Buying land is very different from buying an existing house.
With an existing home, you already know the structure works. With raw land, you are betting that the property can actually support the house you want to build.
That’s why experienced builders structure their land contracts with specific protection clauses that allow them to verify the property before committing to the purchase.
Here are the 15 contract provisions professionals almost always include:
1. Due Diligence (Inspection) Period
Your Most Important Safety Valve
This clause gives the buyer a specific period – usually 10 to 30 days – to fully investigate the property.
During this time, you can:
- Conduct soil testing
- Verify septic feasibility
- Confirm zoning
- Review surveys
- Evaluate utilities
- Walk the property with contractors
If the property fails your evaluation, you can terminate the contract and recover your earnest money.
Many experienced builders refuse to buy land without a due diligence period
2. Financing Contingency
Protection If The Loan Cannot Be Obtained
If you plan to use a land loan or construction-to-permanent loan, this clause allows you to cancel the contract if financing falls through.
The clause usually includes:
- Loan type
- Maximum interest rate
- Approval deadline
Without this protection, you could lose your deposit if the lender declines the loan.
3. Feasibility Study Clause
The Builder's Version of Due Diligence
Some contracts include a broader feasibility clause allowing the buyer to evaluate whether the land can support the intended project.
Typical items investigated include:
- Septic suitability
- Well viability
- Grading requirements
- Floodplain issues
- Environmental restrictions
For custom home buyers, this clause protects the ability to verify whether your house design will actually work on the site.
Here's A Question I Have For You
When we built the example house on this blog, both the well and the septic were ‘borderline’, and we proceeded into our ‘due diligence’ period, not knowing if either would work.
We hired a well-drilling company that didn’t hit water at 200′, which was kind of the ‘normal’ depth in that area. Should we have kept drilling? Who pays for it? The seller could just as well have sold to a cattle rancher, since there were working springs on the property.
The septic field was also turning out a little sketchy. The water table was only a foot deep, and we had to look at an ‘exotic’ system: a ‘drip’ system that incorporated peat moss filtration and cost about as much as a German sports car. Who pays for that?
We ended up hitting water ten feet later, paid for the exotic septic system, and considered ourselves ‘lucky’. There is a risk to it all. If I was to do it over again, I think that I would have structured something into the purchase agreement where the seller at least split some of the costs.
4. Soil and Perc Test Contingency
Essential for Properties Without Public Sewer
If the property will use septic, you should require the right to perform:
- Perc testing
- Soil evaluation
- Drainfield design review
If the land does not support a septic system suitable for the home you want to build, you should be able to cancel the purchase.
5. Survey and Boudary Verification
Confirm Exactly What You Are Buying
Land boundaries are not always obvious in the field.
A survey clause allows you to verify:
- Property corners
- Encroachments
- Easements
- Setbacks
- Access rights
If a survey reveals major issues, the buyer can renegotiate or terminate the contract.
6. Title Contingency
Protection Against Hidden Ownership Issues
The title company will perform a title search before closing.
This clause allows you to cancel the contract if the title search reveals problems such as:
- Liens
- Boundary disputes
- Ownership claims
- Unrecorded easements
You should always receive a clear, insurable title before purchasing land.
7. Zoning and Land Use Verification
Confirm What Can Actually Be Built
This clause allows the buyer to verify the property’s zoning classification and permitted uses.
Important items include:
- Residential zoning
- Minimum lot size requirement
- Setback restrictions
- Height limits
- Lot coverage limits
Without this verification, you could purchase land that cannot legally support your house design.
8. Access and Easement Verification
Confirm Legal Access To The Property
A surprising number of parcels do not have guaranteed legal access.
Your contract should allow you to verify:
- Recorded access easements
- Road frontage rights
- Shared driveway agreements
If access is unclear, lenders may refuse to finance the property
9. Utility Availability Clause
Verify Service Connections Before Closting
Utilities are one of the most common hidden costs of rural land.
Your investigation should confirm the availability and cost of:
- Electrical service
- Public water
- Sewer connections
- Internet and communications
Sometimes utility extensions can cost tens of thousands of dollars
10. Environmental Contingency
Protection From Environmental Restrictions
Some properties contain protected environmental features such as:
- Wetlands
- Protected habitats
- Floodplains
- Conservation easements
An environmental clause allows you to cancel if these conditions prevent the planned construction from proceeding.
11. HOA and Restrictive Covenants Review
Confirm Private Development Rules
Many properties are governed by:
- Homeowners Associations
- Architectural review boards
- Restrictive covenants
These rules may control:
- Minimum house size
- Architectural style
- Exterior materials
- Building placement
Always review these documents during the due diligence period.
12. Appraisal Contingency
Protection Against Overpaying
If your purchase involves financing, the lender will order an appraisal.
If the property appraises for less than the contract price, this clause allows you to:
- Renegotiate the price
- Cancel the contract
13. Closing Timeline Clause
Establish A Realistic Schedule
Land transactions usually close in 30-60 days, depending on financing and due diligence.
The contract should clearly define:
- Due diligence deadline
- Financing approval deadline
- Final closing date
This keeps the transaction moving forward.
14. Prorations and Closing Costs
Clarify Who Pays What
A land contract usually specifies how closing costs are divided between buyer and seller.
Typical costs include:
- Title insurance
- Recording fees
- Transfer taxes
- Attorney or settlement fees
These costs are often negotiable.
15. Right of Entry For Inspections
Permission to Investigate the Property
This clause allows the buyer and their consultants to enter the property during the due diligence period to conduct:
- Soil testing
- Survey work
- Engineering evaluation
- Environmental inspections
Without this permission, you may not legally be able to perform some of these tests.
FINAL THOUGHTS:
Raw land is full of unknowns. Without these protections, buyers risk discovering serious problems after the deal closes when it is too late to walk away.
