You’ve been checking out the land next to yours and figured it would be the perfect spot to build your dream home or expand your current one. The only hitch is that a neighbor owns it. You’re unsure how to broach the subject, but you’re determined to make an offer. Here’s how to buy land from a neighbor.
Buying land from a neighbor can be a great way to expand your property. Best of all, you can usually get an offer in with little or no competition. But it’s essential to follow state-specific real estate laws and to get a real estate agent involved to help with the transaction.
Check your state laws.
Before you even start talking to your neighbor about buying their land, you need to know what the laws and regulations regarding real estate are in your state. Every state has different rules regarding the sale of real estate, so it’s essential to know your state’s laws before proceeding.
For example, real estate transactions in Texas are governed by the Texas Real Estate Commission. They also have standardized contracts that must be used when buying or selling real estate. However, Alabama does not have a standardized contract, but they do have a real estate commission that regulates transactions.
In addition to state laws, there may also be local ordinances that you need to be aware of. These ordinances can often be found online or through your local city hall or courthouse. Before diving into the purchase process, you’ll want to be familiar with these (if you’re not already).
You can find out the laws by contacting your state’s real estate commission or hiring a real estate lawyer.
Play it safe and find a local real estate agent.
Once you know the laws in your state, the next step is to get a real estate agent involved. A real estate agent can help you negotiate the price of the land and help with any paperwork that needs to be completed. Having someone on your side who knows the ins and outs of buying land is essential, so don’t try to do it without an agent.
Of course, there will be a commission, but that’s a small price for peace of mind and a successful transaction.
If you’re unsure how to find an excellent real estate agent, ask friends or family members for recommendations. You can also look online or check with your local Chamber of Commerce. If you make a Facebook post on a local group, you’ll probably receive a few recommendations.
Negotiate the price.
Once you have a real estate agent, you can start negotiating a price with your neighbor. It’s important to remember that you’re not obligated to pay their asking price – there is usually room for negotiation when it comes to buying land.
Be sure to consider the land’s value and any improvements that have been made to it (such as fences, utilities, buildings, etc.). You should also consider how much it would cost to have the land surveyed and any environmental assessments that may need to be done.
For the most part, you can negotiate verbally. After all, they’re your neighbor. However, to make the negotiations official, you’ll want to have your real estate agent draw up a formal contract. This will protect you and the seller if anything goes wrong during the transaction.
Get under contract.
While a simple handshake will work in most cases, that’s not the case when it comes to buying land. You’ll need to get a contract outlining the purchase price, the date of sale, any contingencies, and more. This is where your real estate agent will be invaluable – they will help you draw up a contract that protects your interests.
Once both parties have signed the contract, you’ll need to put down a deposit (commonly referred to as earnest money). The amount of the deposit will be determined by the agreement, but it’s typically 1-2% of the purchase price.
You’ll also have to take care of any due diligence that needs to be done before the sale is finalized. This includes getting a title search and ensuring there are no easements or other restrictions on the land. Financing will also need to be arranged if you’re not paying cash.
After all that is taken, the final step is to close on the land and take ownership. At this point, the seller will transfer the deed to you, and you’ll be the proud owner of your new piece of property.
Don’t fret, though, if the process seems a bit overwhelming. Buying land from a neighbor is a big decision, but as long as you do your homework and work with an excellent real estate agent, it can be a smooth and successful transaction.
Close on the sale.
The final step in buying land from a neighbor is to close on the sale. This is when all the paperwork will be finalized, and you’ll pay the purchase price balance. Your real estate agent and title company will be there to help you with this process and make sure that everything goes smoothly.
Once the sale is complete, you’ll either pay with certified funds (if paying cash) or your lender will wire the funds to the title company (this can sometimes take a day or two). The title company often acts as the escrow for the funds depending on the state.
The last step is for the title company to record the deed and send you the original copy.
Congratulations—you now own what was once your neighbor’s land!
Key takeaways when you buy land from a neighbor.
When you buy land from a neighbor, there are a few key things to remember. Make sure you know the laws in your state and how they apply to the purchase. Get a real estate agent involved who can help with the paperwork and negotiations. Be prepared to put down a deposit and do any required due diligence. Finally, close on the sale and enjoy your new property!
