Buying and Building on Raw Land in San Mateo County

What a great dream, I have had this one as well.  here would be nothing better than to buy a piece of land and build my own home to my own specs. I haven’t done this yet, but have worked with people that have.  What I have found is that you can do it, it just takes patience and education.  I can't help you with the patience, but I can help you a little with the education part.

There are several inaccurate assumptions when it comes to buying and developing land in the area. Below I will try and address a few of them.

I will buy a piece of land and subdivide it.

Not usually.  

Most of the property up here has been subdivided already. Many of the parcels are remnants of large ranches from the 1800’s, land was handed down and different generations subdivided as they went, thus most of the fiscally feasible subdivision has been done.  

San Mateo county uses “density credits” to decide how many homes can go on a piece of land. Generally one density credit equals one home.  Density credits have a whole bunch of things that the county looks at to determine if density credits can be added to a parcel, such as slope, zoning, lot size, prime soils etc, etc.  Even if you manage to get a large piece, do a density analysis, find out you can add additional credits, access may be prohibitively expensive, such as a 5m road or a 10m bridge.  As I mentioned, the fiscally feasible stuff has been done.  The net-net is you aren’t going to buy one, two, five or twenty acres and be able to subdivide it.  There is always that exception, but don’t go into a deal thinking you will subdivide.  There has been some recent legislation that may change that, but I haven’t seen those changes trickle down yet.  When parcels get larger the odds get better, but we should talk if you are thinking about that.

I can have a house up a year from buying my lot.

If you are lucky, you will have just broken ground.  Most likely you will still be arguing with planning and building.

As I mentioned earlier,most of the parcels left are remnants of old ranches, which means that the lots aren’t ready to be built on when they go up for sale.What do I mean by that?  In order to break ground on your home, you need some infrastructure already in place.  Remember there are no sewers up here, and usually no water at the street you can tap Into.  Before you close you need to make sure you can build on the land before you finally purchase it.This means you need to drill a well (you need water), perform a percolation or “perc” test for the septic system (you are going to need a bathroom), you need to make sure there is road access to the site you want to build on.You also need to make sure that in a good rain year, the place you want to build isn’t going to slide, so you need a geology report.  You also need to make sure where you want to build the home is actually on the property, and for that matter where the property lines are so you can comply with setbacks, thus you need a survey.

So the timeline to build a home on a piece of land goes something like this.  You find a piece of land you want, it takes you 3-6 months to make sure you can, with 80% surety, build a home there (and around $40-80k).  Then you get an architect, and submit your plans to building and planning, they tell you to redo something, which you do, then they tell you to do it again, which you do.  Unfortunately the county tends to work in serial not parallel.  This process can take six months to a year or more depending on zoning.Then you break ground, and start the process.  This can take a year or two.  I always tell my clients to be prepared for a two or three-year process from start to finish.  I am not usually wrong.

It’s cheaper to build than buy a home

It depends, as I mentioned earlier, you typically have to spend about 40-80k when you find a piece of land just to make sure you can actually build a home there.  If you have to do this a couple of times, it gets rather expensive.  Building prices up here range from about $600 to infinity a square foot. Also keep in mind that construction loans are typically more expensive than regular home loans (in terms of interest rates).  The closer you get to completion the more your payment is to the bank.  In the interim you are paying

your current house payment, or rent while your home is being built.  This is why you have friends that have built and are riding their contractors to do the finish work so they can move in.  They are making almost a full home payment, and the contractor has almost all of his money.  This leaves you pleading with the contractor to finish so you can move in.

Building on rural land is the same countywide

There are several different areas with different restrictions.  You have scenic corridor areas that have more restrictions on what you can build, and you have coastal zones that have a ton more restrictions. There is the Williamson Act that is one some properties, not to mention the myriad of  conservation easements that some properties have.   What may take you two years on a piece that is not zoned coastal or scenic corridor could take 3 or 4 years for scenic corridor or 4-5 or more for coastal zones, not to mention it could increase your costs significantly, or just plain prohibit you from building.  

Some things to think about

Water requirements:  We all need water, and oddly enough the county requires you have water to build a home.  There are several different ways in rural communities you can get water.  There are numerous small water companies that supply water on Skyline

Blvd, in La Honda, Loma Mar and Pescadero.  But…barring that, you usually need a well. As I discussed earlier, most properties for sale don’t have water. This means before you buy

the place you need to drill a well.  This can run you about $75-100 a foot, and wells are usually 200-500 feet, you can do the math.  If there is no water or the well yields less than 2.5 gpm for a specific period of time , then you can’t build, or you have to drill another one.  There is usually a discount by the well driller for a dry well, but it's not huge. It's an expensive way to find out a lot is not buildable, but at least you didn’t spend $1M+  on a piece of land you can’t build on.  This is why you want to do all these things prior to close.  

Septic:  There are no sewers in rural areas, so you need to have a septic system.  A septic system is usually a concrete box divided into two chambers that holds about 1500 gallons.  Hooked to this are two leach lines that take the liquids from the tanks and leach them

into the ground.In order to find out how long these lines need to be you need a perc test. A perc test (short for percolation) is done prior to installing a septic system in order to assure that the soil is of such a nature to accommodate your septic effluent in a safe manner. The idea is for the soil to filter and allow oxygen contact with the liquid effluent so that the good bacteria will safely

and completely digest the not-so-good stuff. Soil that has too much clay, too much sand or gravel, bedrock close to the surface or too much water, will not do the job properly.  So how do you do a perc test?  What they basically do is dig a hole, put in water and time how long it takes to drain into the ground.  If it drains too fast, that’s bad, too slow, that’s bad too.  After your perc test you will be given a “grade” depending on how fast the water drained out, either

an A, B, C or Failed. The grade is the deciding factor on how long your leach lines need to be. It’s a good idea to have a perc test complete and signed off on by the county prior to close of escrow.These perc test  usually run in the neighborhood of $6000+.Again, if it doesn’t perc anywhere, or there isn’t room enough for the leach lines, or the grade is too steep (you can’t put leach lines on a slope of 50% or more) then you can’t build. But it’s better to have spent

your money on this up front and find out you can’t build than buy the lot and find out later.

Is the lot even legal?  If a lot has not been built on in the past is the lot even a legal lot?  Was it created through a legal process?  This is when you need a certificate of compliance.  What is that you ask and why do I need it?  You might not, but…you need to know if you do.  Back before the county was created and started controlling such things it was literally the wild west, if you wanted to subdivide, you got a legal description, and recorded it, done deal.  Then the county and state came around and said “ hold on, we need to have some control over this process, so if you want to subdivide now you need to go through us, if you did it prior to us controlling the process and there is a house, you are good, if not you need to get a certificate of compliance to make sure you are in compliance with our rules.”   I have had to do this, and there is the easy way and the hard way, but regardless of the process, if needed, you need to have this done prior to closing, lots of people don’t even realize you need to check on this, but you do.  

Easements, zoning restrictions, coastal zones, oh my.  Regardless of the physical challenges with building, you need to pay special attention to any and all easements, and restrictions that are on a parcel.  When you buy a house you typically look at the title report and go, “that's interesting” but there typically isn’t anything on there that would stop you from moving into the house or using the property.  On bare lands there can be.  I have seen easements on large pieces of land that preclude the owner from riding or driving on a significant part of the property unless it was specifically related to an agriculture use, I have seen an easement on a 100 acre parcel that gave the neighbor exclusive rights to 20 of those acres, the owner of the 100 acres couldn’t even go on the 20 acres with out the neighbors permission.  I have seen building restrictions due to prime soils that would make building on a parcel almost impossible.  I have also seen easements allowing someone to hunt on the property until their death.  Nothing like gunshots at 6am to get your heart pumping.  You need to pay very, very, very close attention to these.

These are just a few of the things you need to pay attention to when you are looking at buying raw land.  Building on raw land is a great opportunity if you know what you are getting yourself into.  With a little patience and wide open eyes, building the perfect home to meet your personal needs is still an obtainable dream.   I always have my favorite pieces of land in the area, give me a call and I would be more than happy to further discuss them with you,

Scott Hayes

Compass

650-245-5044

DRE 01401243