QUESTION: Are contract contingencies common when making an offer on a vacant lot? If so, what specific contingencies would be considered 'common' vs out of the ordinary or unreasonable?
SITUATION: I've got my eye on a vacant lot in South Florida on which I'd like to build a custom/spec home (owner/occupant). I'm currently out of the country on business and my realtor is also on vacation… The location is very specific to my desires and lots that will suit my intentions to build in South Florida are few and far between in my price range/specific location.
I'd like to make an offer on the property ASAP but being that it is a new construction/spec build, there are A LOT of issues that could come up that could derail this project and leave me holding a vacant lot unsuitable to my needs. I understand that the vacant lot needs to be determined suitable to build on as well as permitting and design approval for my home via the county and also possible construction loan/financing approval. Lots of variables here. Oh, and did I mention I have certain time constraints, hence the urgency?
Would submitting an offer contingent on determination of suitability to build by the county (soil samples, utilities/infrastructure improvement costs, design approval/permitting, etc) be considered common and reasonable for a vacant lot purchase?
Thanks for any feedback or advice.
Yes, these contingencies would be necessary for your own protection. Nothing worse than owning an unbuildable lot.
Subject to all city and county approvals to construct your building(s).
You can't be in a big hurry though when working with city crats.
Typically, 15-30 days for site investigations. Asking for months for permit approvals and such would be reaching.
I've seen sellers wait many months to close a deal because of contingencies for development. It really depends on the market and the goals of the seller.
For example, for a city infill lot in a hot market, it's not likely that someone is going to wait for you to get all of your permits before they will close on the deal. They don't have to, someone else with experience will buy the lot without having to do much due diligence.
But a parcel with unknown development rules that has been sitting for a while? Most developers are going to request the time it takes to make sure that the lot is suitable for building.
Make an offer that you're comfortable with. If the seller doesn't like it, move on to another deal.
As a good buddy of mine likes to say, "Some times the best deals you make are the ones that you walk away from."
@Jeff Kushner I'm really glad you asked about this because I'm in a very similar situation. I'm looking at a piece of land to develop an apt community and am in the weird, catch-22 stage of spending money on due diligence to determine financial feasibility.
@Jeff S. Thanks for the confirmation that subject to contingencies weren't just for existing structure purchases. Fortunately, the lot I'm considering is in an unincorporated part of the county, so won't have to deal with extra city zoning/permitting. As for timelines, they are more related to financing and just my excitement to put the rubber to the road, money where my mouth is! But I'm definitely not going to rush into this ;)
@Wayne Brooks I agree that I can't expect for existing owners to wait for months of what-if's from the county building/zoning/permitting department to fully approve my project before completing the lot purchase, but I'll definitely need 15-30 days just to get a proper site assessment to determine build feasibility and basic initial response from whomever I can speak to in person at the county regarding my design intentions. If the site works, I can always refine my design as necessary to fit within the county's guidelines…
@Lynn Currie Walking away from this specific lot will be easy if it can't support the project I'm intending but the location is almost unbeatable for my specific desires (this is an owner/occupant new construction build for me, not a grand scale development real estate investment). Certain aspects of the lot make it less than perfect, but will also probably help to keep me within reality budget wise as I move forward building my first (and hopefully my 'dream') home! The lot is fairly priced in my opinion looking at comps, but I think there is some wiggle room to catch a deal, so hopefully I'll get an offer submitted in the next week or so.
@Joe Fairless Sounds like your project is significantly larger and more ambitious than mine, but that probably correlates with your significantly larger experience level, so I wish you the best of luck! I'd love to hear more about your project as it moves forward, even if only still in the due diligence phase. I can only assume that a certain portion of your project's budget is dedicated to determining if the project is worth moving forward. If it turns out that it isn't, I'm sure that would be considered money well spent! Got to pay to play, one way or another. I'm still in the 'spend my TIME and EFFORTS' phase and am dedicated to learning, but it's about time for me to put my money where my mouth is and start applying some of this knowledge, so wish me luck! ;)
Thanks again to all for your responses, perspective, and advice.
Hi there Jeff, if you'd like, you can call my brother. My brother is a real estate agent in South Florida, I can ask him to find out any info you need, I'm sure he would love to help out a former Marine! His number is 561-373-5569. I'm overseas too, so I totally understand how difficult things can be. My Brother's name is George by the way.
@Jeff Kushner Sounds like this may be a great lot for you!
In doing your due diligence, be sure to talk to some banks (or other sources of financing) about the loan. A lot of banks won't do loans to people building their own homes.
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing