Due Diligence When Buying Land: Tips for Buyers

“Due Diligence” refers to the research and analysis that a person or business performs before making a big decision. It means thoroughly investigating facts, risks, and records to ensure you know exactly what you are getting into and to avoid hidden dangers.

Why is due diligence necessary when buying vacant land?

Due diligence is essential when buying vacant land because when purchasing land, a buyer usually knows very little about the property and consequently is at a disadvantage. In addition, unlike purchasing residential property, there are no statutory seller disclosure laws in Michigan that require a seller of land to disclose information about the condition of the property, although a seller cannot misrepresent the condition of property or commit fraud. Consequently, due diligence for buying land is essential both prior to signing a sales contract and during an inspection period in a sales contract.

What to consider before signing a sales contract?

Researching the property’s location and assessing utility access is a good place to start before signing a sales contract. How close is the property to public roads? Is there access for electric, natural gas, fiber optics, telephone, water and sewer. If utilities are unavailable, what are the costs for accessing the utilities that will be needed.

Another important step is to verify the property information on file with the local municipality and county, including zoning regulations and ordinances.

Sales Contract Inspections Periods.

Every sales contract for vacant land should have a well-defined inspection period which makes the contact contingent on the buyer’s approval of all inspections, tests and surveys of the property. This includes inspections and tests for well and septic systems, underground storage tanks, hazardous materials as well as obtaining an acceptable survey and confirming that the land is buildable for the buyer’s use given any applicable building and use restrictions.

Request Disclosures from Seller in Writing.

In addition, a buyer should provide a seller with a written request for known conditions affecting the condition of the property. Important questions to ask about the property include:

• Has the property been surveyed and if so, is a copy available?
• Is the seller aware of any prior divisions or splits and if so when they occurred?
• Is the seller aware of any encroachments, easements, zoning violations, or non-conforming uses?
• Is the seller aware of any flooding, drainage or grading problems?
• Has the property ever had a “perc test” and if so, is a copy available?
• Is the seller aware of any environmental contamination of the property or ground water contamination.
• Is the seller aware of any underground storage tanks either presently on the property or which have been removed from the property?
• Is the seller aware of environmental regulations or conditions which would restrict the use of the property?

Although written disclosures to these questions is a start to a buyer’s due diligence, it is important to recognize that a buyer should have their own professionals and licensed inspectors determine the condition of the property.

Engage an Experienced Real Estate Attorney to Review the Sales Contract, Owner’s Title Policy Commitment and Closing Documents

Engaging an experienced real estate attorney, even for a standard transaction, helps avoid costly mistakes and ensures the contract reflects the buyer's best interests. Although not required by Michigan law, an attorney involvement in the process is always recommended not only to protect against unfavorable terms in sales contract but also to evaluate legal issues a real estate agent cannot.

• An attorney review of the sales contract prior to signing the contract, or within a time period for attorney review in the signed contract, will help to ensure fair terms and appropriate inspection periods before the contract becomes binding.
• An Attorney review of the owner’s title policy commitment will help to identify liens, judgments, easements, restrictions or municipal violations that impact ownership.
• An attorney review of all closing documents will help to ensure that the deed, loan disclosure, affidavits and closing settlement statement are accurate.

Your Next Step: Schedule a Consultation with an Experienced Ann Arbor Real Estate Attorney.

Buying vacant land has many advantages but it also comes with many challenges. Consulting an experienced real estate attorney is essential to understanding and protecting your rights.

Attorney Bill Ager helps individuals and families with all aspects of purchasing and selling real estate, including vacant land. From his Ann Arbor office, he serve clients throughout Washtenaw County.

For additional information on his reasonable flat fees for real estate services, contact Bill Ager by calling (734) 649-0784 , sending an email to bill@agerlawoffice.com , or using his online contact form.