cons
Are you thinking of buying land to build your dream home on? When it comes to building your custom home, you may be wondering whether it’s better to purchase land first or find a builder first. Let’s explore the advantages and disadvantages of buying land before working with a builder, as well as how to select the perfect spot for your house and the current home building scene in South Carolina.
Buying Land First:
PROS: Purchasing land first has distinct advantages, including finding and securing a location that completely suits your preferences. Also, the buyer is in control of the entire building process, including the choice of builder, and can decide how to move forward with construction. Additionally, having the lot acquired prior to selecting a builder may help the buyer secure a more comprehensive bank loan for construction. Buying land ahead of your build can be a good financial decision if the buyer can pay cash.
CONS: However, purchasing and financing land before having a builder means that the buyer will usually pay more upfront. Ultimately, too, most homebuyers do not have the knowledge or years of experience to evaluate the land to determine if there will be additional fees associated with the build. For instance, a buyer needs to be able to estimate the costs of land development (e.g., site work), connecting utilities, and the permitting process. Additionally, the house plans must complement the land’s topography, which can limit the buyer’s design choices.
Hiring a Builder First:
PROS: Hiring a builder before purchasing land definitely has its advantages. The most tangible advantage is the saving of money. A professional builder guides homeowners to the best parcels of land, materials for the best prices, all while helping them stay within their budget. A builder will assist buyers in the process of drawing plans for their perfect home as well as knowing if the home design will work on the piece of land selected.
A builder will help evaluate several lots before a purchase, and they can also help buyers understand zoning, permits, and deeds. Additionally, a builder will help find a lot with the proper setup for drainage and utilities. Finally, a builder can walk the buyer through the entire process from beginning to end.
CONS: There may be limitations to where the builder will work (e.g., outside of their service area)
Choosing Land for a House
Before buyers start looking for land to purchase for building a new custom home, they should already have a not-to-exceed budget in mind. This budget will include the cost of land, permit fees, contingency fees, preparation and construction costs, and builder fees. With a budget decided, buyers will want to also consider (or talk with their builder about):
- Lot Size
Additionally, the topography of the land can impact the home design and construction costs. For example, building a home on a sloping lot may require additional foundation work, which can add to overall construction costs. Last but not least, homebuyers will also want to consider the soil quality of the land. The soil may impact the construction process by requiring additional work, such as additional excavation or soil stabilization.
Home Building in South Carolina
South Carolina is an excellent state for home building, with a diverse landscape and a strong economy. In 2023, the South Carolina housing market is projected to remain strong, with an increase in new construction permits, lower interest rates, and high demand for housing. Our state also sees a variety of housing styles, including traditional Southern homes, modern designs, and coastal homes. The average home value in South Carolina is $273,977, up 9% over the past year. In the U.S. in 2022, 1.55 million new homes were built. South Carolina ranks 4th for states where the most new builds are being developed, with Florida, Idaho, and Utah coming in ahead of us.
TL;DR – Buying Land to Build a House Later
The pros of buying land before working with a builder:
- If location is your top priority buying land before working with a builder may be your best choice
- Allows you to build later, when you’re ready
- Great option if you can pay cash
The pros of working with a builder first:
- A builder will help you find a location that is desirable quicker than if you search on your own
- A builder will discover any issue the lot may have prior to purchasing and can assess its readiness for utilities, if it has desirable topography, and if it will require additional construction to prepare the land for building
- You’ll have a better understanding of the project’s entire cost
Will You Be Buying Land to Build a House Later ?
Will you be buying land to build a house later? Or will you hire a builder from the start? Whether buying land or hiring a builder first, both options have their pros and cons, and the choice depends on the homebuyer’s preferences and needs. Most of all, it is important to consider budget, location, and topography of the land when making a decision.
Are you ready to start the conversation about building your custom home? We’d love to talk with you about it.