With permitting costs and the need for environmental surveys, building a custom home might not be cheaper than buying a pre-built luxury house. However, there are many ways in which to limit the costs associated with a new build. For instance, purchasing low-cost building materials and hiring an incredible design-build team can limit unexpected expenses and delays. Building an energy-efficient home rather than opting for a house with outdated technology can save thousands each year. Furthermore, there are dozens of benefits to building rather than buying. These include everything from laying out the perfect floor plan to going net zero for a sustainable future. While hiring the right design-build firm mitigates most difficulties and eliminates many complications, one struggle remains. Finding the perfect lot on which to build your home can be complex, time-consuming and legally ambiguous. In Los Angeles -- where builds are subject to many restrictions, zoning laws and other ordinances -- finding the right lot can be even more difficult. Follow below for everything Californians should consider when purchasing a lot for their new home in Los Angeles.
Finding the right land is half the battle to building your dream custom home. However, this search can be complex and difficult -- especially in states with more permissive laws surrounding disclosure. First and foremost, prospective landowners should seek expert help where available and search marketplaces.
A professional real estate agent can help buyers navigate building restrictions and codes, feasibility studies and so much more. In his article “Do I Need a Special Real Estate Agent to Buy Vacant Land?” for NOLO, attorney Jedediah Mannis writes that in addition to helping you find land, agents also help with negotiation and closing. Jebediah Mannis explains that “buying raw land adds a level of complexity” to property ownership that realtors can help buyers wade through.
Their experience and connections can help prospective landowners “find suitable listings... deal with the seller's agent [and] arrange for you to walk the land.” They can also help “obtain helpful information not provided by the seller's agent, and walk you through the entire process of purchasing the land on which you'll build your house.” Agents can also better inform you of local zoning laws, building codes and environmental restrictions. This protects you from a legal battle further down the road.
If you would prefer to go it alone, Amanda Dixon offers advice in her article “Buying Land? Here’s What You Should Know” for SmartAsset. Dixon writes that while “a real estate agent can be a big help in facilitating your land search...you can also do it yourself.” Prospective buyers can find on-market lots for sale in “the classified ads in newspapers,” in specialty magazines or on a number of online platforms like “Land and Farm, LandWatch and LandCentury.”
In some areas, lots might also be up for sale by the state or local government. Amanda Dixon explains that “this can occur if the government itself has excess land it wants to sell, or if the government repossessed land from someone else and is selling it off.” Buyers in Los Angeles can search for these types of properties through the County of LA auction site here. The LA Treasurer provides a schedule of auctions here.
Next, buyers should look for “shovel ready” properties. In his “Business Essentials” article “Shovel Ready” for Investopedia, Daniel Liberto explains the term. Liberto writes that “shovel ready is a phrase used to describe a construction project that is considered to be at an advanced enough stage of development for building to begin soon.” Shovel ready land is that which has already cleared a number of barriers. These barriers include soil testing, environmental surveys, basic permitting, map presentation, grading and much more.
However, Liberto writes that there is some controversy surrounding the exact definition of “shovel ready.” In the past, some have argued that “shovel ready really meant six months to a year or even two or three years of planning before projects could be put into operation.” Others define it as land that has been fully prepared for a construction project. Given the soft definition of “shovel ready,” buyers should still look into the feasibility of their project. They should also look into the quality of the land before purchasing.
Buyers should also keep in mind that shovel ready properties often come at a premium cost. Sara Fey elaborates in her article “Buying vacant lots in LA: 6 things to know” for Curbed LA. Fey writes that purchasing a “shovel ready” or “permit ready” home is one way in which to “bypass most of the pre-construction hassles.” As Fey explains, “if a lot is advertised as ‘shovel ready’ or ‘permit-ready,’ it means the legwork described above has already been done and plans for a home are ready to go.”
In addition to the added cost, “shovel ready” land might not be best suited to those planning to build a custom home. This is particularly true of those planning to build homes with unusual specifications. Because the landowner has already applied for and been granted permits for a specific build, buyers might be locked into this design if they do not wish to go through the process again.
After searching in all the right places -- both on-market and off-market -- for shovel ready land, buyers should still double-check claims made by the current owner. In her article “Selling a California Home: What Are My Disclosure Obligations?” for NOLO, attorney Alicia Tasvibi writes that most property owners in California must be transparent about their listings. Tasvibi explains that California "requires its residential property sellers to disclose, in writing, details about the property they have on the market.” However, this does not apply to all vacant lots -- even those located in residentially zoned districts.
Alicia Tasvibi writes that this rule mostly applies to “sellers of residential real estate property containing one to four units in California.” See California Civil Code § 1102 for more information about disclosure requirements. If buyers do not double check claims made by the owner, they could be on the hook for significant payouts. For instance, buyers could be responsible for toxic waste cleanup, wetlands protections and much more.
To find out about the property, consider C. J. Hughes’ advice in “What to Look for When Buying Vacant Land” for This Old House. Hughes writes that before buying a “dream lot,” potential buyers should head over to city hall for public records. C. J. Hughes notes that despite state disclosure requirements, some landowners might not “have all the information at their disposal." To obtain a fuller picture of the property, head to the assessor’s office first. Officials in the assessor’s office can provide “tax information as well as records about “flood-zone boundaries and wetlands proximities." Both of these could "affect where you can build.”
The assessor’s office will also provide information about access to the land and whether an easement might be needed. Next, seek “local water and sewer codes” from the health department, “details on zoning restrictions” from the planning commission and “rules about building size, style or materials” from the preservation office. The local town clerk can provide chain of title records if the buyer wants to know how much the current owner paid.
As mentioned above, the assessor’s office can help direct prospective buyers towards more information about a site’s accessibility. Accessibility is key for a number of reasons. These include ensuring trucks can access the site easily during construction and preventing your property from becoming landlocked. In his article “Roads & Access: Tip #6 For Buying Lots and Land” for LotNetwork.com, Steve Sanders explains why accessibility is so crucial. For those unfamiliar with the real estate term “landlocked,” it refers to “land completely surrounded by property owned by other parties, impacting the owner’s ability to freely access the land.”
While both developed and new neighborhoods typically provide easy legal access for new landowners in the area, not all do. Sanders warns that “having a road near the property doesn’t necessarily mean you have access to it." If there are indeed disputes about access, new landowners might have to apply for “access easements.” While easements are incredibly common, potential buyers should be wary if their “sole or primary access to [the] lot is via an easement.” In these cases, potential buyers should consult with a real estate attorney before purchasing the land.
Next, those considering purchasing a piece of land for sale in Los Angeles should review surrounding infrastructure and how this might impact their build. Buying land upon which to build your home can be very cost-effective if there is infrastructure in place to support the build -- e.g. utilities -- and the family that lives within. Those who plan to purchase a piece of land for sale in Los Angeles should also consider how the area might change. They should research the legality and possibility of surrounding development.
The sixth step in our list focuses on budget. Those who hope to buy land for sale in Los Angeles should research and understand each potential expense involved in preparing the land. They should also consider the time it might take to process each report. Time to approve permit requests, clear the land and other preparatory work before construction may commence should also be considered. In the Mark & Grether Group post “Buying Land in Malibu: What You Need to Know,” Russell Grether writes that “buying land in Malibu is only the first step in the [build] process.”
Grether notes that “on raw, undeveloped land you can expect this process to take about 18 to 24 months.” During this time, landowners must get their “architectural plans, feasibility studies, EIR, geology and archaeology reports ready.” In LA County, this could cost upward of $200,000.”
Insurance and tax requirements on vacant land differ from state to state and locality to locality. They will also likely change once a structure -- or series of structures -- has been erected on the site. As such, landowners must educate themselves about all required insurance they must carry -- as well as all taxes they must pay and file.
In her article “Vacant land insurance: Do I need it?” for Coverage.com, Lauren Ward explains that “even empty land poses risks from an insurance perspective” and thus requires coverage. Ward writes that vacant land insurance “exists to protect you in case anyone gets hurt on your property.” Vacant land insurance is typically cheaper than other forms of insurance, with a “$1-$2 million policy cost[ing’ less than $100 a month.” Few states and localities require landowners to hold vacant land insurance. However, “anything that protects you and your investment from litigation or medical expenses is a good idea.” During construction, vacant land insurance is an especially good idea because lots of people will traverse the site day to day.
As for taxes on vacant land, Steve Lander outlines what California landowners might expect. He explains further in his article “How Do Property Taxes Apply to Vacant Land Investments?” for SFGate. Lander writes that the “county's assessor office will calculate a value for your vacant land investment just like it would for any other piece of property in the county.” Landowners will then owe taxes based on this determined value of their property. Because the value of undeveloped land is typically less than that of built land, the taxes will likely be much lower. However, California properties are subject to Proposition 13. This California law means that a property’s “assessed value cannot go up more than 2 percent per year and the base state property taxes is fixed at 1 percent.” Thankfully, there are actually a number of tax benefits related to purchasing and developing vacant land. Learn more about those here.
Those who wish to purchase a lot in a Los Angeles neighborhood must also consider their financing options. Though many landowners purchase properties with cash, others do opt for land loans. In their article “Land Loans: 3 Things to Know Before You Buy Land” for Investopedia, Matt Danielsson and Julius Mansa note that “the process is trickier than obtaining a mortgage.” Danielsson writes that because “there's no home to act as collateral for the land loan." As such, "obtaining land financing creates a different set of hurdles for potential buyers.” Lenders for vacant lot purchases will “require surveyed boundaries” and will need to “check zoning and land-use restrictions on the property, as well as access to utilities and public roads.”
Completely raw land -- i.e. that which has not been developed in any way -- will come with higher borrowing costs. Similarly, mortgage lenders are less likely to offer favorable terms to owners with raw land lacking “specific plans to build anything." Without specific plans, lenders would be financing "a speculative investment.” Mansa and Danielsson identify the “best loan sources” for land purchases as “seller financing, local lenders, or a home equity loan.” Prospective buyers should contact local lenders before proceeding.
The ninth step in our list corresponds somewhat to our section on “shovel ready” land. Though building on a slope is not impossible, it can come with a number of complications. These can include everything from susceptibility to floods and mudslides to access difficulties during construction. Construction can be more costly and utilities might be complex to hook up. In our article “HILLSIDE HOMES,” we outline everything landowners should know about sloped lots.
When choosing a lot on which to build their Los Angeles home, prospective landowners should prioritize access to utilities. In “What To Look For When Buying Land To Build A House” for Rocket Mortgage, Miranda Crace explains why access to utilities is vital. Crace writes that access to “water, natural gas, sewer, etc.” saves money, time and headaches for owners. For instance, if a sewer is missing, lot owners must learn whether or not their lot can “accommodate a septic tank.” If piping is not available for water, landowners will need to drill a well or find out if “there’s a private or public water company or a shared well agreement.” Laying and hooking up utilities can come at a significant cost to landowners. Depending on the location, utility costs could exceed $30,000.
Properly researching and understanding the zoning restrictions and permitting requirements surrounding your plot of land is key to determining whether it is the right site for you and your family. Not only should buyers scope out the zoning for their lot, but they should also consider how the surrounding neighborhood might change. In their article “How to Select a Building Lot” for Better Homes & Gardens, the BHG editorial team writes that “if there is undeveloped land near a building site, it's critical to find out what is planned for it.” This could be a concern because with a "lot on the outer edges of the subdivision...today's pastoral view can become tomorrow's strip mall.”
They should also review laws surrounding the subdivision and any restrictions that might apply to their build. In the article “Building A House On A Lot? Know What's Involved Before Construction” for Forbes, Nikhil Choudhary outlines common guidelines. Choudhary writes that “where and what you can build on your property is mostly governed by zoning setbacks." It is also affected by "location of easements and zoning district guidelines.” As such, landowners must “find out which zoning district [the] lot falls under and talk to the office of planning and zoning to find out how the use of [the] property is regulated.”
Quoting California-Licensed Engineer Senthil Puliyadi, Choudhary writes that California builders should focus primarily on “‘two major regulatory items.’” These include “‘zoning or planning regulations and building codes.’” According to Puliyadi, “‘zoning regulations dictate what type of house you can build; building codes control the details of actual construction itself.’” For more information about subdividing land, read our recent post “Subdividing Land in California,” Landowners should also consider whether or not their home will be subject to an HOA and to which building codes their build will fall under.
Those who wish to purchase land on which to build their custom home in Los Angeles must consider the lot’s susceptibility to natural disasters. Much of California’s landscape is at risk of wildfires, floods, mudslides, earthquakes, tsunamis and more. Thankfully, there are a number of resources regarding natural disaster risk available to Californians. To determine whether the lot you are interested in might be located in a high risk fire zone, consider this interactive map provided by Alix Martichoux and Lindsey Feingold in a June 2021 article for ABC7 News.
The “California’s Fire Hazard Severity Zones” fact sheet from the California Department of Forestry and Fire Protection is another helpful resource. For flood risk, check this searchable database from FEMA’s Flood Map Service Center. For earthquake risk, consider this map from the California Geological Service. Landowners should keep in mind that few insurance policies cover earth movement like landslides and mudslides.
As mentioned above in our section on financing, prospective landowners should keep in mind that they might need to pay in cash. In her article “The Ins and Outs of Buying Land and Building a Home on It” for Homelight, Jody Ellis explains why. Quoting real estate agent Sandi Van Camp, Ellis writes that “‘more often than not, people buy the land in cash.’” This is because contractors and design-build firms will rarely build until the title has fully transferred. As such, “‘it makes sense to pay for the land in full if you’re buying it on your own.’”
Working with a full-service design-build firm can help prospective buyers eliminate many of the headaches and complications related to purchasing land in Los Angeles. With a team of architects, designers, engineers, builders, contractors and local experts, firms like Element Homes can navigate the entire process alongside their clients. From identifying appropriate lots in Los Angeles to securing permits, Element Homes can help buyers secure the perfect site for their new home. Learn more about how it all works here.
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