A lift station capacity gap that turned a 12 unit infill site into a costly lesson

Take a small 1.1 acre infill lot in a first ring suburb where zoning already allows 12 units by right, purchased at 310k with a 21 day due diligence window because competing offers were in play. A thorough 21 day window typically covers title, survey, a phase one, a soils report, and a call to the planning department confirming zoning. What frequently gets missed is a written request to the utility for a will-serve letter. The risk shows up when a civil engineer submits the capacity request after closing and finds the lift station serving that basin already at capacity, with anything over roughly 4 units requiring an offsite upgrade. If the utility prices that upgrade at 480k with a queue of over a year and no guarantee the queue holds, the economics collapse. Four units rarely covers 310k of land in that kind of submarket, and a scaled down version of the project can run negative before any return to the owner. In a case like this, selling the site later to a builder doing two detached houses at a loss, after architecture, civil, carry, taxes, insurance, and closing costs both directions, can easily land in the six figures underwater. The lesson: the will-serve or capacity letter belongs in the closing conditions, the same as title. If a seller will not wait for it, a shorter feasibility period with a larger nonrefundable deposit paired with sending the utility request on day one is the safer structure. Zoning tells you what you may build. Utilities tell you what you can actually build, and those are separate questions that deserve separate diligence.

2 replies

aaron_fitz10 PU1APRO 13

Same shape, different pipe. Take a site under contract where the zoning is fine and the sewer is fine, but the fire marshal wants 1,500 gpm of fire flow at 20 psi residual. If the main on that street is a 6 inch from the sixties testing at about 900, the fix is 700 feet of new main. That's the kind of thing feasibility should catch, and often only gets caught because a local builder says to ask, not because anyone knew to. The part that stings in your version is that the planning department answered your call and it was true and useless at the same time. They answer zoning. Nobody in that building is going to volunteer the capacity problem.

aaron_fitz10 PU1APRO 13

devon_pierce SS4APRO 15

A little pushback on your own diagnosis, quarry. The lift station is what killed the deal, sure. The thing that made the lift station able to kill it was going hard on 21 days on a competitive lot with no way out. Any one of five other findings could have landed in the same place, contamination, an easement across the buildable area, a soils report that wants piles. If a process only survives when nothing surprising turns up, the utility letter is one patch on a bigger hole. Better to lose the lot to the other bidder than buy a lot you haven't finished asking questions about. $118k is on the cheaper end of that particular tuition, honestly.

devon_pierce SS4APRO 15

A lift station capacity gap that turned a 12 unit infill site into a costly lesson

2 replies