Building Your Home

If you want to build your new home, there are things you need to know before you start. Learn about construction standards and about buying land, so you know your rights.

Buying Lots from Developers

Be well informed when shopping for land. If you plan to purchase a lot which is offered by promotional land sales, take plenty of time before coming to a decision. Before signing a purchase agreement, a contract, or a check:

• Learn and know your rights as a buyer
• Learn something about the developer
• Know the facts about the development and the lot you want to buy
• Stay in control when you encounter high pressure sales tactics
• Information on local ordinances, health regulations, etc.
• Get information about the land, such as title policy & copies of deed and mortgages
• Information about utilities, water and plans for sewage disposal
• Development plans including information on roads, streets, and recreational facilities

The company filing this information must swear that it is correct and complete, and an appropriate fee must accompany submission. Check the developers property report before buying. This is the kind of information you will find in a property report: 

• Existence of mortgages or liens on the property
• Whether contract payments are placed in escrow  
• Availability of sewer and water service or septic tanks and wells
• Present and proposed utility services and charges   
• The type of title the buyer may receive and when it should be received
  

Read the Property Report Before Signing Anything

This report is prepared and issued by the developer of the subdivision. Federal law may require that you receive this report prior to signing a contract or agreement to buy or lease a lot in this subdivision. 

Know the Developer

Knowing your rights under the law is the first step in making a sensible land purchase. To exercise those rights you also must know something about the honesty and reliability of the developer who offers the land that interests you. Make it your business to find out all you can about the company and the property. In addition, get any oral promises or representations in writing. Request a copy of the property report and take the time to study it carefully and thoroughly. If you still have unanswered questions, delay any commitment until you have investigated. Discuss current prices in the area with local independent brokers. Talk to other people who have purchased lots. A local Chamber of Commerce, Better Business Bureau, or consumer protection group may have information about the seller's reputation. 

Know the Facts about the Lot

Once you have decided on an appealing piece of land, inspect it. Don't buy "site unseen." Some of the questions you should be asking are:

• How large will the development become?
  
• What zoning controls are specified?
• What amenities are promised?
• What are the provisions for sewer and water service?
  
• Are all of the promised facilities and utilities in the contract?  
• Will you have clear title to the property? What liens, reservations, or encumbrances exist?
• Will you receive a deed upon purchase or a recordable sales contract? 
• If the developer defaults on the mortgage or goes bankrupt, could you lose your lot and investment to date to satisfy a claim against the development?

This is a partial list of points to consider before you commit your money or your signature.

Know What You are Doing

Land sales promotions often are conducted in a high-pressure atmosphere that sweeps unsophisticated buyers along. Before they are aware that they have made a commitment, these buyers may have signed a sales contract and started to make payments on a lot. They may be delighted with the selection made but, if not, it may be too late for a change of mind.

8 Dishonest Sales Practices

Here are some of the practices avoided by reliable sales operations. Watch out for them and exercise resistance if you suspect they are occurring.

1. Concealing or misrepresenting facts about current and resale value. Sales agents may present general facts about the areas population growth, industrial or residential development, and real estate price levels as if they apply to your specific lot. You may be encouraged to believe that your piece of land represents an investment which will increase in value as regional development occurs. A sales agent may tell you that the developer will resell the lot if you request. This promise may not be kept. Future resale is difficult or impossible in many promotional developments because much of your purchase price -sometimes as much as 40 percent- has gone for an intensive advertising campaign and commissions for sales agents. You are already paying a top price and it is unlikely that anyone else would pay you more than you are paying the developer. You may even have to sell for less than the price you paid for the lot originally. Sales promotions often are conducted in a high-pressure atmosphere. Furthermore, when you attempt to sell your lot, you are in competition with the developer, who probably holds extensive, unsold acreage in the same subdivision. In most areas real estate brokers find it impractical to undertake the sale of lots in subdivisions and will not accept such listings. It is unlikely that the lot you purchase through interstate land sales represents an investment in the view of professional land investors. Remember, the elements of value in a piece of land are its usefulness, the supply, the demand, and the buyer's ability to resell it. The Urban Land Institute estimates that land must double in value every five years to justify holding it as an investment. In some areas the cost of holding the land, such as taxes and other assessments, can run as high as 11 percent a year.
2. Failure to honor refund promises or agreements. Some sales promotions conducted by mail or long distance telephone include the offer of a refund if the property has been misrepresented, or if the customer inspects the land within a certain period of time and decides not to buy. When the customers request the refund, they may encounter arguments about the terms of the agreement. The company may even accuse its own agent of having made a money-back guarantee without the consent or knowledge of the developer. Sometimes the promised refund is made but only after a long delay.
3. Misrepresentation of facts about the subdivision. This is where the property report offers an added measure of protection. A sales agent may offer false or incomplete information relating to either a distant subdivision or one which you visit. Misrepresentations often relate to matters such as the legal title, claims against it, latent dangers such as swamps or cliffs, unusual physical features such as poor drainage, restrictions on use, or lack of necessary facilities and utilities. Read the property report carefully with an eye to omissions, generalizations, or
   unproved statements that may tend to mislead you.
4. Failure to develop the subdivision as planned. Many buyers rely upon the developer's contractual agreement or an oral promise to develop the subdivision in a certain way. The promised attractions that influenced your purchase -golf course, marina, swimming pool- may never materialize after you become an owner. If they are provided, it may be only after a long delay. If you are planning on immediate vacation use of the property or are working toward a specific retirement date, you may find that promised special features of the development are not available when you need them.
5. Failure to deliver deeds, title insurance policies. Documents relating to the sales transaction may not be delivered as promised. Some sales in the promotional land development industry are made by contract for a deed to be delivered when the purchaser makes the last payment under the terms of the contract. A dishonest developer may fail to deliver the deed or deliver it only after a long delay. A sales agent may offer false or incomplete information.
6. Abusive treatment and high-pressure sales tactics. Some sales agents drive prospective customers around a subdivision in automobiles equipped with citizen band radios which provide a running commentary on lot sales in progress. The customer may be misled by this and other sales techniques to believe that desirable lots are selling rapidly and that a hurried choice must be made. Hurrying the buyers into a purchase they may later regret is only one ploy of high-pressure sales agents. More offensive is abusive language used to embarrass customers who delay an immediate decision to buy. In some instances hesitant buyers have been isolated in remote or unfamiliar places where transportation is controlled by the sales agent or the agent's organization.
7. Failure to make good on sales inducements. Free vacations, gifts, savings bonds, trading stamps, and other promised inducements are used to lure people to sales presentations or to development sites. These promised treats may never materialize. Sometimes special conditions are attached to the lure or a customer is advised that gifts go only to lot purchasers. A "free vacation" may be the means of delivering the prospective buyer to a battery of high-pressure sales agents in a distant place. The promised attractions may never materialize.
8. "Bait and switch" tactics. Lots are frequently advertised at extremely low prices. When prospective buyers appear, they are told that the low-priced lots are all sold and then are pressured to buy one that is much more expensive. If the cheaper lot is available, it may be located on the side of a cliff or in another inaccessible location. If accessible, it may be much too small for a building lot or have other undesirable features. The buyers may be lured to the property with a certificate entitling them to a "free" lot. Often the certificate bears a face value of $500 to $1,000. If the buyers attempt to cash it in, the amount is simply included in the regular price (often inflated) of the lot they choose. Often this so-called "bait and switch" technique has a delayed fuse. Buyers who purchase an unseen lot for later retirement may be unpleasantly surprised when they visit the development. The lot they have paid for may be remote from other homes, shopping, and medical facilities. It may be insufficiently developed for use. When the buyers complain, sales personnel attempt to switch them to a more expensive lot, applying the money paid for the original lot to an inflated price for the new one and tacking on additional financing charges. If the unhappy purchasers lack sufficient funds to accept this alternative, they are left with an unusable, unmarketable first choice. Some sales agents provide a running commentary on lot sales in progress.