Land purchase agreements: the contingencies to include

The short version

A land purchase agreement should do more than set a price. For raw land, the contingencies are the important part: conditions that must be met before you are bound to close, each with a deadline and the right to cancel and get your earnest money back if it isn’t met. Standard home-sale forms often leave out the ones raw land needs most: soil, access, survey and buildability.

The contingencies to include

Contingency	What it protects you from buying
Survey	The boundaries, acreage and any encroachments match what you are paying for
Soil / perc test	The land can take a septic system for the house you plan
Access	There is legal access to a public road, wide enough for a driveway and utilities
Zoning and permits	You can build what you intend, and get a permit for it
Title	Clear title, insurable, with no surprise liens, easements or restrictions
Financing	Your loan is approved on terms you can accept
Environmental	No contamination, wetlands or protected areas that block your plans
Due diligence (option) period	A set number of days to investigate anything else and walk away for any reason; Texas’s standard unimproved-land contract calls this the option period, and the option fee you pay for it is usually not refunded

For each one, write down who pays for the work, the deadline, what counts as passing, and what happens if it fails: you can cancel with a full refund of the deposit, or the price is renegotiated.

Other terms worth getting right

• Earnest money: how much, who holds it (a title company or attorney escrow, not the seller), and exactly when it becomes non-refundable. Some states limit what a seller can keep (in Washington, for example, a clause letting the seller keep the earnest money as their only remedy is enforceable without proof of damages only up to 5% of the price).
• Legal description: the parcel as surveyed, not just a tax ID or “approximately 20 acres”.
• What is included: mineral rights, water rights, timber, and any equipment or structures.
• Taxes and rollback: who pays any agricultural-use tax rollback if the land loses that status when you build.
• Closing costs: who pays for the survey, title insurance and recording.

Buying a lot in a subdivision

If you are buying from a developer selling many lots, a federal law, the Interstate Land Sales Full Disclosure Act, may apply. Where it does, the developer must give you a property report before you sign, and you can cancel within seven days of signing. If you didn’t get the report, you can generally cancel within two years, and if you don’t receive the deed within 180 days and the contract lacks certain protections, you may also be able to cancel within two years. The Act doesn’t apply to subdivisions of fewer than 25 lots, or to lots sold with a house or a contract to build one within two years. Some other sales, such as subdivisions where every lot is 20 acres or more, skip the property report but may keep other protections. Ask the developer which applies, and keep any report you receive.

Read our step-by-step guide to buying land to build for the order of the checks, and have a real estate attorney review the agreement before you sign.

Quick answers

What contingencies should be in a land purchase agreement?

For raw land: survey, soil or perc test, legal access, zoning and permits, title, financing, environmental review, and a due diligence period that lets you walk away. Each needs a deadline and a refund of your deposit if it fails.

Who should hold the earnest money on a land purchase?

A neutral party such as a title company or an attorney’s escrow account, not the seller. The contract should say exactly when it becomes non-refundable.

Can I back out of a land purchase agreement?

Usually only under the contingencies written into it, within their deadlines. That is why a raw-land contract should include the ones that matter for building.

What is the 7-day right to cancel for land?

Under the federal Interstate Land Sales Full Disclosure Act, buyers of lots covered by the Act can generally cancel within seven days of signing. Subdivisions under 25 lots and lots sold with a house are among the sales not covered.

General information, not legal, tax or financial advice. Land rules differ by state and county; confirm with the county health or planning department, a real estate attorney or a licensed professional before you buy.