Obtaining the Dream

It seems as if when I was young, everyone wanted a home on an acre or two. I don’t think that dream has changed for a lot of people. If you read this column last month you probably understand that in San Mateo County you don’t buy a land for building a home by the acre. Let’s discuss the cost of "getting the dream."

Land is valued by location, terrain or usability and density (density being the number of single family homes San Mateo County allows to be built on that given parcel). Many 2 to 5 acre parcels have sold for more than some 20, 50 or even 100 acres.

In our current real estate market a 50 X 100 foot lot, ready to build, is very difficult to obtain for less than $150,000.00, and a number of them are starting to sell for over $200,000.00. Once a parcel reaches, or exceeds, one acre in size, in San Mateo County it is recognized as ‘horse’ property (even if the grounds don’t seem ideal). Barring other restrictions, 2 horses are allowed on 1 acre and 1 for each additional acre. So again, subject to location, terrain or usability there is a significant price jump from under an acre to an acre or more. Even if you don’t want horses you will pay a premium for a property of a size that can have horses.

Regardless of the parcel size, below are 3 requirements that may not be included in the original purchase price and involve significant additional costs.

  1. Water source
  2. Waste disposal
  3. Access

When you look at the chart of available parcel costs above, keep in mind that the seemingly "reasonably" priced property may be that way for a reason. It is most probably priced that way either because it is not buildable in the foreseeable future - it may have value is to a neighbor as a "privacy lot" - or due to the costs involved to actually build. When the costs are added to the price you may find the price in line with the other parcels that already have the improvements. Often the Buyer will get a price "break" for buying the property subject to proving the buildability. The price of this "break" is offset by spending money without having a guarantee that the tests will pass. Of course that is better than paying the full price of the lot to then find out the problems, and generally there are preliminary investigations you can do to determine the likelihood of the test working. Caution to any buyer of undeveloped land who thinks they are getting a "deal." The costs involved can be more than a rude awakening. Investigate the following areas prior to your purchase and avoid surprises after you own the property.

Water Source

There is no way to build without providing documentation of a water source. That can either be from a public or private water company or by well water (springs are no longer allowed as a residential source). If there is a water district that serves the area of the property you are looking at you will need to investigate if water is available from them and if there are any special qualifications that your parcel needs to meet. If you are drilling a well, you need to show that it produces 2.5 gallons a minute for a period of 4 hours (more gallons per minute are required for some treatment processes). In addition, the quality tests meet the minimum requirements of SM County also. Testing an existing well can cost a few hundred dollars, drilling a new well is likely to cost $10,000.00 to $20,000.00. If needed, systems to treat the water can escalate the costs from there. Of course there are the unfortunate few who cannot find water, or enough to use treatment methods. Which is, of course why one should never buy without a contingency of obtaining a well that meets SM County quality & quantity requirements.

Waste Disposal

This will be in the form a sewer connection or a septic system. In areas where there are sewer systems, often they do not allow septic systems. Also, simply because there is a sewer authority, does not mean there is sewer capacity or that the particular parcel qualifies for a sewer hookup. The coast has had some very interesting sewer situations over the past few years and it is important to get specific information about the particular parcel if you are in a sewer district. If there is no Sewer district, a septic system will be necessary. To put in a septic system, a parcel must pass a "perc test." This is a test to assure that the soil is able to percolate the wastewater adequately. As I've said in the past, many, many parcels would not meet today’s requirements. First, a property needs to meet the soil percolation requirements, then the set backs start from property lines, the structure, creeks, cliffs, distance between fields and on and on. If you have a water source other than a well, then a level acre site is possible. Less than that becomes very difficult to fit a house on. However if you need a well and a septic system on a parcel, it can be difficult on even 2 or 3 level acres.

Access

So now you’ve found your 20 or 100 acre dream. Its privacy is wonderful; you can’t see another home. It has a great level area that is almost five acres. Either it has water, or because of other wells in the area, there is reason to believe that water will not be the major problem. However, access to the site you love is about a mile from a paved road. Between SM County’s road and driveway requirements it may cost you $500,000.00 to $900,000.00 to create road and/or driveway access to the site. A road like this can severely impede the building process since the Building department and the Bank will demand completion prior to final approval on the construction.

There are many other factors, such as the requirements to build in the least visible spot on the property and not being able to build in the State or County scenic corridors, or prime agricultural land (if there is any other place to build on your parcel).

If you’re looking around and saying you know someone who didn’t have to follow this requirement - times and the development climate has changed and continues to change. Undeveloped land is not something to buy and develop later. There are too many ongoing changes. What is buildable today, may not be within a year, and to wait more that that is just courting disaster. Years ago I bought 40 acres, and the utility lines were free at the time of the purchase. By the time I was ready to build three years later, bringing in utility line was as much as the cost of building the house itself because of a change in the PUC (Public Utilities Commission) requirements. I can never tell you what will change - just that there will be a change and probably plenty of other complications before you get to pour the foundation.

A Final Note

If the parcel you choose is in a rural area without most services, it is realistic to expect the process to take between 2 and 3 years to get all of the approvals needed to start construction. It is not a quick process. If you’re going to undertake building on a parcel, the most important thing is to start and keep the process going so that if there are any changes the possibility of you being "grand-fathered in," and an exception to the new rule(s) or requirement(s) is more likely.