Key Takeaways:

  • A vacant land purchase agreement outlines the terms and conditions for buying undeveloped property.
  • Buyers must conduct due diligence to assess zoning laws, land use restrictions, and environmental conditions.
  • The agreement should detail cost allocation, including earnest money deposits, closing costs, and financing terms.
  • Seller disclosures and necessary documentation, such as land surveys, should be reviewed before signing.
  • The contract should specify contingencies, such as soil testing, access rights, and financing approval.
  • Understanding seller financing and how it differs from traditional loans is crucial.
  • Rights and obligations of both parties, including default consequences and dispute resolution, should be clearly outlined.
  • A real estate attorney can help navigate legal complexities and protect the buyer's interests.

A California land purchase agreement is a contract used for the exchange of real estate between a seller and a buyer. Other names for a California land purchase agreement include a vacant land purchase agreement, an installment land agreement, and an agreement of forms.

What Are Land Purchase Agreements?

Realtors in California typically use a vacant land purchase agreement to facilitate the sale of real estate. With this form, the current owner of the real estate and the interested buyer enter into a contract.

Sellers and buyers can include a variety of requirements in a California land purchase agreement:

  1. Purchase price and payment terms
  2. Interest rates
  3. Fees based on taxes and insurance

Key Considerations Before Signing a Vacant Land Purchase Agreement

Before signing a vacant land purchase agreement, buyers should carefully evaluate several key factors to ensure the property meets their needs and complies with local regulations. Key considerations include:

  • Zoning Laws and Land Use – Confirm that the land is zoned for your intended use (residential, commercial, agricultural, etc.).
  • Access & Easements – Determine if the property has legal access via roads or shared driveways.
  • Environmental Restrictions – Check for protected wetlands, flood zones, or contamination that may affect development.
  • Utility Availability – Verify the availability of water, sewer, electricity, and other essential utilities.
  • Survey & Property Boundaries – A professional land survey can confirm lot size, boundary lines, and any encroachments.

By conducting thorough due diligence, buyers can avoid unexpected legal or financial complications after the purchase.

Cost Allocation

The person selling a piece of real estate will be responsible for covering a number of costs related to the sale. Although septic systems are rarely found on vacant lots, if a septic system is present, the seller will need to pay for an inspection. Similarly, the seller may need to pay for a perc test to determine if the soil is suitable for waste disposal.

Other costs that the seller may be responsible for can include marking of the property corners and determining if the wells on the property produce an adequate amount of water.

Understanding Seller Financing in Land Purchases

When purchasing vacant land, traditional mortgage loans can be challenging to secure. Many buyers consider seller financing, in which the seller provides a loan to the buyer instead of requiring a lump-sum payment at closing. Key aspects of seller financing include:

  • Loan Terms – Buyers and sellers negotiate interest rates, down payment amounts, and repayment schedules.
  • Balloon Payments – Some agreements require a large final payment after a set period.
  • Title Retention – In certain cases, the seller retains legal title until the buyer fulfills all payment obligations.
  • Risks & Protections – Buyers should ensure the contract includes provisions for missed payments and foreclosure processes.

Seller financing can provide flexible options, but it’s essential to draft a legally sound agreement that protects both parties.

Documentation and Disclosure Requirements

Land purchase agreements include a section where the seller will disclose important information about the property. This section will specifically require the seller to reveal any information that would be pertinent to the buyer. For example, if there is an endangered species that lives on the lot that may interfere with the buyer's ability to use the property, the seller must disclose this information. The seller also needs to inform the buyer if the deed to the lot comes with any restrictions.

A land purchase agreement will also contain a section that outlines the Buyer's Investigation period. In this section, there should be a list of items that a buyer should investigate to make sure that the property lives up to their expectations.

Buyers must complete their investigation in a set amount of time. While the default investigation period is 17 days, most buyers will request more time so that they can do their due diligence. A thorough investigation usually takes between 30 and 60 days. Sellers will also have a defined period where they will need to disclose information about the property. The default disclosure period is 10 days. Both the disclosure and investigation periods begin at the opening of escrow.

Once the Buyer's Investigation is complete, the seller can ask the buyer to remove any contingencies they have placed on the agreement. If the buyer removes these contingencies, the seller may be able to keep the buyer's deposit if they leave the agreement. Usually, the seller can only keep the deposit if they hold no fault for the buyer backing out of the deal.

No standard time period exists for contingencies or escrows. The defined period for these events can vary from agreement to agreement and are influenced by how long the buyer believes it will take to complete their investigation. Buyers should consider requesting a longer contingency period so that they can be sure that the property they're interested in purchasing actually meets their needs.

Essential Contingencies to Include in a Vacant Land Purchase Agreement

A well-drafted vacant land purchase agreement should include contingencies that protect the buyer if certain conditions are not met. Common contingencies include:

  • Environmental & Soil Testing – Ensures the land is free from hazardous materials and suitable for development.
  • Title Review & Clear Ownership – Confirms the seller has the legal right to transfer ownership.
  • Survey Contingency – Protects against disputes over property lines and encroachments.
  • Financing Contingency – Allows the buyer to cancel the contract if they cannot secure financing.
  • Permit & Zoning Approvals – Ensures the buyer can obtain necessary building permits before finalizing the sale.

Contingencies provide an exit strategy if unexpected issues arise, ensuring the buyer isn’t locked into an unfavorable deal.

Land Purchase Agreement Terms

Much of a land purchase agreement will consist of boilerplate terms. Some contracts, however, will contain additional information, meaning both buyers and sellers should carefully review the terms of any proposed agreement.

For instance, every land purchase agreement needs a full, accurate description of the property. If the description in the agreement is vague or does not match the reality of the property, a condition should be added to the agreement stipulating that the purchase will only occur after an engineered survey. Banks will almost always insist on a survey when financing the purchase of real estate.

One of the buyer's main goals in a purchase agreement should be negotiating a low price. The description of the price in the agreement must reflect the price agreed to during negotiations. The buyer should also request a low upfront deposit so that they will have the cash needed to cover important costs such as soil tests. Also, a low deposit means the buyer won't lose as much money if they later back out of the sale.

Default Consequences and Dispute Resolution in Land Purchase Agreements

Every vacant land purchase agreement should outline the consequences of contract default and methods for resolving disputes. Key provisions include:

  • Buyer Default – If the buyer fails to meet payment terms or conditions, they may forfeit their deposit or face legal action.
  • Seller Default – If the seller fails to deliver clear title or breaches contract terms, the buyer may seek legal remedies or specific performance.
  • Mediation & Arbitration – Many agreements include dispute resolution clauses to avoid costly litigation.
  • Termination Clauses – Specifies conditions under which either party can legally terminate the agreement.

Understanding default terms and dispute resolution options helps buyers and sellers navigate potential conflicts effectively.

Frequently Asked Questions

  1. What is the purpose of a vacant land purchase agreement?
    A vacant land purchase agreement defines the terms of a land sale, ensuring both buyer and seller understand their rights, obligations, and contingencies before closing the deal.
  2. What contingencies should be included in a land purchase agreement?
    Key contingencies include environmental testing, title verification, financing approval, and zoning compliance to protect the buyer from unforeseen issues.
  3. Can I get a mortgage for vacant land?
    Traditional mortgage options for vacant land are limited, but alternatives like seller financing or land loans from specialized lenders may be available.
  4. What disclosures are required when buying vacant land in California?
    Sellers must disclose known defects, environmental hazards, and zoning restrictions that may impact land use.
  5. How can a real estate attorney help with a land purchase agreement?
    An attorney can review the contract, ensure compliance with California laws, negotiate terms, and protect the buyer’s interests in the transaction.

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