F
or homebuyers seeking new construction, options range from customizing a builder's model to working with a design-build firm. However, some buyers are opting for a more unconventional route: purchasing undeveloped land, also known as "raw" land. According to Realtor.com analysis, land sales have increased by 1.2% in 2023, driven by broader real estate trends such as housing inventory shortages and multigenerational living.

    The top land markets are California, Texas, Georgia, Florida, and Colorado. Real estate agent Harley Bush notes that buyers often choose undeveloped land for its freedom, creativity, and privacy. They can design every inch of their home, orient it around a lake view or sunset, or create a small family compound.

    However, buying land to develop and build a house on comes with unique risks and considerations. Matthew Coates, president of Coates Design Architects, advises buyers to approach this route with a long-term mindset, assembling the correct team and going in "eyes wide open." Infrastructure challenges such as water, power, sewage, and road access can be significant hurdles.

    Buyers should also consider hidden costs like drilling a well, installing a septic system, and building a road. Internet and cell service may require alternative options like satellite. To navigate this process, buyers should assemble a team of professionals including real estate agents, surveyors, builders, attorneys, and planners.

    Key steps to take when buying undeveloped land include understanding zoning and land use regulations, coordinating soil and percolation tests, consulting with an architect and builder, and having a title search and legal review performed. A proper title review can help protect buyers from fraudulent listings and scams.

    Financing undeveloped land typically involves securing a lot loan, which requires a larger down payment and higher interest rates due to the lack of collateral. Buyers should go through a pre-approval process before selling their current home or drawing up plans. The lot loan can often be rolled into the construction loan once building begins.