Buying a Lot for a New Build? Remember to Ask About Lot Costs

Posted on: 6 January 2021

A lot cost is literally the cost of the lot that your new house will sit on; in other words, it is the cost of the land and the costs resulting from dealing with features of the land that you have to buy in order to actually have a house there. These costs may or may not be included in your builder's estimate, and even if they are, there may be costs you can eliminate. Before you arrange to buy a lot and have a house built, you need to know which lot costs you'll be paying.

Ask if Any Are Negotiable

First, find out if any are negotiable. Some may be baked into the cost of the house because the builder has decided certain lots will have houses with certain features. This can depend on the layout or grading of the land; for example, a house that sits on a fairly uneven grade that is supposed to include a basement may have a design requiring a partial basement — one where one side of the basement is underground but the other side actually looks like a ground floor — that you can't change. So, you end up with additional costs to create that exterior, complete with a door and possibly a window. That could make your lot costs more expensive than those for a lot where the basement will be completely underground and not have the need for an exterior door.

However, a cost such as lot clearing might be more flexible. Let's say a builder is going to clear the land of rocks and brush that would hinder construction, and the builder says the clearing will cost $X amount because you want to add a detached guest house on one side of the property where the soil is particularly rocky. You could potentially eliminate that cost if you dropped the guest house from your plans, or you could possibly reduce the cost if you found another part of the property that didn't need as much clearing done.

Are the Costs Included at All?

You also need to find out if the price the builder is quoting includes the lot costs at all. Lot costs can be as much as one-quarter of the costs of building a home, so you can see why you need to know about them upfront. You might also know about some lot costs immediately, like permit costs, while others might not be added until construction is almost over. Be absolutely sure about whether a number you're quoted contains lot costs.

Surface vs. Mineral Rights

When you're having a home built, the size of the closets and the view of the hills might be your main concerns, but you really need to ask if the price of the house and land — those lot costs — include buying mineral rights. The rights to the natural resources under the ground, such as water, gas, and oil, can be severed from the surface rights, which are the rights that let you live on the land and do what you want with the top few feet of soil. In the past few years, many builders have made it a policy to transfer mineral rights to themselves or a subsidiary. While in many cases, the builder won't transfer those rights back to you, the buyer, you should at least know if that amazing, reasonable home-building cost is due to mineral rights being taken away.

Reach out to a home builder for more information.