Frequently Asked Questions - Buy and Selling Land in Texas

Short answer; it depends. If your mobile home needs a septic tank on the property and you have a public water supply, then you’ll need a minimum of half an acre. If your property has a water well and a septic tank then you’ll need at least one acre. On top of those requirements set by the state of Texas, your property’s county, city, and deed restrictions can set additional requirements. Get more details here.

‘Deed restrictions’, or restrictive covenants’, are legally binding rules that dictate what you can and can’t do on your Texas land. They are typically set by the land’s developer and will carry from owner to owner. When looking for land, always ask to review a copy of the deed restrictions from your realtor. Get more details here.

Each tract of land can have different access, or lack of access, to public utilities. Some land will have access points on the property that are ready to hook up to a house once it is built (with the installation of a meter), others will have access near a street or property line and will require additional work to run lines into your property. And some rural Texas properties might not have any access to public utilities at all. Always ask your realtor about access to utilities when looking for Texas land.

An easement is a legal agreement between the property owner and a non-owner to utilize a portion of the property in some fashion. In other words, they do not convey ownership of the property itself, but instead, can grant a right to access a specific area with specific intentions. Driveway, utility, and pipeline easements are some of the common types on Texas land. Get more details here.

The big difference is knowing what you can and can’t do with your land. When buying undeveloped Texas land, a realtor will help you understand the zoning and restrictions for building, the availability of agricultural exemptions, and access to utilities; all of which are usually less straightforward than dealing with houses. Loans for Texas land are also slightly different. They usually require more cash down, have slightly higher interest rates, and are available only for certain types of land based on acreage and sale price. Additionally, the closing process for land can be slightly quicker than with houses.

The ability for you to subdivide your Texas land is regulated by the city or county. Some properties might also have deed restrictions that can affect your ability to subdivide.

Ultimately, the seller decides what the price will be but realtors help by providing “comps”, which are prices for comparable properties that recently sold in the area. There is no set formula for setting a price but land is only worth what someone else is willing to pay for it so using comps is a good way to estimate what buyers would potentially pay for a property.

There are some minor things a seller can do to help their land be more appealing, like fixing broken things around the property or cleaning and maintaining the grounds, but if a property has been on the market for a while then the main issue is most likely too high of an asking price. Make sure to work with a realtor to help determine the right price to get the property sold. Get more details here.

The terms ‘seller financing’ and ‘owner financing’ are interchangeable and define a situation where the seller of a property sells it to a buyer on loan, much like a mortgage company would. This is a good option for those who want to avoid a traditional mortgage or those who may not qualify for other financing. Seller financing is a common option in Texas land sales. Get more details here.

A ‘1031 exchange’ is an IRS rule investors use to postpone paying taxes when they sell a property. If inventors sell an investment property and use the proceeds to buy another within a certain period of time, they can avoid paying capital gains tax at the time of the sale. Get more details here.

An agricultural exemption, or an ‘ag exemption’, is a tax rule that allows owners of land used for certain agricultural purposes to lower their property tax. You don’t have to necessiarly do something big like run a cattle farm to get this exemption but rules can vary from county to county. Get more details here.

When looking at land for sale in Texas you might see a property without a street number in the address, for example, “TBD Buda St”. This happens when a tract of land is developed and the developer hasn’t applied for, or received, a 9-1-1 address from the county. Once a street number is received, this is what 9-1-1 services will use when responding to a call.

Yes, buyers can use loans to purchase Texas land in much the same way they would to buy a house. There are more restrictions than with home loans and the interest rates are usually higher since there isn’t as much collateral without a house on the property. Additionally, lenders typically require at least 20% of the total property price as a down payment. Get more details here.

A “closing’ includes all the logistics to transfer ownership of a property from the seller to the buyer. Most people buy a property with bank financing (or something similar) and use a title company to coordinate the change. In these situations, the bank gathers info to start a new mortgage for the buyer, while the seller’s side does the same to close the current mortgage. Then comes the “funding”, which is just money transferring for the deal. Once money is paid and papers are signed, ownership is transferred, and the deal is “closed”.

Typically the seller pays the commission on a deal. This is standard practice but it is also negotiable. In a seller’s market, it isn’t uncommon to see sellers request that a buyer pay the commission.

The buyer usually pays closing costs. There is a lot that goes into closing costs when purchasing with a mortgage lender and using a title company. There are fees to start a loan, fees to decrease your interest rate, fees for the title company to ensure the property’s deed is clear to be transferred, etc. Luckily, a mortgage company will send you an itemized estimate of all these costs before you close so be sure to read it carefully and don’t be afraid to ask questions. In a buyer’s market, it’s not uncommon for a buyer to ask the seller to cover some, if not all, of the closing costs.