First of all, before you agree to buy, do research on what you are buying. Don’t be blinded because you found a smoking hot deal on cheap land! If you can view the land and talk to locals, you’ll be surprised at what you might find. Maybe you like the “feel” of the area and the land, maybe you don’t. How close are your neighbors?
If you are going to buy sight unseen, you could end up with a “pig in a poke” without an option to switch equity to anther parcel if you don’t like it when you actually see the land. Check on ownership at the county, paid taxes, deeded road access, zoning, flooding issues, covenants, etc. Find out if you can have animals and the number and sizes if you want to raise animals. Check what type of soil there is on the land and the weather conditions in the area, if you want to grow. Do your homework. Make some calls. Check a referral or two if the seller has any. Ask questions. Find out about what it takes to improve. Ask about well depths, water quality, septic systems (be sure and check out our article called Septic Systems For Beginners), permits and building issues. Is power close? Are you going to live “off grid?” How far to the nearest town with a hospital?
Most sellers will use some type of Agreement for Sale of Real Estate, which is also called a Land Sales Contract. The original contract can be recorded at the county seat where the land is. A recorded deed however, would be better. In Oregon, a Warranty Deed is the best deed you can get for land. In California, they use a Grant Deed. Check with the state in which the land exists to determine the best deed to use. Once you are recorded at the county seat, you can deal with the Planning Department directly and not have to go through your seller, to start your permit process for building.
If you are buying on terms, you can ask the buyer for a deed, which he notarizes and records. In return, you give the seller a Trust Deed which you notarize and record. The Trust Deed states that yes, you may have the deed on the property, but you must make “such and such” payments for so long. In this instance, you give the seller a Promissory Note that must be held with the Trust Deed and eventually sent to the title company used as the Trustee between buyer and seller listed on the TD. This is only sent at the end of the contract when paid in full. The trust deed has a “Request for full reconveyance” portion, to be signed by the seller and used when all obligations have been paid. So, the seller would sign that reconveyance on the TD and the title company then, with the Promissory Note in hand, would reconvey, or take away the TD, stating “paid in full.” This would be recorded at that time by the title company, with the county recorder, now showing no encumbrances against the land.
Most of our buyers buy sight unseen, so what my wife and I offer, is an option to switch equity to another parcel if people are not 100% happy when they view their land. Once people view their land and verify they do NOT want to switch, this is the time we recommend getting the Warranty Deed, Trust Deed, and Promissory Note done. If you record your deeds before you see the land, then don’t like it, you’ll have to spend more money to record the changes.