Bulk takedown at $84k or retail at $102k on the same 90 lots

Before anyone votes on the spread, someone should read the takedown agreement, because Plan A's $84k is rarely $84k.

The clauses that move the number: the escalator's base and whether it's tied to an index or a flat percentage, whether the deposit is applicable to each closing or held to the end, what the cure period is on a missed takedown and whether the remedy is forfeiture of the deposit or specific performance, and whether the builder has a right to reject lots for punch list items with no time limit on the rejection. That last one is where I've seen developers sit for two quarters on lots that were finished, fixing things a field manager wrote up.

Also look for a price reset tied to a change in market conditions, defined vaguely, and for an assignment right that lets them move the contract to a subsidiary with no assets. If the deposit is 5 percent of total, that's about $378k against a $7.56M obligation. Walking away costs them 5 percent. Your downside is 90 lots you priced for one buyer.

And whichever plan, ask who signs the maintenance bond and how long the warranty period runs after acceptance, because that's the obligation that outlives the last closing.

Plan B's absorption assumes local builders can get construction financing lot by lot. That's the variable I'd stress first, not price.

The thing that breaks on Plan B at scale is not the pricing, it's the count of relationships. Twelve small builders taking two lots at a time is twelve sets of plans, twelve closings, twelve sets of questions about the sewer stub location, and twelve chances for someone to block the street with a dumpster while your next buyer is walking lot 43.

I've felt a smaller version of this with a portfolio of scattered rentals. Every additional counterparty adds an administrative load nobody prices, and it lands on the one person who understands the project. Over 40 months that person burns out or hires help, and the help is $80k a year, which is $267k off your $2.79M before you've paid a dollar of interest.

I'd also want to know whether the two to four lots a month is observed absorption in that submarket or the developer's assumption. Those are different sentences and only one of them is evidence. If the real number is 1.5 lots a month in a soft quarter, 90 lots is five years and Plan B stops being a patience play.

I'm early on all of this so tell me if the question is naive. When you sell lots at retail one at a time, does the buyer pay the whole $102k in cash at closing, or is there some structure where they pay when the house sells? Because if a small builder needs a construction loan to buy the lot and build, and the lender counts the lot as part of their equity, then the lot price and the builder's ability to close are the same problem.

Also, in Plan A does the national builder ever pay more than $84k if the market runs up? The escalator after quarter four sounds like it might be small enough not to matter, and 18 months is long enough for prices to move a lot.

Managing property has made me the person who inherits the half built street, so that's where I'd push.

With one national builder you get a construction schedule. Streets get paved on a plan, the temporary power gets converted, the sediment control comes out when it's supposed to, and the HOA gets turned over as a complete community. With twelve local builders over 40 months you have an active jobsite next to occupied houses for years, and the developer is still the declarant on the HOA the whole time. That means you're paying the streetlight bill, the detention pond mowing, the entrance landscaping, and the insurance on common area you can't turn over until the last lot is built out. On a 90 lot community that's easily $2,500 to $4,500 a month depending on how much common area you built, and it runs the entire absorption period.

Add that to your interest and taxes and Plan B's $1.62M advantage shrinks meaningfully. I still might take it in a market with genuine lot scarcity, and I'd want the number written down before I did rather than discovered in year three.