The paper lot offer beats the horizontal pro forma on 34 acres

Slowing the thread down for a second, what's a paper lot? Approved on the map with no dirt moved yet?

The two paths aren't the same bet, so comparing profit dollars hides the thing that decides it.

Path A pays you for taking construction and absorption risk on 96 lots. Path B pays you for taking entitlement risk only, then hands the rest to someone with a cheaper cost of capital than yours. A builder paying $38k for paper against a $95k finished lot is pricing about $57k of horizontal, offsite, contingency, and carry that they expect to spend themselves. If your horizontal plus offsite is really $6.02M, that's $62.7k a lot before any carry. Their number and yours are close enough that the gap is contingency, and they think you're short on it.

Which assumption the answer depends on: whether $95k is a closed comp or a verbal. If you have two recent closings at $95k in the same submarket with comparable lot widths, Path A's $310k is a real but thin margin and one yield reduction erases it. If $95k came from a conversation, you don't have a Path A pro forma yet, you have a hope.

On the option itself, a fixed price with no escalator on a 24 month takedown moves inflation risk onto you if your plans get a second or third round of county comments. What the option obligates them to do matters more than the price. Whether an option can be recorded, and what recording does to a later buyer's rights, varies by state, so have a local real estate attorney read it.

Also confirm your land loan terms in writing rather than from a quote. Interest only draw structures and the reserve requirement change the carry number materially, and lenders reprice.

Your carry number is soft in both directions. Thirty months on $1.6M drawn assumes a flat balance, but a horizontal loan does not sit at one number, it ramps as draws happen and falls as lots release. Average balance is probably closer to $2.4M once mass grading and offsite work are underway, and the collector work should be modeled as an early draw because the county will want it built before the first plat is released. That alone can add $150k to $200k over the $440k figure. The other line often missing is property taxes after the plat records. In a lot of counties an approved plat reassesses the parcel from raw ground to lots, sometimes the year after recording, and that is a real number on 96 lots. Check how the local assessor handles platted but unimproved inventory, it varies by county. The $310k estimate is inside the noise of two line items that have not been priced yet.

Before you accept the $740k as pure cost, ask the county in writing whether that collector widening is creditable against your impact fees or eligible for reimbursement from a district or a future benefitting property. Some jurisdictions have a mechanism where an oversized offsite improvement gets partial credit or is repaid as other tracts develop, some have nothing, and the ones that do bury it in the ordinance rather than telling you at the counter. It varies enormously by state and even by county.

If even a third of that $740k comes back as fee credit at plat release, Path A stops looking like a rounding error. If the answer is no, the builder's $38k is telling you exactly what they think that road is worth.

A 30 month timeline assumes the county turns construction plans in one review cycle. Municipal review queues rarely cooperate that cleanly. Two rounds of comments is normal, three is not rare, and every round is six to ten weeks of nothing happening while interest and taxes keep accruing. So the better question for the engineer is not the plan cost. Ask how many of their last five submittals in this jurisdiction cleared on the first pass, and who the reviewer is. If nobody clears first pass here, nine months belongs added to Path A before rerunning the numbers. That is the number that kills a $310k margin.

Who actually runs Path A day to day? You've priced dirt and pipe but I don't see a line for the person managing the engineer, the utility coordination, the bond paperwork, and the inspection schedule for two and a half years. If that person is you, then your $310k is also your salary for 30 months, and if you're hiring it out, a project manager on a job that size isn't cheap. That changes which path you'd pick even if the spreadsheets tied.

$310k on $8.8M is a 3.5 percent margin on cost across 30 months. As a capital allocator I wouldn't fund that, and I don't think you should fund it with your own balance sheet either. There isn't a version of this where nothing goes wrong.

Path B is roughly $950k on $2.7M with fewer ways to lose, but it isn't free of risk. An option is a call on your land. They control the timing, you keep paying taxes and interest until each takedown, and if the market softens they let it expire and you're holding a platted tract with your own $350k of plans sunk into it. Ask for a nonrefundable option payment large enough that walking hurts them, and ask what happens to your carry if the second takedown slips two quarters. If they won't put money at risk, the $38k isn't a price, it's a reservation.

The $38k is their read on finished value minus their risk. Ask what they actually closed lots at in the last two quarters.

At 96 lots on 34 gross acres you are at 2.82 lots to the acre with 55 foot widths. That is achievable, and it also means your engineer has almost no slack. Detention and the collector dedication, plus any buffer requirement, usually eat 12 to 18 percent of gross on a tract this shape, and final plats come in under prelim more often than over. Run Path A at 88 lots instead of 96. Revenue drops to $8.36M. Your per lot horizontal goes up because roads and pipe don't shrink proportionally, so call the total $8.6M. That turns the $310k profit into a $240k loss. Eight lots is the entire deal. The same yield miss barely touches Path B, because your $38k is per lot on whatever gets approved and your $350k of soft cost is fixed. That asymmetry is the real argument for the option, and it's stronger than the profit comparison you led with.

Nobody has said the word borings yet. Every scope blowup I've eaten came from what was under the surface, and on 34 acres the surface is the only thing you've priced.

Get a geotech with enough borings to catch rock and unsuitable soils, and get a dirt balance from your engineer. If you're importing 40,000 yards of fill or hauling out unsuitables, that's six figures nobody put on your $55k per lot. On one job I watched, undercutting a single street cost more than the entire storm system. Spend the $18k on soils before you sign anything, either path!

If you go with the option, the price is the least interesting term in it. Read for what triggers the takedown obligation and whether it is approval of the plat or your completion of something, how long the extension periods run and what each one costs the builder, whether the deposit is applicable to the purchase price or forfeited on default, what remedy you have if they skip a takedown (damages capped at the deposit is common and rarely enough), and who owns the construction plans and the approvals if the option dies. Also look for a most favored buyer clause or a market reset. A fixed $38k with no escalator cuts both ways, and if they have drafted a downward reset without an upward one, it will sit in the definitions rather than the price section. Whether the option is recordable and what a recorded memorandum protects differs by state, so a local attorney should read the draft before you sign it.

At $55k a lot on a project that needs a collector widening, the number reads low for most jurisdictions. Post what your engineer put inside it, because the ones that come in that cheap usually assume gravity sewer the whole way and no offsite water. Questions worth answering: how deep is the sanitary at your connection point and what is the fall across the site, is there a pump station in anyone's plan, what pavement section does the county require on the internal streets, and are you paying capacity or tap fees per lot on top of the $55k. Those fees are often thousands a lot and they show up as a separate check at building permit, which means the builder pays them, or at plat, which means you do. That distinction alone is worth several thousand a lot and it changes whether $95k is a fair finished price.

What does takedown mean in this context? Is that just the builder closing on a batch of lots on a set schedule rather than all at once?

Your $350k to reach approved prelim and construction plans looks like engineering only. When I priced a much smaller tract, the list ran boundary and topo survey, geotech, civil design, wetland delineation, traffic impact study, landscape and buffer plan, attorney for the submittal and the hearings, application and review fees, and a land planner for the neighborhood meeting. On 34 acres with an offsite road component I'd expect that stack to land well past $350k, and the traffic study is the one that sets the scope of the widening you're arguing about.

Which matters because Path B's whole margin is revenue minus land minus that number. If it's $500k instead of $350k, your $950k becomes $800k, still better than Path A. If the traffic study comes back asking for a signal instead of a turn lane, both paths change and you'd rather learn that before you fix a price.