[NA] Purchasing Land [NA]

Let'sgoflying!

Touchdown! Greaser!
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Dave Taylor
An employee is trying to buy a small parcel of land on the edge of town.
6ac, undeveloped raw land to move her mobile home onto.
She has a car note, a house mortgage, a small credit card bill. She is doing OK, never missing payments, paying it all down well.
Her monthly payments for the above divided by her gross income is right at 0.4..... ie 40% which is what one bank told her is important.

She has had discussions with various banks, one said no. They won't do undeveloped land.
Another said OK, but only 50% of the lower of Appraised Value or Agreed Price, which she can't swing right now.
Another will only do it if daddy co-signs, a trap I suggest she avoid if possible.
Another will only do it if she agrees to build a 'real' home within 7 years. (I liked this one... she might could pay it off in 7 years and forget about the restriction).
The last bank is on board - with a good rate, 20% down, but they want a guarantee of water. (its outside city limits)
I told her to mark on a plat of the land where the nearest 10 wells were, and how deep they are, and then get a letter from the only water-well driller around to say they drilled good water in all those wells, and have not drilled a dry well in 20 years in a radius of 10 miles to show the banker. I doubt the seller will guarantee the presence of water and will just find another buyer.

Any ideas to push the land sale through are welcome, she is a good kid and I want to help her.
 
Let'sgoflying! said:
I told her to mark on a plat of the land where the nearest 10 wells were, and how deep they are, and then get a letter from the only water-well driller around to say they drilled good water in all those wells, and have not drilled a dry well in 20 years in a radius of 10 miles to show the banker. I doubt the seller will guarantee the presence of water and will just find another buyer.

Any ideas to push the land sale through are welcome, she is a good kid and I want to help her.

Two ideas. One is that there's probably a public agency with all the aquifers in the area mapped out. Try the Water Board if there is one, the DNR, Bureau of Soil and water resources etc.

The other is that I'd think the sellor would be willing to make the sale contingent on water being present at or above a certain depth, especially if you have the statement you described from a reputable well driller and/or the public agency involved in such things. Then you'd have to drill the well to confirm. Worst case would be the loss of the cost to drill which ought not to be too bad
 
lancefisher said:
Worst case would be the loss of the cost to drill which ought not to be too bad
In some areas of AZ, I've heard of $20K wells drilled a LONG ways down up in some mountainous areas. "Too bad" is a relative term here.
 
Sorry Dave, this doesn't help your situation, but as I am just about to start drilling on a new piece of land I can sympathyze.
In New Zealand I had a farm which had an inadequate well which was about 100 feet deep. I decided to drill a new one and got in a water witcher to pick the spot. We expected to go down about 150 feet and of course came up dry. The driller asked if I wanted to keep going or to try somewhere else. I decided to continue and to cut a very long story short we finally struck a yield at 1300 feet. The water came up hot enough to bathe in. At least it cut our water heating bill and the cows appreciated the added comfort.
I can understand the bank's position, without water the land is pretty useless and there are no guarantees that even if all the neighbors have it a well on that site will be productive.
Stephen.
 
I would try the suggestion elsewhere about getting the bank to accept drill history. However, that may not work. If it doesn't, then the water problem is easy provided the buyer has a little extra cash and the seller is at all amenable to making the deal. The buyer & seller inflate the land purchase price by the cost of a well. The seller puts a 20% deposit in escrow with purchase contract stipulations that the cost of the well drill is the buyer default penalty and the purchase contract requires the seller to drill a well in a location selected by the buyer using a well drilling company contract negotiated by the buyer. The bank ends up financing 80% of the well but the buyer meets the banks stipulation.
 
Dave:

There are a lot of lenders reluctant to lend on raw land that doesn't have basic services. There are some more aggressive lenders. Texas Land Bank advertises aggressively and there are some others. If local lenders don't do a lot of this and like this type of loan, get some perspective from others if possible. I've found finding a lender that supports and likes what you're doing to be very important.

Lance's suggestion is right on. Some entity provides water for the area. The city engineer should be able to point you to the correct party if no one else is easy to find. There is probably a regional water authority, and you can ask the neighbors. The seller is sure the first place to go: ask them how the purchaser can get water and tell them the lender will require it. Saw Ed's comment and agree in principal--not with the specific wording (of course developers don't "inflate" prices). But he has an excellent point, the value may increase with essential services provided.

Since I develop land for a living (and am holding raw acreage here in the Dallas area, if I can help, please let me know).

Best,

Dave
 
Brian Austin said:
In some areas of AZ, I've heard of $20K wells drilled a LONG ways down up in some mountainous areas. "Too bad" is a relative term here.


Here in New England water is not usually the issue. For us it's septic. Right now I'm waiting on perk test for 2ac on Martha's Vineyard my dad wants to sell us. It all comes down to whether we can figure out the septic engineering. Charming topic to research, let me tell you.
 
re: wells... there's an area I know in SD that has problems getting water and a number of folks have figured out it's significantly cheaper to install a cistern and truck water in regularly than to take the chance on poking a number of dry holes in the ground. Dunno if that helps, but it's being done successfully in western SD.
 
corjulo said:
Here in New England water is not usually the issue.
I'm glad you used the word "usually". I had a well go dry in Simsbury CT, not far from you as you know. It went dry two days after every full moon. I've never heard of subterranean tides but strange things happen down there. Probably the main water table rose and fell a fraction of an inch, just enough to spill water into my well and then... not. I finally had to drill a new well. The option was to drill the hole deeper or start over. We were down 127 feet with the original well, and I figured the first 127 feet were free so I went with the re-drilling option rather than starting over. We hit bedrock at 130 feet and when we reached the drill rig's Dne at 600 feet we had a very dry hole.

We then elected to hydrofracture the well. Very similar/identical to what they do to old oil wells to increase the oil flow. They use an inflatable collar to seal the well, and pump very high pressure water below to open up the seams. The pressure was above 2k/psi when it broke. (They go up to about 3k/psi if necessary). That gave us a reliable 2g/min which was enough for us. Particularly when I figured I had a three day supply sitting in a very deep granite hole!

Back to the subject at hand, I agree that it is common for the bank to insist on a buildable lot, meaning water and septic have been proven or even built. The alternative is to base their loan on the price of land in an unbuildable condition which won't net you much of a loan....

-Skip
 
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