Sellers want faster decisions on land
A sellers’ market in residential land in the Truckee Meadows means buyers often are asked to make decisions more quickly than they did in the past.
Sellers, after all, often have another potential buyer or two waiting in the wings and they want a quick decision.
The upshot? Lots of late nights for homebuilders and folks who develop lots for construction as they race ever-tighter deadlines to complete the work they need to make a smart decision.
“There’s absolutely a feeding frenzy,” said Ted Stoever II, who handles land and investment properties at the Reno office of Colliers International.
“Those who don’t have inventory for the future are desperately looking.
The squeeze is on.”
One needn’t climb too far up one of the hills that surround the Truckee Meadows to get a clear picture of the situation.
The bowl is nearly built out.
Within the Truckee Meadows, nearly all the large parcels that once were available for large residential subdivisions have been built out or have plans under way.
That’s pushing development farther out to the North Valleys, to Spanish Springs, up the slopes of the Sierra, out to Fernley or Dayton.
Both the tight supplies of land in the Truckee Meadows and the academy groundbreaking efforts in outlying areas present challenges for those buying land for residential development.
Mark Krueger, a senior advisor, land and investment, with Grubb & Ellis Nevada Commercial Group noted that raw land with nearby neighbors an increasingly common description of parcels in the Truckee Meadows probably will take longer to prepare for development.
That increases the uncertainties for a buyer.
“We are becoming a mature community, and there are a lot of voices being heard,” he said.
Almost by definition, the land that was easy to develop was among the first to sprout subdivisions.
Today’s land is more challenging.
“We’re starting to climb the hillsides, which makes the development process a lot more complicated,” said Krueger.
Even an easily developed parcel needs a careful due-diligence process, said Stoever.
Among the factors a buyer needs to examine:
* The physical constraints such as slopes that will limit construction.
* The availability of utilities.
* Whether the land is threatened by floods, geothermal activity or environmental hazards such as toxic waste sites.
* The zoning and the likelihood that local officials will agree to changes.
* The availability of utilities.
It’s a lot to examine, and sellers who once were willing to give 90 days for developers to conduct their due-diligence work now may want an answer in 45 days.
The result? “Guys are taking some land risks,” said Krueger.
Patty Wade, president of Renobased Wade Development Co., said experienced sellers of development land recognize that different types of sales require varied amounts of time for duediligence work.
A subdivision of finished lots probably will require a short look,Wade said, while a piece of raw land in the middle of nowhere might require several months to gather the information to make a good decision.
No matter whether the work is quick or lengthy, buyers usually are protecting more than their own interests when they undertake due-diligence on a land purchase.
Lenders demand good studies, as do the boards of directors or top executives of larger homebuilding companies.
Sellers’ unwillingness to provide time for leisurely due-diligence work is just part of the pressure cooker in which buyers of residential land operate these days, said John Mitchell, Reno division president for Centex Homes.
Much larger deposits on land purchases are required these days, Mitchell said.
Sellers are highly unwilling to agree to contingent closings and often are unwilling to provide any representations or warranties about the property.
The result, Mitchell said, is that buyers of land for subdivisions are assuming more of the risks of a deal.
But many buyers have little choice than to accept the terms because they need to keep projects flowing through the construction pipeline.
“We’ve adapted to it because we have to buy land,” Mitchell said.
Still, he said, the pressures on buyers are immense.
One Centex employee typically works 12 or 14 hours a day assembling information about potential land purchases.
“I don’t know how long he can keep it up,” Mitchell said.
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