That about sums it up. I’ve already seen some so-called “Bulk Sales” wherein a developer sells off 20 or 30 recorded and finished lots to another builder. “Finished lot” meaning the site improvements prior to construction of the structure have been completed: streets, curbs, gutters, rough grading, etc.
I just got done appraising a small subdivision project up in the Temecula area and ran across a couple sales like that among my data. A developer is sitting on a recorded subdivision map and the sales of their finished homes is moving too slowly so the holding costs for the lots is eating them alive. They sell off a portion of their project to another builder and that reduces their holding costs as well as providing some cash to continue on with their Plan A.
The new developer buys the finished lots and proceeds to build what would amount to a project-within-a-project. The only thing that would stop the 2nd builder from going smaller/cheaper is if they have already agreed in advance not to do that as part of the sales agreement; if there are private deed restrictions or CC&Rs that would prevent it; and/or they paid too much for the sites to go smaller and still clear a profit.
I wouldn’t expect to see it happen as a result of the original developer changing midstream as I would expect it from successor builders who get the lots cheap as a result of a weaking market.
