2 Things You Must do Before Signing the Purchase Agreement

by on February 26, 2014Shannon O'Brien

Once upon a time, in a sleepy little town in Minnesota, a man with big ideas and lots of vacant land decided to build a subdivision. Unfortunately, his parcel was zoned for commercial development. City leaders, however, were more than accommodating when he asked for a zoning change on enough of the land to build 170 houses. The rest of the parcel retained the commercial zoning designation.

The subdivision was developed, homes were built and families moved in. It became an in-demand neighborhood because of the majestic and natural beauty of the heavily wooded acreage that fronted it.

Before signing on the dotted line, homebuyers should check zoning and tax history for their property and the surrounding areaAlmost 30 years later, the original landowner’s son, who inherited the vacant parcel when his father died, has decided to sell it, and a major big-box retailer has decided to purchase it. The plan is for a 24-hour, 180,000-square-foot superstore, directly across the street from the sleepy little neighborhood.

Environmental impact studies show that traffic in the area will go from 2,000 vehicles per day to a whopping 14,000. The back of the superstore will face the neighborhood. And the back of the store is where huge diesel trucks make their deliveries in the middle of the night – big trucks that beep when they back up and idle while they unload.

Homeowners are upset, to say the least. Although hundreds attended each city council meeting on the new commercial development, voicing their concerns over the noise, the traffic, and the decimation of their home’s value, the city council finally granted the store’s developers their conditional use permit.

The Moral of the Story

Homes surrounded by open space are attractive to many homebuyers. For these people, you just can’t put a price on the seclusion and serenity such a location offers. Vacant land near a residential area, however, should raise a red flag. After all, if it’s vacant, it’s buildable.

We hear all the time about homeowners fighting airport noise, the building of major freeway overpasses, or industrial development that they feel is too close to their homes. They’re known as NIMBIES – for “Not in my backyard” – a term coined in the 1980s by the hazardous waste industry.

Avoid the possibility of becoming a NIMBY. The only way to find out for certain if anything is planned for vacant land is to consult with the local city or county government.

Check the Zoning

Another example of a homeowner affected by zoning is Jack, who owned a 5-acre ranchette in Northern California. Situated on a prime piece of real estate, Jack paid a hefty price when he purchased the property.

Because he didn’t bother checking the zoning in the area, Jack lost about half of the value of his home when the property fronting his was purchased by someone who then used the land to raise and butcher pigs.

Zoning rules also affect how you can use your own property. If you plan on operating a business out of your home, remodeling the house or adding structures, parking a boat or RV in your driveway, or even cutting down trees, you will need to check your area’s zoning rules.

Check the zoning of nearby vacant land or the property you want to purchase by going to your county’s courthouse or city municipal building. The local planning department is a good place to start. Look at the city or county’s long-term plan for the area as well.

Check the Property’s Tax History

It’s hard to think of doing a background check on a house you’ve fallen in love with, but doing so is critical. One of the checks that most homebuyers fail to run is the property’s tax history. Real estate taxes go up – that’s a given. But knowing how quickly and how high the taxes on the home of your dreams have moved in the past is important.

This is especially important if you’re purchasing in a new development where there is a greater need for infrastructure development. Excessively high property taxes make a huge impact on your monthly payment.

Known as “tax traps” by Bankrate.com’s Marcie Geffner, they include unexpected reassessments and rate hikes, among other unanticipated surprises. She suggests that you check with the local tax assessor to determine the following:

  • How the assessor calculates the tax.
  • If the home will be reassessed when you purchase it.
  • The date of the next reassessment.
  • Which exemptions, if any, apply.

Ask if the home qualifies for a homestead tax adjustment. While not available everywhere, if it’s eligible, you could save a significant amount of money in taxes.

The real estate industry is quick to suggest that homebuyers have a home inspected for any structural deficiencies or problems with its major systems before finalizing the sale. That is excellent advice, but your home isn’t merely a structure, it’s also an investment. In fact, there are few investments in life as important as the purchase of a home. Do some sleuthing beyond the home inspection to ensure you’re spending your money wisely.

{ 1 comment… read it below or add one }

Jason Feinman March 1, 2014 at 8:32 pm

A good buyers agent will pull up the tax map of the subject property and other properties and look for potential pitfalls before they even arise. Excellent advice.

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