This episode dissects a New Jersey infill lot review where DR Horton’s off-market multi-parcel purchases created false valuation signals. The comps showed high price-per-acre figures but investigation revealed land banking arrangements, non-arms-length transactions, and bundled sales where one 30-acre parcel in a seven-parcel package distorted per-acre calculations, demonstrating how national builders operate in inaccessible markets with predetermined returns.
Key Takeaways:
- Multi-Parcel Distortion When seven parcels sell together with six at quarter-acre and one at 30 acres, price-per-acre calculations become meaningless without checking individual APN acreage.
- Builder Market Inaccessibility DR Horton’s land banking relationships (10-20% predetermined returns to land bankers) don’t reflect open market pricing, making their purchases unreliable comps.
- Official Records Investigation Finding multi-parcel details requires checking property appraiser sites or deed records for APN lists, dates, and total acreage since MLS data often omits this critical information.
Listen to learn the complete process for identifying multi-parcel sales and avoiding valuation disasters from distorted builder comps.
(Podcast transcript below)
Hi, Chris Duff over at Serious Land Capital vacant land funding partner. So I just got off a land daily diligence live review today. spent way longer on this one and fill lot property that I thought was going to be a very simple review. but I think it served as an example of where, you know, if you just take
You know, you kind of judge a deal book by its cover here. I think I it’s gonna be pretty like pretty basic quarter acre lot Street access, you know basic infill Probably doesn’t have that much to it. Let’s figure out the comps but the comps are a much more difficult Situation to figure out where
Again, it’s an example to where if you’re just, cause again, we’re all looking to be efficient. Same on our side, like how fast can we properly review these deals and get to accurate pricing here? And I know there’s, you know, I’m trying to build this land price, your software too. And I know there’s other tools on the market that are also trying to be accurate with competent vacation and pricing and so forth.
You know, in regard to looking at these, it’s easy to be misled in some markets. Like some, yeah, it’s very clear cut when it comes down to just looking at the numbers. Okay. There’s all this good soul data. It’s near identical in terms of these comps and so forth. But in some areas, and if you want to look at like my full review here, this was a infill lot in New Jersey, kind of near the ocean front.
you know, roughly quarter acre lot, and there pretty much warrant any sold comps that I thought were really appropriate to consider a lot were off market. but I can actually break this review down into a number of sections here, but to keep it simple, you know, the land investor who sent us this deal. Included a number of comps.
that were recently purchased by D.R. Horton, a national home builder. So that’s the thing is if you’re scraping some comps right off on the last, it’s not necessarily going to tell you some of that information and you can take it a lot more like face value and think, my God, look at these wild valuations here. I’m getting it at this price like this could be like a three, four X type of deal.
But when you look a little bit closer, it all of a sudden, some of those numbers become a lot more suspect and you have to break them down. in this case, and this is oftentimes like going to be most relevant for when you’re dealing in infill lots. But in this case, like, okay, I pulled up one of these DR Horton deals and
The key thing here is that it was also an off-market sale. So I’m always very skeptical about those types of deals that show up on MLS anyway. And you can tell when it’s off-market when there’s nothing within the listing description and all it shows is like, you know, a sold date and whatever that price might be, assuming it was in a disclosure state or, you know, won’t show a price if it was in a non-disclosure state. So we have no idea really what happened.
in the back end and what the situation was with deals like that. So that’s why I’m just so skeptical and I’ll leave out some more of that for future podcasts as well, but mainly focusing on like, okay, first off warning sign, this was an off market deal. And then I go and check this comp within land ID and see that it was bought by DR Horton.
And it was in an area that seemed to be an active development. mean, it’s D.R. Horton, right? they’re, know, they can, you these national home builders, multi-billion dollar companies, they can be using like very sophisticated tax saving and like P &L and balance sheet type of, I wouldn’t call it shenanigans, but, but,
they’re trying to keep the math more in their favor for how they might structure their balance sheet. And so they’ll work with some land bankers so they’re not holding land within their core holding company. mean, the D.R. Horton must have like a million of these different states. And I think this one was like D.R. Horton, New Jersey and so forth. But typically they’ll work with land bankers.
to where land bankers are holding land for some type of point return. I’m not sure what they’re typically, I think it’s like between like 10 to 20 % on average, kind of interest assigned to holding on to these vacant land properties. And then a home builder will piecemeal pick up different chunks of the land being held by the land banking.
Entity usually some you know separate company entirely and then paying them whatever that you know requisite amount of interest is like that Basically, that is how land banking will work. I’m sure I’m missing some of the nuance here, so you know go go use perplexity go use AI to review that more as as needed but that’s the basic mechanism behind it and
So you might see, okay, DR Horton’s like picking up these parcels for, I don’t know, hundred thousand, whatever. And then using that as a comp. But when you actually check it out, that’s not necessarily indicative of the underlying asset value because it wasn’t purchased on the open market. And oftentimes, not always, but that’s why you have to kind of click around on some of these infill lots.
situations where it could be a multi-parcel sale. And some of the MLS data will show you that sometimes in Redfin or Zillow, it’ll indicate, this was a multi-parcel purchase. I think usually Redfin does that versus Zillow. And then you have to be even more careful, like, okay, how many parcels were actually included in this purchase price? And sometimes the only way to do that is then you have to get on to either the property appraiser site for that county or
even into the official records and the official records can be difficult to find because if you don’t know, well, you know, especially if you’re dealing with a purchaser like DR Horton, so like they’re going to have so many, so many transactions within the official records. And so then you’re really going to have to dive in and I spy figure out where that grantee is in relation to that exact lot that you’re looking for.
And sometimes you can match it up by the date that that can make it a little bit easier. w w which would typically, you know, be the more efficient way to, to route that, but then you’d have to find, okay, what is within this deed and then how many APNs are associated with it. And some counties don’t even allow APNs with on deed within deeds. And so then you have to like figure out, okay, does it mention the acreage? You know, total amount of parcels that that can be a little unclear. That’s why I like,
refer when the property appraiser site might indicate how many parcels might have been a part of this sale. But yeah, ideally, the official records will show you, this was associated with this APM, this APM, this APM. And then you can actually figure out what that total amount was. But that’s not even the full story there, because you’re like, OK, I found out.
there were like seven APNs attached to this, but then you’re also making another assumption based on the total acreage there, because what happens if like six of those APNs were, you know, quarter acre lots, and then that seventh one is, I don’t know, like 30 acres, just to be an extreme example. And so then all of sudden, if you’re still rushing through your process here and not double checking the full
list of acreage via those APNs. What was included in that multi-parcel sale, then your price per acre and your true evaluation can still be off entirely. again, even if you figure that out, I still really wouldn’t trust the numbers from a national home builder buying it. they’re operating in a market that none of us have direct access to. like, again, they’re in have like private relationships.
with land bankers and so forth and have agreed upon purchase prices and so forth that aren’t necessarily following current market forces. So just like that is the most important thing that I’m mentioning here. But you know, I’ve also just want to have you be mindful that whenever you’re looking at some of these, you know, seemingly stronger markets and there’s a lot of activity within an infill area, a whole bunch of sales.
that seem to be like, yeah, this is like really moving here. You’ve got to be checking the multi-parcel possible sales, especially in like lower value markets. They tend to be more common. So that is the way to actually check on it before you arrive at final judgment. so I like, again, I would love for pricing land to be like as efficient as possible, but you can just see like,
Depending on the area, you’ve got to do your extra level of research before you pull a trigger and buy anything because you can easily be misled. I just took you through probably 10 different examples within one overarching example of where you can run into hiccups if you’re not paying close enough attention or you’re just trying to rush through your process. So hopefully this one is helpful as well.
And that hasn’t even told the full story on this particular property that I was reviewing. So might even be able to get a few more days of content out of it. With that, serious land.capital for any of your funding needs. Also, land daily diligence, which I just mentioned, Mondays and Thursdays for zero cost review land deals and then landpricer.ai for the most simple and accurate way to price land. next version, we are just moving and grooving on it.
See you tomorrow. Subscribe and share. Take care. Bye.
