Lo and behold, in the past couple of weeks I’ve received calls from local, Semi- Custom Home Builders who are actively looking for groups of finished lots on which to start construction. Although we’re not yet talking about higher end, custom home builders; the builder’s who are ramping up are serving the move up buyer. Specifically, they’re looking for land to support 1800-3000 sq. ft. homes with beginning prices in the high $200’s that will reach into the upper $400’s with added upgrades and lot premiums. To reach an acceptable profit margin, they will pay from $60,000 – 80,000 per lot. Additionally, they are expecting to purchase the lots on a rolling option basis. This is a structure that allows a builder to purchase a large group of lots at a predetermined price but actually close on them in a gradual way over an extended period of time.Thus allowing the Builder to purchase lots from the proceeds of sales and limiting the amount of money they have to borrow. As example, I’m working on a deal where a builder will contract for 20 lots with the first of those to close this August. They’ll immediately build a model home on it and begin their marketing program. They’ll then be required to , at minimum, buy another lot in February of 2011 and every 60 days thereafter. A structure that becomes a win- win for all parties; Builder, Developer and underlying Lender.

It’s a very positive sign that the lower to middle end of the new home market is becoming active again. If interest rates stay at or near the current record lows, I think it will only be a matter of time until we’ll see this trend continue and move into the higher end , custom home segment as well.

This entry was posted on Tuesday, June 15th, 2010 at 1:49 pm and is filed under News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.