How to buy land for a custom home

Key takeaways

• Researching a parcel thoroughly is essential. Buyers should investigate soil conditions, zoning, environmental risks and utility access before making an offer, as any of these factors can affect whether the land is buildable and how much construction will cost.
• Location impacts more than lifestyle — it shapes the entire budget. Remote lots often require expensive utility hookups, additional site prep and higher impact fees, while redeveloped lots may save on infrastructure but bring demolition costs and zoning considerations.
• Professional guidance helps prevent costly mistakes. Working early with a builder, architect and soil or survey experts ensures the land can support your home design, meets local regulations and won’t surprise you with hidden expenses once construction begins.

Before you can build a custom home, you need to buy a place to build it.
Finding land to purchase is similar to buying a home. It starts online. Homes.com, as well as its sister site, Land.com, has listings of property for sale.

Before you can search for land, you need to have a sense of what you are looking for. Are you looking for a few acres in some out-of-the-way place or are you looking for a parcel in an established neighborhood? Perhaps you are interested in redevelopment, which would require you to buy an existing home with the intentions of replacing it.

When looking for land, consider lining up some experts to help determine how easy or hard it will be to build on a plot of land.

"Never assume an empty lot is ready for immediate home construction," said Andrew Fortune, a real estate broker with Great Colorado Homes in Colorado Springs, Colorado. "Raw dirt hides expensive secrets below the surface. Patience prevents buyers from making bad financial mistakes."

Buying the land is an investment in building the home, so making sure you can afford to build on the land needs to be factored in. If you have to do extra work to hook up electricity, install plumbing and prepare the land for building, then those costs need to be considered with the purchase of the land.

"Site prep, impact fees, permits, utility hookups and carrying costs on the land loan can add $50,000 to $150,000 or more before a single wall goes up," said Alexei Morgado, a Miami, Florida real estate agent and founder of Lexawise, a test prep company for real estate exams.

Remote sites will likely require the most work and costs will likely be higher. Utility hookups can add up and are often overlooked.

Redeveloping a property will have extra costs for demolition, but the electricity, plumbing and road access will already be in place. You also will need to consider if there are any impact fees, which is money you pay the local government to cover the burden of adding a new home.

"In rapidly growing Florida counties, a single-family home can easily add $15,000 to $30,000 plus in impact fees for roads, schools and utilities before even getting a permit," Morgado said. "That doesn't include site clearing, grading, well/septic tank installation if there are no municipal services, driveway from the public road or utility extensions, which can easily add another $15,000 to $50,000."

Just like when house hunting, consider the practical factors of daily life, like your proximity to work, school or the grocery store.

You need to visit the property and walk it just like you walk through an open house.

• Calculate the total cost of building in addition to the land price.
• Factor in site prep: clearing, grading, utility hookups, driveway work.
• Check feasibility of electricity, water, sewer or septic, and internet options.
• Ask whether impact fees apply and how much they may cost.
• Compare commute distance to work, school, shopping and emergency services.
• Visit the property in person and walk the entire lot.

Before you sign a purchase agreement, you need to make sure you know as much as possible about the land.

Investigate environmental factors for the property. This will change based on the region you are buying in, but know what weather or natural disasters are common for the area.

"Check the FEMA flood zone, too, because homes in Special Flood Hazard Areas have to be elevated above base flood elevation, and that changes your construction costs in a real way," Morgado said.

For areas prone to fires, look into what preventative measures can be done to minimize risk. Take note of the vegetation and if the property needs to be cleared before building.

Ask about the soil and what discovery the owners have done on the property so far. You can also consult a soil expert before finalizing a sale.

"A professional soil test provides the real truth about your lot," said Fortune, the Colorado real estate broker. "Engineers drill deep holes into the earth to analyze the dirt. They look specifically for solid sheets of underground bedrock. Hidden bedrock discovered during excavation causes real financial problems. You'll need specialized crews to blast solid rock away."

• Look up the FEMA flood zone for the property.
• Assess fire risk, vegetation and mitigation requirements.
• Ask about any soil tests already completed by the seller.
• Hire a soil engineer for a professional geotechnical test if needed.
• Observe the lot after rainfall to study drainage patterns.
• Check whether the property will require vegetation clearing or grading.

The United States does not have a federal zoning system. Instead, zoning, the rules for how land can be used, is set at the state, county or local level. There are different types of zoning codes. If you buy land zoned for commercial use, you likely will need to apply for a change to the zoning before building a residential property.

To learn about the zoning in your area, reach out to the local government offices to get more specific information. Some zoning codes are more detailed than others.

"Always verify zoning directly with the county, not from the listing sheet," Morgado said. "Sellers often don't know what they actually own, and listing descriptions carry no legal weight."

Aside from the use, zoning also can stipulate how many floors a home can have, where the garage should be and how close to the road a home can be built.

"County setbacks dictate exactly how close you can build to boundaries," Fortune said. "Mountain properties often have incredibly strict wildfire mitigation requirements. You need to understand these unique local rules before writing an offer."

If you are in a so-called "form-based" zoning area, then there could be rules on the style of the homes. Euclidian-style zoning focuses more on the uses, separating residential and commercial use.

Outside of zoning, neighborhoods and homeowners associations could have their own set of rules.

"Architectural control committees wield lots of power over custom-home builds," Fortune said. "These local neighborhood boards can legally dictate the home's exterior paint colors. They might even force you to use unnecessarily expensive roofing materials."

If you are looking to redevelop a property, then you might face more stringent zoning and construction rules, especially if the land falls in an historic district or other special area.

• Confirm the zoning directly with the county, not from the listing.
• Identify allowable uses (residential, commercial, agricultural, mixed‑use).
• Check height limits, setbacks and minimum distance from property lines.
• Ask whether the area is form‑based or Euclidian‑style zoning.
• Review HOA or architectural control committee rules if applicable.
• Ensure the home on a redevelopment property is not historic.

Consult with your builder and architect before purchasing the property. They will need to conduct their own due diligence to make sure they can deliver the project.

"Ask the architect if the natural grade supports your specific layout," Fortune said. "People who buy dirt before consulting a builder completely limit their options. A steep downward slope requires a specific walkout basement design."

The logistics of construction need to be considered as well.

"Ask your builder about access to heavy equipment throughout the construction phase," Fortune said. "Concrete trucks cannot climb steep temporary dirt driveways. Involve your design team before signing a contract."

When it comes time to break ground, you might need to gain zoning approval, so make sure your ideas comply with the zoning during the land acquisition phase. Getting through the permitting phase can take a while, so having your team onboard and confident with the property will help make the vision come to life faster.

"Counties demand a master building permit before any physical work begins," Fortune said. "You must also secure separate plumbing approvals from county inspectors. The approval timeline depends entirely on the local government bureaucracy. Some rural counties approve plans in just a few short weeks."

• Consult your builder and architect before making an offer.
• Ask whether the natural grade suits your desired home layout.
• Verify access for heavy machinery (concrete trucks, excavation equipment).
• Confirm that the buildable envelope fits your home design.
• Make sure your plans comply with zoning and HOA requirements.
• Understand the permitting timeline for the county.

Once you have narrowed down the properties you are looking at, sit down and map out their total costs. The cost to buy the land is the baseline. Get estimates on the hookups, site prep and permit fees.

You need to make sure you can afford all the elements needed to break ground and present your case to your lender.

"Banks view bare land as a very risky financial investment," Fortune said. "They demand large down payments for vacant lot loans. Expect to put down 20% to 50% in cash."

Buying the land is one piece of the financial puzzle. You likely will also need to secure a construction loan and ultimately convert that to a mortgage. All should be considered before signing a purchase agreement.

"Construction loans act like short-term credit lines during the actual build," Fortune said. "The bank releases funds in stages as the builder completes specific work. You later convert that construction loan into a standard permanent mortgage. Property insurance premiums for new mountain homes may also drain your budget. Be ready for that."

Your team is another cost. Outside of the construction team, you might need to consult a real estate attorney, which could cost extra.

• Add up: land cost + site prep + utility hookups + permits + impact fees.
• Confirm down payment requirements (20% to 50% for land loans).
• Understand how construction loans release funds in stages.
• Request insurance quotes early — especially for wind, flood or wildfire zones.
• Budget for design, architectural, engineering and legal fees.
• Make sure the total development cost, not just the land cost, fits your budget.