Land Purchase FAQs
You’re reading this because you want to buy land, or are at least thinking about it, and we are SO here for that! Anne recently had a number of interesting mining claim listings come on in Idaho Springs, and so many of you reached out to us to find out more information. Between your inquiries and other land transactions our team has conducted this year, I’ve received a ton of great questions and I wanted to use this month’s blog to address them.
#1 Can I finance my land purchase?
By far, the number one question asked of our team regarding land purchases, is this one. There are a few local credit unions that offer financing on raw land, with stipulations. Depending on which CU you choose, the maximum amount they will finance is $200,000 / $250,000 or 70% of appraised value or selling price. Appraisals are usually required, and interest rates are currently between 8.25-11% depending on the loan term (3 years, 5 years, 10 years). There are also a few other credit unions that offer financing if you plan to improve your land within a certain timeframe, or if you’d like to buy farmland for agricultural production, or to purchase recreational land for something like a hunting and trophy trout fishery, or a duck hunting river property. These creative/speciality financing options do have loan minimums to meet, most $100,000.
If you’re looking at a lower dollar land purchase, it might be a great idea to look into a personal loan with your current bank rather than a raw land loan. Or, if you already own a home, do you have equity you can pull from/ do you qualify for a HELOC (home equity line of credit)? Do you have someone you trust that might want to go in with you and match the cash you already have? These outside-the-box options could be better economic choices, depending on your current situation. Email us at Team@COMtnRealty.com if you have a specific question/ scenario you want advice on!
#2 I found land I’m interested in, but it doesn’t have road access.
Not having road access isn’t the quickest or easiest obstacle to overcome, but it is possible. Searching for land in and around the mountains means you will most certainly find oddly shaped parcels of land that used to be mining claims, or parcels that were subdivided waayy back in the day. Regardless of how or when it happened, if you fall in love with land that doesn’t have road access, you’ll need to be granted an easement. Obtaining an easement means that, as the easement holder, you will have legal permission to use land that isn’t yours for the specific purpose(s) outlined in the easement. For example, if your land has one other parcel of land between it and the road, you will have to contact the owner of the land to obtain an appurtenant access easement through necessity (appurtenant meaning it will carry with the land going forward, and necessity since your parcel is landlocked with no other way to access it).
In Colorado, easements are created and conveyed in writing (an “express easement”), as oral agreements are considered invalid under the statute of frauds. No particular words are necessary to convey an easement in writing. Colorado courts have routinely found that when the intention to give an easement uses wording specific and adequate to demonstrate its creation, and is sufficiently definite and certain in its terms, the easement is valid and would stand judicially. Anne and I highly recommend finding a legal professional to help in document creation, as we are not able to assist in this area.
We also advise that, since you are approaching someone to use their land, you think of terms that will make it easiest for them to say yes! It might be best to suggest that you will excavate and maintain the road, and find the route that will be least inconvenient for them. Again, let us know if you need help in this arena, and we can point you in the right direction.
#3 Not all land can be used in the same way.
Land use is a topic we chat about with our clients in every single transaction, as you’ll need to check with the county, city, and subdivision or HOA as to how you can use your land. You’ll have to first check with the HOA or in the neighborhood CC&Rs. If the neighborhood allows something/ doesn’t specifically prohibit it, you’ll have to then check with the city if your property is within town limits, and next with the county. Even if the neighborhood allows it, if the city or county doesn’t, you likely can’t do it (unless granted special permission by the city or county). Some neighborhoods are only for camping and tiny cabins, and some allow no camping or small structures at all. In some you can only have one structure on your land, in others you could have a few. Some cities allow suburban farming, and others don’t. So, if you want honey bees and chickens like I do, you’ll have to make sure you can actually make it happen! Do your due diligence when it comes to land use so your investment can be a successful one.
#4 What are current building costs? How much do utilities cost to install?
If you are planning to build a home on raw land with no improvements, consider the cost of not only buying the land, but building your home and a driveway, engineering you might need if your home will be on a slope. And, if your land is not on public water and sewer (many are not here in the mountains), you’ll have to add a septic system and well, or pay a sometimes hefty tap fee if there is a community well.
So, what are we looking at to build a traditional home?
-Cost of Land: $14,000 to ???
-Building: $400-$500 / sq. ft. (Q4 2022) + additional engineering cost if needed, so a 1,500 square foot home might be $600,000 – $750,000
-Driveway Excavation: $10,000-$30,000 (depending on slope and length)
-Septic system and well: $20,000 – $40,000 each
-Electric: Cost varies drastically depending on where the closest electric service is. Could be a few thousand to tens of thousands of dollars.
There are certainly options to reduce building costs. In neighborhoods that allow it, we’ve seen manufactured/ modular homes gaining popularity (not to be confused with mobile homes on axles) since they’re about $100-200/ square foot. We’ve also seen active solar systems with generators replace traditional electric, and natural gas tanks for heat as well.If you’re dreaming of buying land, let us know how we can help! We can set up your search, provide financing recommendations, help you navigate land use by providing the right contact info, and connect you with traditional and modular builders to help make your dreams a reality! Our team truly provides exceptional real estate experiences. Contact us at Team@COMtnRealty.com.