In This Article
Cost Factors
Impact Fees
Estimating Site Improvement Costs
View Sample Budget                        View all LAND BUYING articles

You may find your perfect piece of land hidden under overgrown brush and get a great deal. However, land purchases can also spring any number of unpleasant, and often costly, surprises on the inexperienced. Developers buying large tracts of land to subdivide often budget more for development costs and fees than for purchasing the land itself. The ratio will be different for a buyer of a single lot at retail pricing, but it’s critical that you get a realistic estimate of development costs before purchasing a piece of land.

Site development  or “site improvement” costs can vary dramatically depending on site and soil conditions, your development plans, and local fees and permitting costs. Fees and permits, alone, can cost well over $10,000 in high cost areas and often exceed $20,000 in California. If the house site is a long distance from existing utility lines, you may have to pay a fee of $50 to $100 or more per foot to extend the utilities to your house, in addition to the “tap fee” to actually hook up.

Since many site development costs are  not readily apparent to the inexperienced, they have the potential to eat up dollars intended for house construction or to derail a project altogether. So it’s important to get a realistic estimate of  site improvement costs as you evaluate a  piece of vacant land.

Even when buying a “developed” lot, make sure you know what exactly in included in the package as it can vary a great deal from one development to another and you may still need to pay for additional site work, permitting, and fees including costly impact fees. In addition to purchase price of the land, make sure you budget for:

  • A survey, if required
  • Hookup to utilities: phone, electric, cable, gas, and sewer and water (municipal or community systems). Include both the cost to extend lines to your house and the “tap fee” to hook up.
  • Septic system design  and installation (conventional or alternative, if required)
  • Well drilling, pump, and hookup to house
  • Earthwork: excavation, cut-and-fill,  and blasting, if required.
  • Paving: road, driveway, patios
  • Landscaping
  • Permits and fees: The number and size of fees vary widely. Ask for a list of all permits and fees required in your jurisdiction
  • Legal costs: title search and other closing costs. Also may include variance requests, addressing challenges from abutters, resolving conflicts over rights-of-way issues, boundaries, etc.
  • Impact fees – varies by state and municipality. Also called development fees, mitigation fees, service availability charges, facility fees, and other creative names

Impact fees are now assessed by many towns to help them pay for schools, infrastructure, and other public costs associated with adding new homes to their community. Depending on the state, they may be called development fees, mitigation fees, service availability charges, facility fees, and other creative names. According to a recent survey, about 60 percent of all towns and cities with over 25,000 residents have impact fees and the number is growing. The number is over 80% in Florida and 90% in California.

Impact fees are rarely under $1,000 and may exceed $20,000 in some areas. Some communities in California impose fees of over $100,000 as a way to discourage development.  The average impact fee for single-family homes is just under $12,000, according to a 2010 impact-fee study of 275 jurisdictions in states with impact fees. Even if you a purchasing a design/build package with the lot, you a likely to be hit with this fee, separate from the price you pay to the developer.

Before making an offer, you’ll want at least a rough estimate of what it will cost you to develop the lot. These costs are often underestimated and can make or break project.  Like going to the hospital, one procedure may generate bills from a number of vendors who all charge a la carte. For example, getting electricity to the site might involve paying the utility company to install a transfomer, an excavator to dig a trench and run underground conduit, and electrician to pull cable through the conduit from the transformer to the house and install the “socket” and service panel, and then the utility company again to install a meter and tie the cable to the transformer.

Key items to include are listed below. Also you can view and download sample budgets at these links:

View Sample Land Development  Budget
Download Typical Site Development Costs (.xls)


Cost of land: plus any brokerage fees

Permitting: Septic, well, driveway, building, other (varies with jurisdiction)

Other regulatory fees: Plan review,  inspections, land clearing, monitoring wells, curb cuts, etc. (varies with jurisdiction)

Impact fee: Charged in over half of municipalities over 25,000 population – can be costly

Tap fees: Connection fees for municipal water, sewer, electric, and gas if available

Utility connections:  Costs to bring all utilities to the house, including electrical power, natural gas, water, sewer, phone, cable TV, Internet. May include trenching costs for underground utilities; transformer (the big green box by the road), meter installation for electric and gas, and tank purchase for propane or oil. Some utilities charge $50 to $100 or more per foot to extend existing lines, so long runs to the nearest utility line can be very expensive.

Survey: If needed; required by many lenders and building departments

Engineering inspection: If needed, for steep sites, wet sites, problem soils, excess ledge, or other site problems

Water well: Well drilling, casing,  pump and wiring, pressure tank, trenching, and plumbing to house. May also include water treatment if needed.

Soil testing: If required – deep hole test, perc test

Septic System: Design and installation; more expensive “alternative systems” may be needed for poorly drained soils, waterfront property, or other environmentally sensitive areas.

Clearing: Costs more to cut carefully and preserve trees; may include removal of stumps and cut timber

Rough and Finish Grading: May include purchase  of soil, sand, gravel, or crushed stone

Blasting: If required for the foundation or when trenching for utilities; include cost of removal of blast rock

Excavation and Backfill: May require purchase of granular fill

Site Drainage: As needed: foundation perimeter drains, swales, culverts, subsurface drains, curtain drains, sand, gravel, and stone

Steep Sites: Cut and fill, retaining walls, terracing

Landscaping: Finish grading and plantings

Driveway: Rough driveway, top layer or gravel/stone, paving

Other Paving: Walkways, sidewalks, patios



  1. Should Utilities Pay to Bring Lines to Property

    We have purchased a piece of property zoned residential. We understand that we have to pay for trenching and service installation on our property, but the municipality is trying to charge us for the lines leading up to our property line as well. Should they not be responsible for that portion considering that it’s zoned serviced residential?

    • buildingadvisor says:

      Zoning typically determines what types of buildings and uses are allowable, but not the availability of utilities. A public utility district, on the other hand, would define where city services are available now or in the future, but is no guarantee that services would be brought to the lot line for free.

      Each city, power company, and other public utility has its own rules and fees for hooking up to services. Some absorb most of the cost if the connections are nearby, while others push most of these costs to the builder or homeowner. The trend has been that more of these infrastructure costs are passed on to owners or developers (who typically pass them on the owner).

      The two main costs are:

      • Connection (tap) fees that you pay for the privileges to hook up to town water and sewer and other utilities such as gas or electric.
      • Extending the lines to your parcel and then to your house site, including trenching and running pipes and wires

      Tap fees are often modest, but may still run several hundred dollars. The cost to bring utility lines to the house can be much higher, especially if there is a long run to the nearest water main, sewer line, or power connection.

      In some cases the town or utility will pay for a certain distance – say, the first 100 feet – and then you pick up the cost from there. Rates for extending water and sewer lines can run $50 to $100 or more per foot. With a long run of, say 200 feet, fees can reach to $20,000 or more! Power companies tend to charge less, but cost could still reach several thousand dollars for similar run, including the cost of a transformer.

      Since every town and utility has its own rules and rates, you need to contact them for pricing and details. Find out exactly what you will get for their fee, how far they will bring the lines (to the lot line or house), and what additional out-of-pocket costs you should anticipate.

      Best of luck with your building project.

  2. Maureen Allen says:

    Well this is certainly a Reality Check! Your summary is so helpful–I had no idea. This great info is the single most important factor in the decision to build rather than buy. Thank you so much!

  3. April Raymond says:

    I think that the fee we were charged for hooking up to water, which was $700, was unfair because impact fees were waived for our county and because we are forced to get our water through this company. Isn’t this price gouging?

    • christopher Wand says:

      It’s not really price gouging in the strictest form. The main factors that I’ve found that contribute to this number are the contracts the utility company needs to sign in advance usually for the year which control these pricing scales. Because the contracts are made several months before even the first person would want to hook up water they need to keep the staff and contractors around which usually means having a higher fee than if you were to shop the price around yourself.

      On the flip side because they do this the price can’t get exorbitantly higher and you can get timely service.



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