The Ultimate Guide to Land Due Diligence
When buying land, due diligence is more than a formality—it’s a critical step that ensures you’re making a sound investment. Rushing through this process can lead to costly surprises down the line. Let’s break down the key steps of due diligence and what you need to check before finalizing a land purchase. And for sellers, this post will give you an idea of what we do when evaluating the purchase of your property.
What Is Land Due Diligence?
Due diligence is the process of investigating and verifying all aspects of a property to ensure there are no hidden issues that could affect its value, usability, or legality. It covers everything from zoning laws and property boundaries to environmental conditions and title checks.
Key Steps in the Due Diligence Process
Verify Property Boundaries
Conduct a boundary survey to confirm property lines and acreage.
Ensure there are no encroachments or boundary disputes with neighboring properties.
Review Zoning and Land Use Regulations
Check the property’s zoning classification and permitted uses.
Verify setbacks, building height restrictions, and other development guidelines.
Determine if rezoning is required for your intended use.
Evaluate Access and Infrastructure
Confirm legal access to the property (e.g., public road frontage or easements).
Check the availability of utilities like water, electricity, and sewer.
Assess the condition of roads and whether maintenance is required.
Conduct an Environmental Assessment
Identify any environmental issues, such as wetlands, flood zones, or contamination.
Review FEMA flood maps to determine if the property is in a floodplain.
Consider a Phase I Environmental Site Assessment for potential contamination risks.
Check for Easements and Encumbrances
Review the title report for easements, liens, or rights-of-way that may affect the property.
Understand how these encumbrances impact your intended use.
Obtain a Title Search and Title Insurance
Conduct a thorough title search to ensure the seller has clear ownership.
Purchase title insurance to protect against undisclosed liens, boundary disputes, or title defects.
Inspect Soil and Topography
Test soil quality for septic systems or agricultural purposes.
Review topography to identify grading or drainage issues.
Assess Development Costs
Estimate costs for clearing, grading, and preparing the land for construction.
Factor in fees for permits, impact studies, or rezoning applications.
Understand Property Taxes and HOA Rules
Verify current and future property tax obligations.
If applicable, review HOA covenants and fees to ensure they align with your plans.
Real-Life Example: A Comprehensive Due Diligence Saves the Day
We recently evaluated a property that appeared ideal at first glance. However, during the due diligence process, we discovered:
The property was partially in a flood zone, which required elevated construction and higher insurance costs.
An unrecorded easement gave a neighboring property access through the land, limiting development options.
The soil quality was unsuitable for septic installation, requiring significant investment in alternative systems.
Thanks to thorough due diligence, we renegotiated the deal and saved thousands in unexpected expenses.
Tools and Resources for Effective Due Diligence
GIS Maps: Use county GIS systems to review property boundaries, zoning, and infrastructure.
FEMA Flood Maps: Check flood risk and insurance requirements.
Professional Surveyors and Engineers: Hire experts for surveys, environmental assessments, and feasibility studies.
Title Companies and Attorneys: Work with professionals to review title documents and ensure legal compliance.
Conclusion
Land due diligence is a vital process that protects your investment and ensures your land meets your needs. By taking the time to investigate every aspect of the property, you can avoid costly surprises and make informed decisions.
