The pitfalls of not performing Due Diligence on vacant waterfront land

We knew a couple named the Robinsons who lived up north and who had always dreamed of owning a beautiful waterfront property in Florida where they could build their dream home and enjoy their retirement. They searched for months and finally found a perfect lot that was located right on the water's edge. The views were stunning, and they could already picture themselves enjoying their morning coffee while watching the sunrise over the water. Their family could come and visit and they could take the grandkids out on the new boat which they would keep out back on a boat lift.

Excited to make their dream a reality, the Robinsons went ahead and purchased the property without performing their “Due Diligence.” After closing, their excitement soon turned into disappointment when they discovered that the lot had several restrictions that would make building their dream home a challenging and expensive task. No one had forewarned them. Their realtor did not know about many of the problems or restrictions and just wanted to get a quick commission check. She sold them on the beautiful views.

Well the problems were numerous: First, the lot was located in a flood zone, which meant that they would need to obtain flood insurance and follow strict building codes to ensure the safety of their home. The codes stipulated they needed to build 10-feet above the exiting ground on pilings. A piling foundation is very expensive (and not considered when they calculated their budget) and Mr. Robinson had a bad knee which would make climbing the stairs everyday agonizing. So now, they were also going to have to factor in the cost of an elevator to get from the ground to the main living floor!

Second, they discovered the soils were poor and unstable, making it difficult to build a strong foundation for their house. The piling foundation for their property would be more expensive because the house required more piling and larger piling. The costs to build just kept climbing.

Third, the lot contained wetlands, which were protected by state and federal laws, and building on them would be a violation of these laws. So now, what they thought was a big waterfront lot that could be filled with good soil and nice landscaping was reduced by a third in size of useable space. The realtor used a recent comparable sale of a similar sized lot to justify the sales price of their lot. Yet, the other lot had NO WETLANDS and much more buildable area!

To make matters worse, the property was subject to strict building setbacks, which meant that they could not build as close to the water as they had hoped. They thought they could build within 20-feet of the water but instead it was 50-feet from the water! So now, the boardwalk to their future boat lift would be an additional 30-feet in length. Again, the costs kept rising.

Finally, the Homeowners Association (HOA) that governed the neighborhood was very overbearing and had strict rules and regulations that they would need to follow, which included obtaining approval for their house plans, the paint colors, and the type of landscaping they installed. They had envisioned a modern style house with lots of windows on the wall facing the water. Instead, the HOA said they needed to build a Craftsman Style house and that an entire wall of windows was prohibited.

Dismayed, the Robinsons put their property back on the market to sell. Their dream home couldn’t be built due to costs and architectural restrictions. They sold the property at a loss because the Buyers performed their Due Diligence and discovered the wetlands reduced the effective size of the lot.

If you are considering purchasing a waterfront lot, do your Due Diligence! Don’t know how to do it? We can help!

Click Here For The Guide.