August 30, 2012
Ocracoke Real Estate:
What to consider if you want to buy a lot and build
By B.J. OELSCHLEGEL
was a point in time when house prices were high enough that buyers
would consider purchasing a lot and building their dream home. Rather
than having to make repairs or remodel someone else’s dream, folks
would undergo the sometimes daunting task of starting from scratch.
The buyer’s sweat equity was an option for savings in the building
project. Hands-on, hard-core shopping for material prices was one way
to bring construction in under budget. Depending on the architecture
and the interior choices, the purchase of land and the cost of
construction together would often cost less than buying a ready-made
That was then. I am looking over a comparables sheet, and it looks like
there have been 11 lot sales on the island since 2007. Five of the 11
are waterfront lots. Access to the water is what Ocracoke is all about.
This category of land sale is the easiest to market and maintains a
higher value. It is the interior lots that exemplify my point. Six
lots, in five years, indicate a greater interest in homes. With the
prices on homes dropping, it has been hard for new construction to
The impetus for this article was a request from a prospective buyer.
These folks were primarily interested in looking at vacant lots and
designing their own home. They were curious about the critical issues
to consider in this process.
In this market, I believe that the proposed lot purchase needs to be viewed through the lens of comparable sales.
Here is what I mean. Nowadays, insurance companies are using $150 per
square foot of heated space as a replacement value on their fire
policies. We had used values as high as $200 per square foot when the
market was hot and a homeowner had high-end tastes. If the proposed
dream home is 2,000 square feet, you are generally looking at $300,000
to build the home. At this point, the buyer might want to tack on an
additional percentage to cover the unknowns that always seem to pop up.
When you add the value of the house to what was paid for the lot and
any expenses for septic and water, your total should not exceed the
price of a recently sold, ready-made house of the same size and
amenities. With home prices dropping, the savings margin, in starting
from scratch, is dwindling. A buyer may choose to go further out on a
limb with regards to a discrepancy between their project total and
recent sales, but they need to do it knowingly. At the very least, a
buyer should use this formula as a yardstick.
The preferred characteristics of the land are the next step in the
sorting process. Aspects such as a location, “in the village” vs. in
one of Ocracoke’s suburban subdivisions and access to the water or a
view of the water or marsh are often the first major preferences to be
Falling in behind these are other factors which would apply to any lot purchase.
The amount of square footage in the lot will determine how much of a
buffer you will have from the neighbors on either side. A minimum lot
on the island is a postage stamp size of 5,000 square feet. With side
setbacks, which are 8 feet in the Ocracoke Development Ordinance, there
could be a span of 16 feet between houses.
It is important to know whether the lot has a septic permit or an
installed system. A permit would require the buyer to have a system
installed at a price between plus or minus $8,000 to $30,000, depending
on the choice of system. The world of septic is a newspaper article
Whether the lot has an existing water meter or one would need to be
purchased might prove to be an additional expense to the lot purchase.
A three-bedroom, two-bathroom impact unit would run about an additional
The consistency of the surrounding neighborhood may be an aesthetic
issue for a buyer, but might also have an effect on a resale value. If
there is not a state maintained access road, the buyer will need to
work with the neighbors to keep up the road.
Another consideration that is important to keep in mind when
buying a lot has to do with covenants. A restrictive covenant is
inserted into a deed and is defined in the N.C. Real Estate Manual as
“a private deed restriction which limits the uses to which real
property can be put. Restrictive covenants specifying the type of use
that can be made of the property, setback and sideline requirements,
minimum square footage, architectural design, and numerous other
specific limitations on land use are commonplace.”
These deed restrictions run with the deed, so as properties are bought
and sold, the development in that subdivision should be consistent with
these limitations. There are subdivisions on Ocracoke that have
recorded and enforceable restrictions on the development that can occur
in those tracts of land.
Some subdivision covenants are more restrictive than others. The more
restrictive covenants will always take precedence over the more general
and less strict Ocracoke Building Ordinance. Covenants do not come with
an enforcement officer. The developer, the landowner, and, I believe, a
prior landowner are given the right, by the deeded covenants, to take a
non-compliant neighbor to court to force the use of the deed
There are some lots on the island which have unrecorded covenants or no
covenants at all and must rely on the restrictions laid out in The
Ocracoke Development Ordinance to control density and use.
Covenants can be a double-edged sword. On the one hand, there are more
rules telling you what to build and where, but a neighborhood with
strong enforceable restrictions has a consistency in the quality of the
development and that will have an effect on the property values in that
Obviously, there is a limited pool of vacant properties to choose from
on Ocracoke. Once buyers start to carve out what is important to them
in a lot purchase, there will be one last set of possibilities to weigh
before deciding on the ultimate location for the dream home.
Ocracoke is subject to the jurisdiction of the federal U.S. Army Corps
of Engineers, the North Carolina Department of Environment and Natural
Resources, and the N.C. Division of Water Quality. These agencies have
legal authority to protect the waterfront and the marshes on the
I would take the safe route and make, as a condition of any contract to
purchase, inspections by these three agencies and their subsequent
letters stating “no jurisdiction.” It would be a sin to have purchased
the property and to have begun building, only to have DENR fly over and
issue a stop-work order. If a waterfront lot is purchased and a dock is
planned, it would be wise to include the permitting of the proposed
dock in that contingency to the contract.
After having made all of these choices and taken the time to perform
your due diligence, please make sure to consider having the lot
surveyed. Before doing the work on the ground, the surveyor does his
homework at the deed office and will include any easements or line
discrepancies which exist.
With the new flags in the ground, after the current field work is
finished, purchase some 4-inch PVC pipe and some cement and make those
flags permanent. A 2-foot section of PVC driven into the ground and
filled with cement will suffice. You will always be happy you took the
I have also had a surveyor plot the location of the trees on the lot,
the location of the septic system, and to include what is called the
MBL or Maximum building line so the buyer can get a visual of how a
building can be placed on the property.
Make sure you request a title search and title insurance from your
closing attorney, as with any real estate purchase. And, lastly, work
with an agent you can trust to be aware of these considerations. Most
agents on the island have taken a buyer or two across these hurdles.
Oelschlegel has lived on Ocracoke Island for more than 30 years and has
worked in the real estate business for almost as long. She is a
broker with Ocracoke’s Lightship Realty and a real estate columnist for
The Ocracoke Observer. You can reach her by e-mail at [email protected])