10 Questions to Consider When Buying Land in Gig Harbor
by Vic Jones, Falynn Auston
Many people dream of buying land in order to build their forever home, and with Neighborhood Experts’ new land division, we are thrilled to now offer services in land acquisition and new construction. While building a home can be an exciting adventure, there are a lot of details to think about when making sure this is the best option for your particular goals. So read on for 10 questions to consider as you start planning the next steps on your home journey.
1) Financing
The first conversation we need to have before even going to look for land is how you are going to start financing or paying for your land. There are limited options for purchasing raw land, and raw land financing can be a challenge. If the property does not have approved building plans, a water source on site, and an approved septic or sewer system there are limited choices for financing. Typically raw land loans are 50% down and can be secured with Timberland Bank.
However, if the property has water and the building and septic plans have been approved (septic doesn’t have to be installed, just approved), then you can use WaFd, 1st Security, or Timberland Bank for construction loans which will wrap the land and the construction costs into one loan. Any of these banks would need 25% down, and if you own the land, sometimes they will allow that to be your down payment. I personally have a contact at 1st Security, so feel free to reach out to me for more information.
To be ready to build we recommend having at least 30% of the total build cost in reserve (not including any of the land work), so for a $550,000 build cost that would be around $165,000 in cash. There are a couple banks that do owner-occupied construction loans that can have some development costs worked into the loan. These usually need 20% down, but they will not finance you without an experienced builder involved. The rates on a construction loan are likely to be prime plus 2 points, so for example if mortgage rates are 6% then construction will likely be 8-9%. The sooner you can get an experienced construction loan bank involved the better, as they will help you minimize wasted expenditures.
2 ) General Contractor & Builder
You will want your builder involved from the time you begin searching for land all the way through to occupancy. Banks will require an experienced professional to run your building project. Rarely will they allow a homeowner to manage their own project, unless they have a proven track record doing this.
The costs for a general contractor can be done as a fee build or as a percentage of the build. A fee build is a set cost that can vary, but plan to pay about $50,000-$75,000. A percentage build is usually about 10% of the total build cost. Make sure you are clear on this—in writing—before you even start looking at land.
There are multiple options when it comes to builders, from full custom-built homes to more affordable semi-custom homes. The new construction team at Neighborhood Experts knows who all the best local builders are, so when you join with us we will be able to point you in the right direction based on your goals and desires.
3) Feasibility
Once you have found your piece of land and you are under contract, there is usually an amount of time to conduct a feasibility study to verify that the property is buildable. In this competitive–or seller’s–market, the feasibility period has been about 5 days, but in a more neutral market a standard feasibility timeline is closer to 15-20 days. It can take two weeks just to get your water source approved and a month to get an answer on soils or get septic approved, so most feasibility studies are 30+ days. Whatever the market, though, it’s important to take the amount of time necessary, as once you get past feasibility it is more difficult to make changes or switch to a different plan.
4) Land Development & Building Costs
When creating a rough budget during the feasibility period, it is important to account for the land development cost. From raw dirt to being permit ready, you should plan on $50,000-$100,000, which will cover clearing the land, water, sewer, and power. (Note that this cost is on top of the price of the land itself.)
Next you have your engineering and permitting costs, which will vary depending on the county and the size of home. Then you have your actual building cost. For this, it’s good to add about 20% on top of the base rate in order to account for upgrades. Finishing off the project you will need to factor in costs for landscaping and flat work, such as driveways, walkways, and patios.
5) Water
As you begin your feasibility study, water is the most important subject to address, as without water you cannot get building plans or a septic system.
Does the property have a dedicated water source? If not, this will need to be discussed up front. If yes, is it on a well, or city water?
Well Water
If the property is on a well, has it been tested for parasites, lead, and arsenic? Before you close, it must be tested to ensure healthy drinking water.
If the property does not have a well and cannot get city water, then you will have to plan to drill a well. The deeper you must go the more it costs, and with drilling currently at about $71 per foot, you will be looking at anywhere from $9,000 to $35,000. Before closing, be sure to consult with a well company like Richardson Well Drilling. With current Pierce County regulations, I would also recommend that the well be taken care of before you close on the property, as there are a great many variables that go into installing a well.
City Water
If the property has city water, is the water connection at the site? If not, how far away is it, and how deep is the line? In some cities, depending on how many homes you are building, there is a $9,000-10,000 charge per home for connection fees. If you have access to city water you will also need to work with the water company to get a letter of water availability. This will be used during the permitting process with the county.
Is the water main in a busy street? Digging up a busy street is very expensive, plus you will be charged for having to close down the street and will also have to pay for the necessary traffic control.
Water Flow
How many gallons per minute does the water source flow? To be functional, water needs to flow at 7 GPM (gallons per minute) at the very least, but over 15 GPM is preferable. If it is below 7 GPM, then plan for putting a water tank on the property to back up the water system. An on-site water supply and treatment system can run into the $30,000 range.
If the home requires an independent sprinkler system you will need to confirm with the local fire department and the correct city, county, or state jurisdiction to see what the water requirement is. Sometimes an additional water holding tank of 3,000 gallons is necessary to ensure there is enough water to run the system.
6) Septic & Sewer
Does the property have a septic tank, or can it tap into the sewer?
Septic
If a septic system is necessary, you will need to work with a septic designer during the feasibility period. They will come out to the property with a small excavator and dig perk holes to verify the soils are adequate and what type of septic system the property requires. Expect about $3,000 for the septic design and about $25,000 for the septic installation. This assumes you have good soil and drainage, though, as the better the soil and drainage the more affordable the system. If there is clay in the soil or a lot of wet areas it will likely be a more expensive system which can reach up to $40,000.
If you decide to go with septic there are necessary distances that you must have the septic set back from the well and the home, which will impact the size and type of house you can build as well as that of any detached buildings on the property. Once you have an idea of where the well and the septic will go we recommend having a detailed site plan drawn up. This will give you direction as to what and where you can build.
Sewer
If a sewer is available then it will cost about $10,000-$15,000 to connect depending on how far away the main connection is. Note that some jurisdictions will require that you connect to the sewer if it is within 300 feet. Approximate costs are around $1,000 per lineal foot to connect, but the cost also depends on how big, how deep, and how old the main line is, and if there is a busy road that will have to be closed or partially shut down during the process of connecting. A competent developer will be able to handle all of this at a cost to the client.
7) Power
Does the land have power? If not, how close is the closest power line? Will they have to dig a trench, or put up a new power pole? You must know where your power is before you close on the land.
Expect it to be about $10,000 to hook up to power depending on how far the line needs to be brought and which power company it is. Puget Sound Energy is pretty good about providing quotes, but other places like Ohop Mutual Light Company in Eatonville can be a little slow. A good builder will have relationships with each company so you can move through this stage quickly.
8) Critical Areas
Wetlands
Are there wetlands? This is another question that needs to be addressed early on, as the type of soil and water on the property will determine what can be built. It will also determine necessary setbacks from any structures, and what type of septic you will need. If the property does not drain it will cause issues with a septic system and a well.
Do not assume that just because you do not see wetlands or moving water there are none. Most jurisdictions have classified areas as wetlands that may not have been classified as such in the past. Depending on who is doing your dirt work, they usually have a pretty good idea of where we have wet issues in this area. The local county can also help with this, and PublicGIS will shed light on basic wetland information. If there are any questions it will be wise to invest in having a wetlands biologist analyze the parcel, and they can tell you what type of wetlands you have, the necessary setbacks, remediation, and what each jurisdiction will require. Where the wetlands are will determine where everything—well, septic, driveways, home structure—can go. There are lots that are 90% wet that can still be built on, but it is very limiting. The less you’re able to develop the land, the less value there is in the land.
Topography
What is the topography? Rolling hills or lots of slope on a property equate to necessary engineering. If you have to do a hillside foundation, figure a 25% increase in foundation costs. You will also have to address items like water runoff and erosion control (you have to do so with every lot, but slope adds up to more money).
Wildlife
What wildlife is on the property? Are there any spotted owls, eagles, blue herons, unique fish, or other animals? Any nesting areas we have to be aware of? Are there any protected plants or trees, or other critical items or areas? Do take into account that if there are any of these things on your property you will likely have a neighbor that will want to use them as a way to delay your progress.
9) Jurisdiction
Who has jurisdiction for your property? Is it the city, county, or state? This is a big deal. For example, building permits for the city of Puyallup are double the cost of those in Pierce County. The city is also much harder to deal with when it comes to permitting, site work, design requirements, and clear communication. If you plan to build in the smaller city jurisdictions it will help to have a builder/developer that is familiar with any unique issues, as every jurisdiction has different rules for things like land use, zoning, and minimums and maximums for lot size. The process is also different in each jurisdiction with proceedings like community forums where the neighbors can ask questions and have a say in what is going to be built.
10) Other Considerations
Are there any businesses close by that generate noise, smells, or traffic? Think churches, schools, manufacturing, or agricultural operations. Drive around the proposed lot to see what is really there. Do not trust Google Maps or pictures from the MLS—go see the land yourself. Can you handle being next to a building that has shift work where there is a constant flow of traffic? A church that has big events five days per week? School bells ringing every 90 minutes?
Be really critical of the surrounding area. What do the neighbors’ homes look like? Are they similar to what you want to build? The future value of your property can be affected by the neighboring structures, as will all real estate. Is there a lot of open land around your property? If so, who owns it and what is the future plan for it? New homes? Warehouses? A farm? A new school? Your build team can help with this to a certain extent, but you must also do your own research.
Closing Thoughts
We hope looking at some of the aspects of buying land and building has been helpful. But if all this information is making your head spin or causing you to wonder why you ever thought building your own house was a good idea, there is no need to worry. We have you covered with a team of Neighborhood Experts who are ready to help you find your dream home that is already built and just waiting for you to move in. Give us a call today at (253) 313-4093, or contact us online.
As a real estate expert, builder, and land specialist, nothing matters more to Vic Jones than making sure his clients always feel heard and supported, and that every individual he serves is truly happy with the outcome—financially, emotionally, and mentally. When you’re working with Vic, you can expect direct, open communication, a tenacious work ethic, and lots of laughter. A lifelong Puyallup resident, Vic has always marched to the beat of his own drum and never shies away from a challenge, whether it’s finding a needle-in-a-haystack home, negotiating aggressively on behalf of his clients, or competing in Powerlifting competitions. One of his favorite adventures to date has been building a spec home for resale (and he can’t wait to do it again). When he sets his mind on something, he won’t stop until he’s achieved it. He brings that calculated-risk taking approach to real estate, always putting his clients’ needs and wants first.
Falynn Auston has a can’t stop-won’t stop attitude when it comes to helping you buy or sell your Gig Harbor home. Whether you’re looking for your first home, investment property, or downsizing, she’s there for you every step of the way and is here to arm you with all the information you need to make the best investment decision. A true neighborhood expert, Falynn will tell you everything you want or need to know about Gig Harbor, from the best breakfast spots to where you can find the best views of the sunset. She knows all the local people and all the local happenings. Her husband, a captain at the South Kitsap Fire Department, and her family are deeply integrated into both communities.
