Why Conduct A Feasibility Study?
The purpose of a feasibility study is to determine whether it is financially feasible to build on a particular piece of land before you are committed to purchasing the land. A feasibility study can also help determine if building on the land is possible at all. It is recommended that your offer to purchase the land include a minimum 30-day but preferably 45-day contingency for a feasibility study. It’s important that your real estate agent includes contingencies in your offer that will allow you to back out of the property for virtually any reason. That way you can tie-up the property and perform your feasibility study without the fear of someone purchasing the property from under you.
The reason you should care about feasibility is there can be unforeseen and costly items that you would not know about unless you conduct a feasibility study. Real estate agents typically lack the expertise needed to advise whether it is feasible to build on a piece of land. Their goal is to sell the land, not to talk you out of it, so they will tend to oversimplify what is required to build. Do not let an agent lead you to believe that building on a piece of property is feasible because it has water and power at the front of the property and has passed a perc test. More research than that is needed to avoid a costly error.
What Is Included In A Feasibility Study?
Below is a limited list of items that may be included in a feasibility study:
- What is the total estimated cost of the project and does this make financial sense? Some costs to consider:
- Purchase of land including closing costs, legal fees, and assessments.
- Cost to survey the property.
- Cost to build the home you want along with your desired upgrades and needed contingency.
- Sales tax.
- Land clearing, dig-out for home, backfill and final grading.
- Connection fees and assessments for water, sewer, electric, gas, phone, etc.
- Septic system perc testing, septic system design and installation
- If water is not available at the street, cost for installation of a well including all components.
- Constructing needed roads and driveways.
- Building, sewer, plumbing, electrical, mechanical, clearing, fire sprinkler, and other permits and fees.
- Fire sprinkler requirements, system installation, and upgrades that may be required to the home to comply with local requirements.
- Impact, development and mitigations fees due state, county, and municipalities.
- Construction loan finance fees.
- Does the zoning allow for the size and type of house you wish to build?
- Are the boundary markers in place, and if so, will the house you plan to build fit on the property in a way that conforms with required setbacks or other zoning restrictions?
- Is the land flat or does it have slope? Is your builder willing to build on a slope and will your builder be able to easily access the building site with truss trucks and other equipment?
- Has the site passed a perc test to see if a septic system can be installed? Is the testing still up to date or has it expired? What type of septic system can be installed (conventional or alternative)?
- What will be involved with getting water and power to the property and to the building site?
- Are there any liens, easements, restrictions, agreements, or encroachments on the property?
- Are there wetlands or is the property in a floodplain?
- What was the land used for in the past? Is any cleanup required? Is it native soil or has there been artificial fill? Is anything buried on the property and, if so, what will be required to mitigate it?
A Feasibility Study Is A Protection
While these questions may seem imposing, answering these questions definitively before committing to the property, will pay for itself over and over again throughout the build not only with coming in on budget, but also on schedule, and with the peace of mind that there are minimal ‘unknown’ conditions that could arise. Suprema Homes can recommend a company that specializes in performing feasibility studies if you do not have the time or desire to do so on your own.