Selling For Land in Arlington: What Builders Are After

Today I happened by a brand new real estate listing for land in North Arlington. There is a home on the parcel, but the assumption at this point is that the home would be leveled in favor of a new custom home in it’s place. So strong is this assumption that the property is not even listed as a residential sale, but as “Lot & Land”, which means you won’t find it in basic real estate search.

Back to that parcel in a moment. Seeing the property today has led me to try and answer a question that folks may, or may not actually have. My guess would be if you own an older, minimally updated home in Arlington, you probably have wondered this. The question: what are builders and/or investors looking for in a piece of land these days, and how much are they paying.

Based on what I have heard from builders I have spoken with, or have sought me out, and what I have seen first hand; here is a short and incomplete (by far) list:

  1. A lot large enough to work with: Many builders are offering semi-custom homes where they have the models designed and customers can make interior modifications rather than full custom homes designed to suite the lot. So, the lot has to work for the builder.
  2. Staying profitable: don’t assume this means builders are looking to pay below market value for a parcel, but they are not likely to overpay either. They know, generally, what they can charge the end buyer, and they know their construction cost, so they need to purchase the lot for a cost that allows that equation to work. Most often this allows them to pay fair market value and still be profitable. The opportunity is in the value of the improvement to the land.
  3. Creating opportunity: Builders throughout Arlington are increasingly building on speculation (“spec”) that the buyers are out there, but need something to actually see. With this vision in mind builders are spending into the millions in some cases to obtain suitable property for their product. Obviously the better the property, the more the builder can charge the end buyer, and the more they are willing to pay up front

Again, that is a short and incomplete list. I am anxious to see what happens with the land I saw today. It is divided into two seemingly unusable parcels and priced individually at what I would expect the two together to go for. If and when anything happens there I will write a follow-up post.

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