Selling land to a homebuilder: from LOI to takedown

What a builder is actually buying

A homebuilder does not buy acres. It buys the right to deliver a certain number of homes, of a certain product type, at a certain pace, and it prices the land by working backward from the home it expects to sell: whatever remains after construction cost, overhead, margin and the cost of carrying the land is what the lot can be worth. That is why two parcels of the same size can be worth very different amounts to the same builder, and why a builder’s first questions are about yield, entitlements and infrastructure rather than acreage.

Land arrives on a builder’s desk in three conditions. Finished lots have roads, utilities and a recorded plat; the builder can pull permits and start homes. Entitled land has the zoning and land-use approvals but not the horizontal improvements. Raw land has neither, and the buyer is underwriting the time and risk of approvals as well as the cost of building lots. The price per lot rises with each step, and so does the number of builders willing to look. How far to take a parcel before selling it is the owner’s first decision, best made with a land-use attorney and a civil engineer before the property is marketed.

The letter of intent

A builder’s letter of intent is short and non-binding, but it sets the terms the contract will follow, and a term is much harder to improve later than to settle now. The points that matter:

• Price basis. Per finished lot, per entitled lot, per acre, or a total, and what happens if the approved lot count differs from the number in the letter.
• Deposit. The amount, whether it is refundable during the inspection period, and the date it becomes non-refundable, or “goes hard.” A deposit that never goes hard is an option, not a purchase.
• Inspection period. How long the builder has for diligence, what it may do on the property, and whether the period can be extended, at what cost.
• Entitlement contingency. If the builder is pursuing approvals: what counts as an approval, who pays for the engineering and applications, how long the contingency runs, and who keeps the work product if the deal terminates.
• Closing structure. One bulk closing, or a takedown schedule with the number of lots in each phase and the interval between them. Takedown agreements often include a price adjustment for later phases; the mechanism is negotiated, not assumed.
• Outside dates and exclusivity. The date by which the builder must close or walk, and whether the owner may talk to anyone else in the meantime.

A higher price with a longer free look and a smaller deposit is not necessarily the better offer; we translate competing letters into comparable terms before an owner chooses one.

Due diligence: what the land team checks

A builder’s land team runs a checklist, and every item on it is a reason to reprice or walk. Before we market a parcel we assemble what we can on each of these:

• Zoning and future land use. What is permitted today, what the comprehensive plan allows, and whether the density the builder needs requires a rezoning, a land-use amendment or a planned development approval.
• Utilities and capacity. Where water and sewer are, whether the utility has capacity, and what connection and extension will cost. A capacity letter is worth obtaining early.
• Access and frontage. Legal and physical access, road frontage, and any improvements the county or city will require at the entrance.
• Soils, wetlands and floodplain. The lines on an environmental map determine lot yield. A wetlands delineation and a soils report change a builder’s number more than almost anything else.
• Title and survey. Easements, encroachments, mineral rights, old plats, and anything that clouds the ability to deliver clear title in phases.
• Environmental condition. Prior agricultural or industrial use, and the Phase I report a lender and a builder will both require.
• Comparable sales and absorption. What lots and land have sold for nearby, and how fast homes are selling in the submarket; the builder is forecasting its own sales pace, and the land price follows that forecast.

Where deals stall

Most builder deals that fail do so for reasons that were visible on day one. Entitlement timelines run longer than the contingency period. The utility cannot confirm capacity. The wetlands delineation removes lots the price was based on. A title defect prevents the phased conveyance the takedown depends on. And the builder’s own approval process, in which a regional land committee and then a corporate one review the deal, produces a counter-offer or a withdrawal weeks after the LOI was signed.

The market moves too. Residential permits in the Orlando metro fell 22.1 percent in the twelve months ending July 2026 (Zillow, September 14, 2026), and Volusia County issued 582 residential permits in the second quarter of 2026 against 819 a year earlier (Volusia County Division of Economic Development, Q2 2026). Nationally, Zonda rated lot supply “appropriately supplied” in its second-quarter 2026 index (August 13, 2026), which is to say the lot scarcity of the early 2020s has eased. Builders are still buying: Meritage bought Phase 1 at Ormond Crossings, about 450 lots, for $15.54 million (Ormond Beach Observer, January 12, 2026). But they are underwriting more carefully than they did in 2022.

The takedown

A takedown is a purchase in phases. The builder contracts for the whole community, closes on the first group of lots, and returns for the next group on a schedule, each closing subject to its own conditions. For the builder it matches land spending to home sales. For the owner it spreads the proceeds over time and keeps the owner exposed to the builder’s performance between phases, so the contract must say what happens if a phase is not taken down on time: whether the deposit is forfeited and whether the remaining lots are released.

A recent example from our own work: at Tattersall at Tymber Creek in Ormond Beach, K. Hovnanian Homes closed its first takedown of 26 homesites for just over $5.1 million on August 5, 2026, the first phase of a 62-lot commitment. The first closing is the visible event; the contract that governs the remaining phases is where the owner’s protection lives.

Timing and taxes

Two questions belong with your CPA and attorney before you sign. First, whether the land is investment property or dealer property: land that has been subdivided and held primarily for sale may be excluded from a §1031 exchange altogether. Second, if an exchange is planned, how a takedown affects it. Each phase is its own transfer with its own 45-day and 180-day periods, so an exchange planned around the first closing alone will not fit the second. Our guide to the 1031 calendar covers the deadlines.

On value: we prepare a broker opinion of value for landowners considering a sale, drawing on comparable sales, the entitlement position and what builders are paying for lots in the submarket. A broker opinion of value is not an appraisal and may not be referred to or relied upon as one (s. 475.612, Florida Statutes).

Before joining the Lifestyle Group in 2024, Drake Dickerson spent nearly five years in homebuilder land acquisition at Richmond American Homes, Taylor Morrison and Meritage Homes, underwriting parcels for the same land committees described above. That is career history, not a client list, and it is why the diligence questions in this guide are the ones a builder will actually ask.