Dear Real Estate Adviser,
We possibly want to buy the lot next to our home, but we are not sure of the best way to go about this. Can you help?
I'd be glad to. If there is no "for sale" sign on the lot, county tax records should indicate who the owner is. Though it may be a private owner, there's a pretty good chance it's a builder who never sold the parcel when the subdivision was constructed.
Typically, buying a lot next door is a strategic -- if not potentially profitable -- move for most homeowners. Let's run through some of the issues. First, realize you will be assuming new responsibilities, including additional property taxes, new monthly payments and maintenance obligations such as mowing and weeding.
Also, if you're part of a homeowners association, covenants may obligate an owner to build on an empty lot within a year after buying it -- a possibility in many tightly controlled communities. Barring that, be careful not to overpay. The lot has likely been vacant for a while and because you're emerging as a somewhat motivated buyer, the owner may feel he or she has added leverage and may not be willing to be as flexible on price. Feign passivity in your dealings!
And before you tender an offer, make sure to check with the county to see what the land's tax-appraisal value is. That won't necessarily be what you should pay, particularly these days, but at least it's a good reference point. This sort of lot purchase seems to make the most sense if you plan to remain in the neighborhood awhile and want the extra yard for kids, pets or privacy. Buying it as an investment or as the future site of a rental property may not be a bad move, either, depending on market conditions.
It's likely such a lot purchase would enhance your existing home's value beyond the additional cost of the lot. But this all depends on what you pay for it and in what part of the real estate cycle you eventually sell, if you sell at all.
Buying the lot next door gives you absolute control over it and eliminates the possibility of someone else buying and building something obtrusive there. If you do decide to resell it, you can essentially pick your future neighbor and even place conditions on the lot purchase such as making sure there'll be no swimming pool built or no upstairs windows facing your house.
By the way, a few cities, including New Orleans and many of its surrounding communities, have "lot next door" initiatives that offer buyers several thousand dollars and free landscaping expertise to help buy and restore vacant properties adjacent to their homes.
For now, interest rates remain low, making it more affordable to carry such a lot long term. Sometimes, "land only" loans are tougher to get than regular mortgages, but a modest residential lot next to you shouldn't be a big problem. In most cases, you should be able to deed the purchase to your existing home and add it to your mortgage. Check with your mortgage lender.
Again, it's very important to be sure you won't be facing any regulatory issues when you buy the place. That aside, it sounds like a pretty good move. Good luck!
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