8 steps to follow when buying a plot of land

While finding a place to build a home for a lifetime is a unique process that each family adapts to its own way of doing things, in today’s post we set out 8 steps to follow when buying a plot of land—steps you should follow in one way or another from the moment you decide to build your own home until you own the land.

We will see that what may seem like a very simple process is, in fact, a relatively complex transaction. Choosing a plot of land for what could be our future home is not something to take lightly; it is important to be clear on each phase and understand the implications of every part of the process.

1 Set a budget

Setting a budget is the first of the 8 steps to follow when buying a plot of land, as the maximum price of the land we can buy will be determined by our total financial capacity—that is, the total investment we will allocate to the land and the house.

Based on our experience at our architecture studio, where we are constantly working with clients who are searching for and purchasing land, you should never allocate more than 30% of the total budget to buying the land.

For this first step, it is already advisable to contact an architect who can help you get an idea of what both the land purchase and the construction of a house may cost, including taxes, permits, and the technical project associated with building a house.

Defining a maximum budget for the land will help you apply an initial price filter to your searches—something that is very easy to do online.

Let us look at an example: if our total budget is €240,000 to buy a plot of land and build a 100 m² house, we should allocate a maximum of €80,000 to purchasing the land.

In addition, you should bear in mind that to the sale price of the land you must add the property transfer tax, which is 8%, plus land registry and administrative agent fees, which will amount to an additional 2%—10% in total on top of the sale price.

On the other hand, you should be careful with land that is owned by a company, in which case you are buying one of its assets and must pay a total of 21% VAT instead of 10%.

2 Define a location

If the land you are buying is to be your future home, you will likely have preferences for certain locations.

Perhaps not a specific town or a particular neighbourhood, but rather an area or setting—more urban or more rural—within a given search radius.

You should also check that the plot is well connected in terms of access. Depending on your circumstances, you may want public transport to reach nearby. Likewise, the type of roads and streets that lead to the plot—fast roads or narrow streets—may influence the final decision.

In addition to connectivity, you should also consider proximity to schools, shops, and other public services. You will likely prefer to have a school or some shops close by.

Finally, the site location will also determine certain climatic characteristics. In this regard, it is worth researching or finding out a little about local rainfall and temperature patterns. The climate can significantly affect the subsequent design and construction of the home.

3 Check the plot’s characteristics on site

Perhaps this is one of the clearest of the 8 steps to follow when buying a plot of land, because you need to walk the site and get a first-hand impression of the place where you will live.

In this regard, at Slow Studio we always accompany clients to visit the plot, because it is a way to check first-hand the sun exposure, the slope, the soil type, and potential issues such as nearby high-voltage lines, unfinished developments, or even defective ground that could cause foundation problems.

Sun exposure and orientation

Orientation—and therefore sun exposure—is almost the most important factor to consider when making a decision.

A plot without sun, either because it is blocked by obstacles or because it is on the north-facing side of a mountain, can be a major drawback when building a house.

The sun is a source of life, warmth, and light. Exposure to the sun provides vitamin D; UV rays help eliminate microorganisms in water and air and provide negative ions, which are so necessary for a healthy environment in a home.

Your home should take advantage of southern light to warm and illuminate the rooms, especially in winter. You should check whether it is possible to orient the house to the south, or whether there are trees, neighbours, or other obstacles that could prevent sunlight from reaching it.

Slope

Slope will also be essential and, in a way, is related to sun exposure.

If the plot you are considering slopes to the south, it will be ideal, as the house will open up to the views and the sun in the direction of the slope, while the land itself will protect you to the north.

If the slope runs in the opposite direction to the ideal orientation, this does not necessarily have to be a problem, but it will need to be addressed in the design, as you will be working to bring sunlight into the home through courtyards and internal openings.

Although sloping plots tend to be cheaper, they later entail higher construction costs. Earthworks and retaining walls are key elements on this type of land. When assessing the total cost of a plot, it is important to take this into account.

Ideally, before deciding to buy a plot of land, you should always consult an architect who can help you review all these conditions.

Utilities

In addition to sun exposure and slope, it is also important to ensure that connections to water, electricity, and gas networks are available.

You may find plots where the development has not yet been completed due to legal, political, or planning issues. There are also developments where some services have arrived and others have not; it is common to find plots without a sewage network, requiring wastewater to be managed through a private septic tank.

At other times, the routing of these installations is planned, but at the expense of the owners of adjacent plots in the future, and this additional cost should be taken into account in the cost of the land.

There may also be constraints caused by nearby power lines or transformer stations. These are rights established prior to your purchase and cannot be modified.

4 Understand the type of subsoil

The fourth of the 8 steps to follow when buying a plot of land is to understand the type of subsoil.

The subsoil of your plot can significantly affect the cost of the foundations, which can represent between 5% and 20% of the total construction cost.

If you have doubts about the subsoil characteristics, it is always best to carry out a test pit. In fact, at our Slow Studio, we always come to see the plot with you and assess whether it is necessary to call in a geologist to carry out a test pit and provide details on the soil composition and bearing capacity.

Very soft ground may require very deep foundations, which can mean a significant additional cost in the overall construction budget.

These characteristics are not only important when planning construction; they can also be a basis for negotiating the land price, in the sense that the additional foundation cost can be used as an argument to reduce the total sale price.

5 Check the building regulations

Before buying the land, it is also important to understand the building regulations that apply to it.
It is essential to consult the municipality’s specific building regulations. The buildable area and site coverage can limit the dimensions of your home, and it is important to check whether this fits your idea of a home.

Site coverage is the area of the plot footprint that you are allowed to build. For example, if a 1,000 m² plot has a coverage of 20%, you could build a house with a footprint of 200 m².

On the other hand, buildable area refers to the total number of square metres that can be built across all storeys, if there is more than one.

Continuing with the previous example, if on a 1,000 m² plot you have a coverage of 40%, you can build a total of 400 m² distributed over two storeys of up to 200 m² each. However, the number of storeys may also be limited by regulations and, in general, for single-family homes the maximum height is usually limited to one or two storeys above ground level. There are also many regulations governing the construction of attic spaces.

Another limitation that is not always considered is the number of parking spaces required per plot, as well as whether they must be covered or enclosed within a porch or garage.

On sloping plots, it will be very important to consult the regulations regarding earth retention. Some regulations limit the volume of earth that can be moved on a site; others limit the height of retaining walls or the terracing of the land.

These specifications are included to prevent disproportionately high walls from being built that disrupt the harmony of the development and affect, in an uncontrolled way, the natural functioning of the land and the local ecosystem, with its run-off patterns, vegetation, or groundwater.

Materials, especially for the façade, may also be determined by regulations. For example, in rural areas or charming small towns, you may sometimes be required to build a stone façade so that it fits in with the surroundings.

We recently came across a case like this at the studio. In the Colomers house project, we had to use stone on the façade due to regulations, as most of the village is built this way.

Finally, you will need to check the boundaries with neighbours and the street.

First, it is important to review the required setback distances. Generally, the setback from the street is restricted, either requiring an access strip or requiring alignment with the street façade, as well as the setback distance from neighbours.

Sometimes the type of boundary between plots is defined or limited. For example, regulations may prohibit building the perimeter of the plot with a wall or opaque element, or may limit wall height or wall typology.

6 Consult the town hall

The sixth of the eight steps to follow when buying a plot of land is not mandatory but is advisable; it is worthwhile to review all the above points with the municipal architect, who is the person who grants building permits.

You should confirm with the town hall whether the development has been formally adopted and which services are available.

When a development is adopted by the town hall, it means the municipality takes responsibility for maintaining public spaces and services or utilities. The opposite case is that of private developments, where the neighbours themselves pay for repairs to installations and services, as well as street cleaning and waste collection.

You should also check, as mentioned earlier, that there are supplies of water, gas, sewage, electricity, or even fibre optics. If any of these networks are missing, you would need to plan a home that can operate autonomously for the missing supply. This is information the town hall should provide.

7 Sign a deposit agreement

Once you have checked the plot and the regulations, and once you are clear about the land you want to buy, you will sign a deposit agreement with the owner.

A deposit agreement is a private contract between the buyer and the seller in which part of the total cost of the land is paid as a deposit.

It is a contract that serves as a firm reservation, so that neither party can back out without serious penalties, and it is signed so that the buyer has a time window from the moment they decide to purchase to carry out the necessary steps to gather the full amount.

For example, you may be waiting for mortgage approval, a personal loan, or the sale of another property to raise the money needed for the purchase.

In the deposit agreement, two key factors are defined:

The first is the price. Typically, you pay around 10–20%, although this is agreed between both parties. The deposit amount will also depend on the buyer’s liquidity, as it may sometimes be subject to the bank granting a loan.

The second is the timeframe. A deadline is set to formalise the purchase and pay the remainder of the total cost of the land. In the meantime, the buyer must carry out all the legal or administrative procedures required to complete the purchase.

This period is usually between 2 and 6 months, although again, it will always depend on the agreement between both parties.

For the signing of this contract, it is important to have the advice of a lawyer.

At Slow Studio, we always advise our clients when signing the deposit agreement through our team of lawyers, with whom we review the deposit agreement point by point before it becomes effective.

8 Apply for a mortgage or arrange the final payment with the bank

This is the last of the steps to follow when buying a plot of land, and the one that will ultimately make you the owner of land on which to build a lifetime home.

It is important to know that it is difficult for a bank to grant a mortgage to purchase land, because if you cannot repay it, the bank would be left with an asset that has no profitability of any kind.

If you need to borrow money from the bank to buy the land, you will have to do so through a personal loan, which carries a much higher interest rate than a mortgage.

Another option is to seek a combined land-and-house mortgage, in which case the bank will require at least 20% of the total transaction amount—or the equivalent cost of the land—as a guarantee.

In this case, the bank will not grant the mortgage until you have an officially approved project, which means that you either need to have saved the money to buy the land, or that during the design process you will need to have taken out a personal loan to pay for the land.

As for the final cost of the land, you should check in whose name the land is registered. If it is a company, you must pay 21% VAT; whereas if it is in the name of a private individual, there will be an 8% property transfer tax plus around 2% in land registry and administrative agent fees. This is a key factor to take into account and can also be an argument when negotiating with the seller.