Property development in the past was traditionally regulated by local cities and counties. Today more than ever, land developers need to focus their attentions and be aware of the numerous federal and state laws which protect wetlands, endangered species, forests and water resources when they are contemplating a development project.   Developers must be aware that from the very beginning of the project, the process will involve obtaining land use and environmental approvals in order to successfully develop the site in an effective manner. These land development changes are here to stay. 

 What Factors Have Influenced Changes:

1. The U.S. Army Corps of Engineers have been instrumental in creating a variety of federal and state related approvals and more restrictions that have resulted in significant costs to developers who must make the appropriate changes to comply with wetlands mitigation requirements.     
2. New endangered species lists and critical habitat designations are creating more government regulations and approvals.  Agencies such as the U.S. Fish and Wildlife Service and National Marine Fisheries now have more mitigation authority over land development projects.
3. Water issues and land development are being dramatically impacted.  For instance, today all levels of government are now involved with endangered species protection and public water allocations caused by severe droughts and water shortages in certain parts of the country.  Water quantity and quality are now part of the land use decision process.

 
Many municipalities have adopted water setback ordinances for bodies of water such as streams. There are numerous forest protection acts, erosion prevention laws and other legislation that have popped up over the last decade that are increasing laws and regulations affecting development projects. Federal agencies are issuing large fines against business entities and filing criminal actions against private individuals for violation of environmental laws.  In turn, private citizens are filing lawsuits against the federal and state governments to modify regulations affecting development projects.

Natural resources are influencing how the development project will go forward or in some cases whether the project will go forward at all.   Developers must understand this natural resource permitting process and how it affects their project before they begin any permitting process.  The following are recommendations to understanding the process:

1. Prepare in the very initial development process by identifying early any natural resource or environmental permits that may be needed by using your legal and technical development team’s resources and relying on their advice.  Plan ways to avoid the natural permit process and be prepared to spend a considerable amount of time and money.
2. Consider changing your project so that it will not have a significant impact on wetlands or endangered species.  If this is not possible, focus on what special permits you will need and start the application process as soon as possible so that you are able to plan accordingly.  Conducting species surveys is a good way to find out if there are endangered species that will be affected by the development of the site. 
3. Identify water issues.  Make sure that you have sufficient water rights and water supply. Obtain all storm water permits and meet waste discharge requirements by applying for these permits early on.  Also investigate whether nearby water sources have restriction issues and have a plan to deal with and solve those issues.
4. Research and investigate local government regulations, setback provisions, water and erosion law and regulations and forest regulations.

By investigating and addressing these issues at the beginning of the project, you will be more successful in obtaining any required natural resource permits and successfully completing your project.

Many developers have been on the sidelines of late waiting for the credit crunch and property prices to stabilize. But not everyone is scared to enter this market. Many think now is the best time to buy property they have witnessed in 20 years.

A recent article in The New York Times addresses that very issue. (Sure, Land Is Cheaper. So Is It Time to Buy?)

I agree with the New York Times article that there are some great opportunities in the marketplace right now. What I fail to agree with is the approach the article seems to condone.

The article is focused on land banking instead of property development. Land banking is where you purchase a property with no intention of developing it. You simply are holding it with the hope that it will appreciate in value.

Personally, I think land banking can be much riskier than actually developing the property. With property development, you first recognize a demand for a certain product in the marketplace (office space, apartments, medical, etc.) and then you develop a piece of property to meet that demand.

With land banking, there is often no real plan of what the end strategy is going to be. That’s very risky. If you don’t have a good idea why your property is going to appreciate in value, and how and when you are going to sell and recover your return on your investment, then you are just gambling.

I have been around the development industry long enough to see how quickly permitting requirements and building codes can change. Many of these changes can have huge impacts on the value of your property.

The longer you hold an undeveloped piece of property, the greater the risk that a change in permitting, codes, or zoning will negatively impact your property.

Wouldn’t you rather get the property developed as quickly as possible and avoid such risks?

Now is the time to be looking to buy land - but only if you can develop it into a marketable product today.

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It seems nearly every city in every state is aggressively trying to grow in size these days. This can often be a golden opportunity for your property development project.

City’s are looking to grow in size by annexing land for one simple reason – tax revenue. Every parcel that is acquired or annexed by a city increases its tax base and tax revenue. It is a simple way for cities to pay for thier constantly growing services and budgets.

As a property developer, when you conduct your due diligence, it is a good idea to be aware of what cities and towns may be in close proximity to your parcel. If another city is nearby your property, you should definitely evaluate what annexation could do to the value of the raw land and the final developed project.

Through annexation your property may be able to acquire;

• a higher density zoning or even a complete change in land use
• access to beneficial services like water, sewer, mass transit, fire and rescue, or snow removal
• possible change in school districts or added leverage to initiate a change in school districts
• tax incentives (normally for large parcels and developments)

Consider these scenarios.

1. You find a piece of vacant land that does not have water and sewer available nearby and is thus priced accordingly. You put the property under contract and then talk with the nearby city to arrange for annexation and the construction of a sewer line via a fair share agreement. Before you even close on the property you have increased its value significantly.

2. You are under contract to purchase 35 acres for the development of a high density commercial and retail center (complete with a big box anchor store and major hotel chain.) During your due diligence it becomes clear that the city’s water line does not have the capacity to serve the entire site. However, the adjacent city has water service nearby that does have capacity. Rather than walk away from the project, you pursue annexation and obtain the water concurrency needed for your development.

3. You pursue rezoning of your property to allow for a higher density mix use development but are denied. However, the adjacent city’s planning and zoning board is much more in tune with your development vision and would be in favor of the project if the property was within their jurisdiction. You go through the annexation and rezoning process simultaneously (which is the norm) and get the zoning you need for your development.

It pays to explore all your options when developing land. This is often where the real profits are found. So add annexation to your due diligence checklist. It could bring your property development much bigger profits if you do.

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Many of the readers of Property Development Source.com are not interested in developing real estate. They would rather simply buy and sell land and leave the land development to someone else.

So many of these readers have asked me the same question, “How can Property Development Source.com help me buy and sell land for maximum gain?”

Well, when it comes to buying land I think the answer is obvious. Without proper due diligence and a site evaluation there is no way to really know what the development potential of a property is. And thus, it is impossible to determine an accurate value or price for the land you plan to buy.

The advantages of conducting due diligence when you are selling land is a little less obvious. So let’s look at a few of the ways it can help.

1. Determining an appropriate asking price
Once you have done your research you are in a far better position to know what a good asking price would be. This is important because if your asking price is too high many potential buyers may not even bother submitting an offer. (99% of all real estate agents use the wrong techniques to estimate the value of raw land.)

2. Eliminate low ball offers and unqualified buyers
When you provide interested buyers with a property package that provides them with all the information they are going to need to it shows that you are not someone to be taken advantage of. Your package makes it clear that only serious offers will be accepted.

3. Gather more interest from the buyers you really want
Many of the bigger developers and companies have people who do nothing but look for properties. These people are extremely busy and will often skip over properties that require to much effort during the initial evaluation. A complete property package will get these buyers attention because you have done the initial work for them.

4. Give your asking price more validity and you more leverage in negotiating
Many buyers like to get a contract signed by the seller and then start chipping away at the price by finding things wrong with the property during the due diligence period of the contract. By putting everything on the table up front in your property package you significantly reduce the effectiveness of this tactic and give your starting price more validity and you more leverage.

To further illustrate my point, here is a story of the way many people go about selling property. Notice how the seller is constantly negotiating from a position of weakness during the whole story.

Jane Q. Farmer owns about 6 acres of rural land outside a major metropolitan area. The city is expanding in the direction of her property and she is nearing retirement so she decides its time to sell. She assumes, and wrongly I might add, that she only has 2 options for selling her property – sell the property herself (i.e. putting a sign on her property with her phone number and hoping someone drives by), or hire a real estate agent to list the property and sell it for her.

Jane isn’t in too big a hurry so she decides to simply put up a sign and wait to see what happens. Well, Jane has some luck and after a week or two she gets a phone call.

Steven Developer calls the phone number and starts asking her about the property and what Jane’s asking price is. Well, Jane doesn’t really know what the property is worth or what price she wants (just that she wants to get as much as possible, whatever that is). She had asked some of her friends what they thought the property was worth, but her friends aren’t any smarter about land than she is.

So out of fear of making a mistake and telling Steven a price that is too low, she just tells him they haven’t set an asking price but are accepting offers. This only delays the problem.

A few days later a contract offer from Steven comes in the mail offering $150,000 for the 6 acres. Jane has no idea if this is a fair offer or not but it is way lower than what her friends had told her the property was worth so she decides to do nothing.

Two days later Steven calls back and Jane tells him she felt the offer was too low. Steven replies that with the odd shape of the property and the current zoning he doesn’t think he can build more than 5 single family homes on the property and $30,000 a lot for raw land is a more than fair price.

That sounds reasonable to Jane but she’s still uncertain so she declines the offer and tells Steven goodbye.

Over the next 6 weeks, Jane relives this same scenario 3 or 4 more times. Most of the offers were for similar prices between $100,000 and $200,000. One was for $450,000 but the contract for that offer was very long and there was talk about the sale being contingent on rezoning which Jane didn’t understand so she passed on it.

Finally, Jane got tired of the stress of the whole ordeal and when the next offer came in for $175,000 she took it just to get it over with.

In reality, if Jane had done some basic due diligence and site planning, she would have known that the property was worth considerably more than $175,000.

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I have created a short video that runs through the main features of a Site Evaluation or Due Diligence Report. The video goes through an actual report that we prepared for an existing client.

The format that you see in this report is the same one we use no matter what type of site we are evaluating. This particular property is a small outparcel of a shopping center, but the report would look similar if we had evaluated a site for a large subdivision, or even a multi-use planned development. All reports look the same.

As a developer, you should be doing similar due diligence reports on the properties you are evaluating. Although they don’t need to be as formal, a consistent structure will help ensure that nothing is missed or overlooked. It will also make it very easy to find information quickly when a question comes up on a project.

Another great reason for a developer to compile their due diligence in a report, is that it is beneficial when hiring your team members. When you meet with your team members to request proposals on a project and you hand them the preliminary report you have completed, it shows professionalism. And it also shows what level of service you expect from them as well.

Please note: To protect our client’s information, all names and identification of the property, its location, and the people and companies involved have been changed.

You can watch the video here,



Site Evaluation Video.

A downloadable copy of the report in the video is included with “THE BIG 6: Answers to Developer’s Top Questions that Hinder Success”

You can get your copy here,

THE BIG 6:Answers to Developer’s Top Questions that Hinder Success.

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Please check out the Site Due Diligence Checklist Video and Download below. This is the same checklist that the engineers in my office use when they are conducting an initial site evaluation for a land development project.


The checklist is a great guide for developers. Use it to make sure you have investigated the more common problems properties tend to have.


(The land evaluation checklist is quite thorough but I don’t want to imply that it includes everything. I make no claims that this checklist will eliminate any and all surprises on your development projects.)


I have done a quick video overview of the checklist and have placed the video on a different page for better viewing. Please go here,



Land Due Diligence Video,
to watch the video, but submit comments and questions on this blog post, please.


Download a copy of the Checklist in Word and PDF format when you order,


THE BIG 6: Answers to Developer’s Top Questions that Hinder Success


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