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Updated almost 9 years ago,
Vacant Lot Purchase Agreement
I am looking to purchase a vacant lot in San Diego for the purpose of building a spec home. I have already spoken with the land owners and they are expecting my contract in the next day or 2. What is the appropriate length of time for inspection period and escrow in this kind of purchase? Better yet, does anyone have a contract they have used in California to purchase land for the purpose of new construction? There will be no splitting of lots, changing of zoning, etc. Thanks, Matt
1) For your contingency period and close date there are a couple of factors to nail down before you write down a specific period for each.
a) Contingency Period (inspections): first, if you are applying a loan on the property, verify with your lender on the amount of time they need to perform their appraisals and underwriting. Write this into your "Loan Contingency" period part of the contracts. If no loan, great, forget about the above. For inspection periods, there is little to bee done on vacant land. Give yourself and the owners enough time to deliver you their required disclosures. On your part, you want time to verify that the land is zoned for the use you want. In building a spec home, give yourself enough time to coordinate with your architect to insure that your preliminary plans for a home will work for the lots. With a good architect who knows the area very well, this should take less then 14 days.
b) Closing: our clients primarily close within a few days of the release of contingencies for vacant land on an all cash purchase since there is nothing else to be done at that time (no one is moving out of the property, no one is moving in as it is vacant land). If there is going to be a loan applied to the Property for purchase, verify with your lender the time frame they need to fund once underwriting has approval.
2) There is no real purchase agreement in purchasing land with the intent to build. After you purchase the land it is up to you what you want to do with it. Once you go to sell the Property with a structure on it, there will be a New Construction Purchase Agreement used.
If you need some sample Purchase Agreements, shoot me a PM
Hey @Matt C.
As the gentleman above me so thoroughly detailed, there really isn't a 'standard' time frame for escrow/contingencies. What ends up being the most advantageous terms will depend on the extent to which you'll need to conduct your due diligence in terms of checking all the boxes for making sure your plan for the lot will ultimately be permissible.
There is a contract we typically use here in San Diego specifically for the purchase of vacant lots.
Feel free to shoot me a PM if you'd like my help in getting that contract put together for your deal. I'd happily work out an arrangement that makes sense for both sides.
@Nicholas Smiththanks for the insight. What is rule of thumb? 90 day inspection? 120? How about escrow? @Karen margrave I know you probably deal with this quite often.
I've only done one deal with land so take this as minimum experience, that said. It closed.
I used a one page contract and I think I had a 60 or 90 day inspection period. You just want lots of time... the more the better. Escrow is just like any other piece of property.. needs title insurance etc. Standard stuff, don't over complicate the contracts. The area that needs to be precision is your numbers on the deal.
If the seller is motivated and you don't want to miss the boat, just throw a big number on there and go. You just want lots of time to do your homework and know you are getting into a profitable deal, while having the protection the deal is yours to have.
Dude, Matt you're an agent. Just use the vacant land purchase agreement (VLPA), its a CAR form.
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@Matt C. Sorry, I just ran across this because the @mention didn't work. Being a licensed agent, we always use the standard VLPA (Vacant Land Purchase Agreement) However; you can probably find a contract online at legal zoom. As for contingencies, it would depend on the lot, the location, are there any soils reports or anything that have been done on the property yet? Is it level? Do you already know what the lot coverage can be, setbacks, etc.? Are there utilities on the property, down the road, or ? You'll need a Natural Hazard Disclosure Statement too, you want to make sure nothing was on the property that could cause a disaster cleanup (oil dumped, etc.) I'm not sure of time frames to get a soils report in San Diego, but you might be able to make the offer contingent upon the completion and approval of the report. You want to get as long as you can, at the same time, in a good market the seller wants to give you as little as they can, so talk to them and see what they're willing to do. Many sellers have no clue what it takes to build on a lot.
What are the dimensions of the lot? What's around it?
- Karen Margrave
As stated by @Kevin Foxthere is no standard time frame for contingencies, If you use the VLPA, which I also suggest, the default is 17 day contingency for inspections and appraisals and 21 days for loan approval. BUT, this is all negotiable. Some of our clients opted in for a shorter Contingency Period due to the fact they are well versed with the neighborhood and already know their numbers. For them (the Specs whom work a specific area repeatedly) it's all about getting their money in and working for them as soon as possible. If you are not as familiar with the area, building codes and Buyer demand, I would opt for a slightly longer contingency period to make sure all your ducks are lined up. This would be a personal preference on your end. I believe that 30 days is more than sufficient to do your due diligence. If after a month you are still unsure on whether the project will work for you, it probably won't.
If everything works in your favor, than closing after the contingency period is a matter of personal preference to you. Since you will have all your questions answered during the contingency period (inspections), the only thing left to do is fund. If you are getting a loan to purchase the property, the time between contingency removal and close is up to the amount of time your lender will require to fund.
Hope this helps!
Do you have an architect yet? I work for a small firm that has experience with spec homes. We are currently doing two of them. PM me if you would like to talk.