If you are interested in buying vacant land in order to build your next house, this guide outlines not only how to buy land but the specific and unique challenges of buying vacant land in Olympia, Washington and the greater Thurston County area.
Where to Find Vacant Land Listings?
As you would look for existing homes, start with a search on your favorite brokerage site like my site, Coldwellbanker.com, johnlscott.com, refin.com, etc. Third-party sites like Zillow, Trulia and Realtor.com are not reliable sources for information, so stick with sites where realtors actually work (brokerage sites) and you’ll get the most accurate and up-to-date information. Read more here about the pitfalls of using third-party websites.
How to Research if the Land is Buildable?
Thurston County has excellent resources to find information about vacant land or any property, for that matter.
I’d recommend starting here https://www.co.thurston.wa.us/permitting/ and going to Geodata Maps.
Geodata is a powerful mapping program and this is what the county planners use, too.
Watch this video as I go through researching a property:
What Buyers Need to Know about Buying Vacant Land in Thurston County, WA
When researching vacant land, here is what to look for:
What is the zoning of the property? Make sure it is zoned for your use. If you plan on building a home, you’d want the zoning to be residential (versus commercial, for example).
Are there easements? Usually there are utility easements, which is very normal and common but check to see how you would access the property. Does it have its own access from a public road or would the property need (or does it already have) an easement for access? You cannot build on an easement that would limit or prohibit the use of that land by the easement owner.
Are there homeowner association rules and restrictions (CC&Rs)? If you are researching a parcel that is under neighborhood covenants, those covenants will outline the size and type of home that can be built and other standards that would be required.
For example, the rules may not allow manufactured homes, or your home needs to be x number of feet from the boundary line, or there is a minimal size of home that is allowed.
Is the parcel located within a city’s limits or is it in unincorporated Thurston County? For parcels of land within a city’s limits, you’ll also want to go to that city’s planning department.
Common building restrictions in Thurston County
Thurston County has many environmental concerns that affect building such as preserving fish and wildlife habitat areas, wetlands, and bodies of water. Many require a buffer or a setback, which can shrink the building envelope of a parcel. Many buyers of vacant land assume they can use and develop every inch of the property. In many instances, this isn’t the case due to the protection of these critical area and/or the required setbacks.
Here are the common issues that affect what and where you can build on the parcel:
Critical Areas – these can be found on Geodata Maps. Critical areas are:
- Important fish and wildlife habitat areas
- Wetlands
- Critical aquifer recharge areas
- Frequently flooded areas
- Geologically hazardous areas like bluffs and slopes
On Geodata Maps, you can see if any of these critical areas exist but you’ll need to speak with a Thurston County or city planner to understand what this means for developing the parcel.
Most of these critical areas will require setbacks or a buffer to protect them. For example, if there is a fish-bearing creek on the property, the house may need to be X number of feet away from that creek. (For a recent parcel I researched, the planner stated the setback from this particular creek had to be between 150-250 feet depending upon other factors.)
Shorelines (Puget Sound inlets, lakes, rivers)
Thurston County has a Shoreline Master Program that manages development along any shorelines and therefore is regulated under this program and/or the Critical Area Ordinance. A county planner would need to provide assistance to you to determine if the property contains a shoreline that is regulated and what is allowed.
A few examples of work that is regulated by the Shoreline Master Program includes home building, land clearing, and installing or replacing bulkheads, stairs, docks, etc.
Special Flood Hazard Areas
Floods are the most common natural hazard in Thurston County, and rivers, streams and groundwater are typical causes of flooding. If the property is in a flood zone or in a Special Flood Hazard Area, you can go through an exception process to build. Your Thurston County planner can guide you on this.
Pocket Gopher Study
In Thurston County, you’ll hear a lot of talk about the Mazama pocket gopher. This threatened species of gopher has been called the “ecosystem engineers” of prairie and grasslands because of their many benefits to the soil, vegetation and other animals.
As their habitats are being lost due to development, their numbers have declined and they are now protected under state and federal law.
What this means for land buyers:
When you apply for a building permit, the county will need to inspect the land for these gophers. One of the bigger headaches for landowners is these inspections are only done between June 1st to October 31st because that’s when the gophers are active. And two inspections will be done, thirty days apart. This can delay your building plans.
If pocket gophers are present, many building projects can still go forward with modifications such as moving where the building is to be constructed, change the building footprint, and designating areas of the property as gopher habitat.
Reality Check:
Wetlands, slopes and prairie lands (where the protected and endangered Pocket Gopher lives) are very common issues with land in Thurston County. The required setbacks and buffer zones can dramatically shrink where you can place the house, what size of house you can build and even if you can add a shop or barn.
In my own professional experience, I had a seller who purchased vacant land about 20 years ago. He did not develop it at the time and when he tried to sell it, the planning rules for development had changed so much that this lot became unbuildable.
The green dotted line denotes wetlands and the left edge of the parcel is the road. The edge of the wetlands to the street is 175 feet. When my client was trying to sell this parcel, the neighborhood rules (CC&Rs) stated the home needed to be set back from the road fifty feet. The county required the setback from the edge of the wetlands to be 250 feet. Between these setbacks, this left this 1.5 acre lot completely unbuildable. (There were the setbacks required for this particular parcel. Your setbacks and requirements may be different.)
How to Finance Vacant Land?
If paying cash for the land isn’t feasible nor what you want to do, you can get a construction loan to purchase the land. But this isn’t a stand-alone loan; this loan is for you to also develop the land.
- Construction loans are temporary.
- Not all lenders offer construction loans.
- Construction loans require that you have a builder, plans and a cost sheet and budget as part of your loan application.
- Construction loans are risky for banks because for one, there is no collateral. The vacant land is not sufficient collateral.
- Typically, borrowers can expect to put down 20-30% (you cannot do a 0% VA loan, for example);
- the interest rate is usually higher than it is for an existing home loan;
- many lenders require the water to be on the property. This means if you have to drill for a well, that is an out-of-pocket cost and not part of the loan.
- Construction loans, as I mentioned, are temporary. For example, your lender may offer this construction loan for 12 months. At the end of 12 months, the home should be completed. At that time, your loan is then converted into a standard home loan. It’s at this point, you can choose the loan product you are eligible for including a VA loan.
- For some lenders, the construction loan and the conversion to the permanent loan is a two-step process meaning you could pay two sets of closing costs. Other lenders offer a one-step construction loan process where it automatically converts to a permanent loan without additional closing costs. There are pros and cons to each.
- Construction loans are interest-only and the monthly payment increases as the project nears completion.
- Understand how draws are handled, who approves them, when they are paid out.
- Ask how cost sheet line items that come in over the cost are handled, and likewise, how are credits handled? Can you apply credits to other line items?
If you are considering a construction loan, contact me for my list of preferred lenders.
Reality Check:
Many buyers are unaware of the costs to build. Although you may be getting a loan, many costs are not included in the financing. It can depend upon what your builder is including in the cost sheet, what your lender requires, and a long list of other items that will come up in your build including but not limited to:
- Utilities – water, septic, electricity, gas, propane, cable
- Feasibility Studies – Geotech engineering, prairie land studies, septic perc test
- Surveys – finding the boundaries of the land
- Mitigation/impact fees – for schools, parks, transportation, etc.
- Loan costs (closing costs)
- Construction overruns
- Items not included by your builder or outside of the cost sheet. For example, a driveway, landscaping, fencing, etc.
- If the home doesn’t appraise, you will be required to cover the difference
These things can add up quickly add up and can easily get to a six-figure cost.
If buyers do not have substantial cash reserves, building may not be the best option.
Another cost buyers forget: they still will have to cover their current mortgage/rent along with making their construction loan monthly payments. You’ll need the income to cover both payments.
Reality Check – the Cost Sheet:
The cost sheet that the builder prepares will outline the costs for each step of the build. You’ll want to know if the lender will pay out draws based on invoices? Or just what the line item is for?
Builders may skim, meaning the line item for a roof may be $25,000 but it actually only cost $18,000. The builder may pocket that $7,000 as his profit.
You’ll want to know how the lender and the builder is handling draws, cost sheet line items, invoices, overages and credits.
What to do During your Feasibility Period?
When offering to buy vacant land, I will suggest you make your offer contingent upon a satisfactory feasibility period. This feasibility time is meant for the buyer to determine if the property can be built and developed as the buyer intended.
Here are just some of the professionals you’ll need to determine the suitability of the land for your purposes:
Professionals Needed for your Land Purchase
- Realtor
- Lender
- Builder
- Architect
- Attorney
For your feasibility studies, the most common professional consultations needed are:
- City and/or county planners and inspectors
- Prairie plant/pocket gopher inspector
- Geotechnical engineer (for slopes, evaluating landslide hazards, etc.)
- Surveyor
- Septic designer
- Well driller
- And more
Reality Check:
These will be inspections at the buyer’s cost.
Some buyers are risk-adverse to paying for these costs only to find out they cannot build what they wanted. Some sellers have not done this legwork and put all of this risk on buyers. This is why it is important to work with the city and/or county planners to find out all you can before moving forward with an offer.
Septic Systems
If the property will need a septic system installed, a septic system designer will need to be consulted. They can evaluate the soil to determine if and what kind of septic system would be suitable. This is commonly referred to as a “perc” test, which is short for percolation test. They are testing to see how permeable the soil is for the drain field. High clay content or solid rock are the worst soils whereas sandy soils drain best.
Drilling for Water
The biggest risk for many buyers, including us when we purchased vacant land in 2018 and built our current home, was determining if there was water. Since city water was not available, we had to drill our own well and you don’t know if you have water until you drill.
To minimize the risk, we looked up the well logs for neighboring homes (at the Department of Ecology – www.ecology.wa.gov) to see how far they had to drill, how much water they found and at what pressure. After reviewing these logs, we felt our risk was minimal and we knew we probably had to drill deep. Not to our surprise, we ended up having to drill over 200’ but that was similar to the neighbors’ wells.
Conclusion
It is the buyer’s sole responsibility to verify and determine whether or not the property can be developed and the cost to do so.
As your agent, I can guide you to the experts and work with you to craft an offer that provides you contingencies. Buying land can be risky and costly, but after you do your due diligence, you should be confident you can build the home of your dreams.