The COVID-19 pandemic has changed everything and nothing at the same time. This is especially true in the world of real estate. As a real estate broker and owner of a real estate firm, the fears of the first couple months of lockdown subsided long ago, and real estate continues to be the largest investment most Americans will ever make. The “mass exodus” of individuals leaving major cities may be present in some areas, but it is not the case everywhere—including in Washington, DC. There seems to be one universal trend, however, since the start of the pandemic, and that is the interest in acquiring more land, whether it is an acreage in the suburbs or rural farmland.
Since the early days of the pandemic, my business has seen significant growth in land purchases, something that real estate agents licensed only in Washington, DC, or those who specialize in city real estate in general, haven’t seen. So, what’s the rush to buy land? What’s the difference between the types of purchases? And what would I need to do if I’m interested in purchasing land?
Importance of Land
One of my favorite movies I remember sharing with my grandma was Gone with the Wind. If you haven’t seen it, you should! It is a stunning film and definitely one of my favorite “real estate” movies. You may say, “Wait, isn’t the movie about war, the American South, and the recreation of the South after the war?” Sure, but all of those things were fundamentally about land (in the movie). At the beginning of the movie, Scarlett’s (the main character) father states: “Do you mean to tell me, Katie Scarlett O’Hara, that Tara, that land, doesn’t mean anything to you? Why, land is the only thing in the world worth workin’ for, worth fightin’ for, worth dyin’ for, because it’s the only thing that lasts.”
When the words are spoken, Scarlett, the young, spoiled Southerner, overlooks the importance, but as difficulties continue to come her way in the movie, she discovers just how true the words spoken by her father are.
“It’s the only thing that lasts.” Let that sink in! We are not Scarlett, and we are not dealing with a literal war like in Gone with the Wind. But we can all relate, because we are fighting the effects of a virus that has taken over and touched all of our lives. We seek something secure. Something that cannot be changed. This is where owning land comes in.
Why Purchase Land?
Unlike residential properties, which people usually purchase for one reason (i.e., to live in), there are many reasons that clients look to purchase land, especially undeveloped land. Here are a few:
· Agricultural: Anything, from growing corn or trees to marijuana
· Residential: Future cabin, residence, or developing and splitting land into multiple lots
· Industrial: Building business operations, think “industrial parks” where companies set up operation
· Recreational: Anything, from camping to hunting, basically simple enjoyment of the land
· Financial Opportunity/Investment: Some clients purchase land simply to hold on to it to sell at a later time; this often happens when other developments around the property, which already do or will increase the land value, are created
· Combination of Above: Most of my clients do not simply purchase land for one of the reasons listed above but for a combination of them!
Figuring Out the Process
So, how is the process of obtaining land different from other real estate transactions? As with every real estate deal, land comes with its own guidelines, appraisals, and survey options, depending on where the real estate property is located.
The first thing to be aware of is this: buying land is a different beast than purchasing a residential property, but the steps to making a purchase are the same:
· Step 1. Obtaining Preapproval for Loan: As with residential real estate, there are many routes one can go when purchasing land. An added bonus to land loans, however, is that there are federal programs that may be able to assist with purchasing farmland.
· Step 2. Showings: It usually isn’t difficult to figure out boundary lines when purchasing a residential property. With land, especially with a large number of acres, the boundaries aren’t always so clear. In some states, surveyors will use land features, such as “boulder” or “creek” to separate land.
· Step 3. The Offer: The contracts used to purchase land versus residential properties will be different. There is certainly overlap in the purchase contracts, but even if you’ve worked with a hundred residential contracts, you are in for some surprises!
· Step 4. Inspections: An inspection is usually ordered and reviewed prior to closing on residential properties. For a land purchase, this is called a “study period.” In order to truly study the land, a number of different professional opinions will be necessary (e.g., soil tests, water/flooding review, zoning review), which means the cost to review the property is also higher. Closings for land can also be more time-consuming.
· Step 5. Closings/Settlement: Don’t expect to sign the typical 1,000 documents, and don’t expect to collect the typical set of keys. Instead, the process can be a bit quicker, and purchasers usually walk away with few, if any, keys in their pocket.
At the end of Gone with the Wind, Scarlett’s husband, Rhett Butler, provides one of the most famous lines in all of cinematography, where he tells Scarlett: “Frankly, my dear, I don’t give a damn.” This is the point when Rhett walks out the door and is ready to move on with this life without Scarlett, believing his love for her was never fully returned. However, even more important than that famous line is how Scarlett responds. When all hope is lost, she looks to her land to give her strength and states: “Tara! Home. I’ll go home. And I’ll think of some way to get him back.”
About the Author: Ryan Fiero is the Principal Real Estate Broker and CEO of Urban District Realty, LLC, operating in Washington, DC and the Commonwealth of Virginia. His successful real estate background includes sales, property management, and development. Ryan currently lives in the Truxton Circle neighborhood of Washington, DC with his husband and exceptionally large Newfoundland pup.
Contact Information:
Ryan.Fiero@UrbanDistrictRealty.com