The first question a buyer should consider is, “Why am I thinking of purchasing land and building, rather than buying an already-existing home?”

Generally the cost of bringing the elements of home-building together (Land, site improvements such as road, clearing, well, septic, possibly earth moving to create flat areas, electrical hookup or off-grid system) will cost more than the fair market value of a similar, already built home.

That may sound counter-intuitive, but it is a matter of supply and demand regarding home prices, vs. the cost of building materials and the cost of hiring contractors.

Even if you plan a lot of sweat equity, you can frame and finish a house, maybe wire and plumb the house, do the siding, roofing, and finish work, but most people would not have the skills and/or time to do all that themselves, and almost everyone would have to hire contractors for the septic system, and well, and driveway, and electricity. Oh, and putting in a foundation with proper footings and draining. Did I mention landscaping?

Figuring your costs can be tricky. Someone may give you a figure of so much per foot for driveway, but the particular topography might require switchbacks, and culverts, which have to be added in to the costs. A contractor might put in a lovely-looking driveway, get paid, and next spring you find out that the driveway washes out when it rains hard.

A land buyer can get in over their head, thinking that they did well to get a nice building lot with a south-facing slope for $50,000 when similar acreage goes for twice as much, but it often turns out that the real acquisition cost of the less expensive parcel is greater because the site improvement for the lower-price land will cost more. Maybe the driveway and power will be terribly expensive, and maybe the septic system will be a lot more expensive because of a high water table or ledge.

So why would someone buy land and build?

Maybe they want a special type of house which is only possible with a building scenario. Perhaps it is an earth-bermed, net-zero house. Of a geodesic dome. Or an octagon or round house (which require thought for what you will use for furniture against odd shaped walls).

While I think that sometimes people think too much about resale value at the expense of what they really want for themselves, I also know that a time can come when someone needs to move, and resale becomes important. If you have build an oddball house, will you have trouble selling it, particularly if lenders will not finance a purchase? 

A buyer might be thinking about a small cabin or tiny house with highly-efficient use of the space. Will they be surprised that living there is not quite as idilic as youtube videos and magazine articles? Will they get on each other’s nerves when they need to spread stuff out for a project?

And while we are on “what ifs:” What if your off-grid electrical system does not seem so green when you realize that your solar voltaic system could also be called a lead-acid battery system, needing continuous monitoring of the sulfuric acid for PH, not to mention adding acid to keep the level up, not to mention running a polluting small engine generator when it has been cloudy.

Building can become consuming. Dealing with contractors can be stressful. Keeping within budget and on schedule can become impossible. There are complex elements which need to be coordinated, so that if the electrician does not come when promised, the sheet-rocking may have to be delayed. Unexpected problems can develop.

For example when I was renovating my cabin to get it ready for sale, a stone mason who built a beautiful retaining wall, and a plumber, who needed to get my water line under the wall decided that the best way to communicate with one another was to start World War III. They each seemed to see my role as referee. For me the issue was getting the work done well; for them what seemed most important was who was right, who was the bad guy 🙂

Even if everything goes well with only minor glitches, the process is inherently stressful. Purchasing a home is also inherently stressful, but it is much less so.

Finally, a possibly unexpected cost of a highly-stressful endeavor can be strains on a relationship.

I am not saying that a land-buying and building scenario should not even be considered, it requires analysis, planning, reality-testing. It could be the right thing for some people, but not for everyone.