Thursday, January 1, 2015

The Land Ownership Journey: Lessons Learned

  As a prequel to the creation of this blog, I'd like to take this opportunity to present a short list of summarized bullet points that led up to the actual land acquisition.  You may consider nearly two years an extremely long duration to purchase land, and you'd be correct...but the events along the way provided a valuable lesson in how a transaction could go terribly wrong if left unchecked.  If you're considering buying anything from a small plot to sprawling farm acreage, these buyer precautions and tips might assist your search.

(Please note:  The following are my recommendations, experiences and opinions. They are not meant to replace the advice of certified, trained and blah blah blah endorsed professional.  In other words, these tips are meant to help not hurt, but use your own judgement and brain power!)
  • Find yourself a motivated and qualified real estate agent that specializes in stand alone land sales.
     Too many times we felt like second class buyers and weren't being taken seriously.  It took several weeks to find an agent that we felt was interested listening to our needs and actually assisting us.  We were interested in raw woodland property that was less than 50K without a residence and we weren't selling our home in the process.  Finding an agent that is motivated by more than commissions is a challenge but they do exist!  I highly recommend Kayleen McDowell of Congratulations are in order for Kayleen and her team members in celebration of business ownership and the launch of the new website, but don't let the "new" part confuse you.  The professionalism that accompanied our purchase transaction was forged through years of real estate experience.  Jennifer and I wish you all the best in the future!   
  • Even when you've found the right agent and have been equipped with an internet based buyer preference portal, continue to search the web on your own.
     If it wasn't for Jennifer's persistence in scouring the internet and the most obscure land sales websites, we would have not found our parcel. 
  •  Submitting a purchase offer?  Get your financing in order first,  keep your offer reasonable and leave the bulk of your down payment in the bank.
     Formulating and submitting a purchase offer is both exciting and nerve racking, but even before the pen hits the form get the financing prepared.  Ironically, the term "prequalified" wasn't applicable for us because we were purchasing farmland and not a home.  So, we found a bank that considered raw land/farm acreage loans the norm (many banks do not) and that offered reasonable financing options at extremely competitive rates.  We recommend Farm Credit Mid-America as a result of our positive purchase experience.

     It goes without saying that only you know what you can afford and what you feel the potential property is worth.  The worth only matters to you.  This may be blunt, harsh and to the point...but the worth established by real estate brokerages, agents, and automated online appraisal engines means nothing because they are not the ones buying the property, but the ones attempting to prop up the sale price in SELLING it.  They don't have to come up with the deposit, pay the mortgage, taxes, purchase fees, etc...YOU DO!  Place a bid that you feel comfortable with and know that it is highly unlikely that the first submission will be accepted.  Figure on agreeing to a final figure that falls some place in the middle.  
Submitting an offer requires earnest money, but use caution as to the actual amount!  Give only enough to establish a serious intent to purchase and nothing more.


An earnest money deposit shows the seller that a buyer is serious about purchasing a property. When the transaction is finalized, the funds are put toward the buyer's down payment. If the deal falls through, the buyer may not be able to reclaim the deposit. Typically, if the seller terminates the deal, the earnest money will be returned to the buyer. When the buyer is responsible for retracting the offer, the seller will usually be awarded the money. 


A deposit made to a seller showing the buyer's good faith in a transaction. Often used in real estate transactions, earnest money allows the buyer additional time when seeking financing. Earnest money is typically held jointly by the seller and buyer in a trust or escrow account.

The key element of consideration is the word phrase "the buyer may not be able to reclaim the earnest deposit".  If the deal falls through and/or goes want to be arguing about the return of as little money as possible.  
  • Anxiety safeguard:  a correctly worded purchase offer. 
It was of paramount importance to us that any potential property be free of protective covenants, easements and/or deed restrictions.  The last thing you want is to plunk down your hard earned money only to discover that some other person or force has predetermined how you can or cannot use your property.  Sounds far fetched in a free society, let me assure you IT ISN'T!  Always, always, always include "this offer contingent upon the parcel being free of the
following- protective covenants, easements, and/or deed restrictions."  Do yourself a favor and include "and the transfer of gas, mineral and oil rights" as well.  And to cap your offer off, the inclusion of "must pass a septic perc. test and a 100 year title search".  
  1. Wikipedia's definition:  A percolation test (from percolation, colloquially called a perc test) is a test to determine the absorption rate of soil for a septic drain field or "leach field". The results of a percolation test are required to properly design a septic system.
  • Disclosure Statements:  Fact / Fiction and trusting your gut feeling.
A disclosure statement is a document that provides you with information known to the seller about the property you intend to purchase.  Most of the questions are cut and dry; while others are tainted with loopholes.  Questions that include, "to your knowledge, that you know of, and that you're aware of" leave definite areas for seller vagueness (to their benefit). 

Do not trust the seller's knowledge, trust the certifiable and legally binding opinion of a professional in the field.  The monies spent for a title search, 100 year mineral rights search and a good title company that will outline anything unusual in terms of land use covenants is well worth the investment!

Example 1:  Your dreams of owning and operating a farm have finally come true. You've purchased the ideal parcel in both size and location that will give you the opportunity.  Months later you begin to clear away trees and prepare for the arrival of more livestock.  The pole barn is up and the chickens are clucking away.  A neighbor is passing by and notices the improvements you've made.  Compelled to stop in and say hello, this visitor has more on his agenda.  After exchanging transparent greetings, he brings to your attention a laundry list of protective covenants that prohibit farm animals, prohibit the siding on your new barn and prohibit your RV from being parked anywhere on the lot.  Sound unrealistic?  Not so, even in "the country" things aren't what they appear until you've looked hard enough to see them as they are.  A title search would have revealed these "association" based deed restrictions before you had made the purchase.

Example 2:  Same scenario as above, but this time you're ready to start the farm house build.  The architect has drawn up the plans just as you envisioned them, the builder is ready to get started and you decide to drop into the county building department to pull permits.  A percolation test to determine septic feasibility is needed before anything else.  It is revealed that the lot you love so much will not support a septic system under the newly passed, more stringent, septic system guidelines adopted by your local township.  You read the soil inspection report in dismay because you know that if it won't pass a septic percolation test, your chances of attaining a building permit are zero!

Example 3:  The time has finally arrived, the point where you can relax is here.  It seems that you've done hard labor for years to reach this point.  Your handiwork brings you great pride because everything is shaping up so well on the farm you've built through blood, sweat and tears.  The outbuildings and support structures are up, the livestock are happy, the garden is full with produce.  The farmhouse, complete with its big picture window that allows you to kick back and enjoy the sun setting on the surface of the newly stocked bass pond is almost surreal.  A single tear falls from the edge of your sleepy, yet restless eyes.  You can't believe that an oil company will begin drilling an exploratory hole in your front yard tomorrow morning.  Nature's predawn
melody followed by the furious sympathy of birds celebrating the rise and warmth of the sun will become secondary to the seesaw squeaking inherent of the up/down motion of a well pump activated by the power supply of a noisy generator.  The view of the golden diamond size sparkles bursting off the waves of the pond you spent days digging with a borrowed backhoe will only be destroyed by the shadow of a 20 foot diameter, 12 foot tall oil collection tank.  The worst part?  The royalties, which amount to thousands a month, go to the previous owner.  Sound far fetched?  It would be if only you had ordered and paid for the 100 year mineral rights search prior to signing the final purchase paperwork!  

To be continued...