Land Development Issues, Construction expert witness California

The development of raw unimproved land into super pads, sheet graded pads, rough graded lots, blue-topped lots, and eventually, finished lots is a risky endeavor that typically is fraught with grading surprises and infrastructure issues resulting in budget overruns and completion delays.  Unfortunately, these land development issues are often the source of substantial litigation between the LLC members, as well as, project subcontractors.

Once the land has been developed into finished lots (horizontal construction) and is ready for the construction of the homes (vertical construction) the construction risk factor to the homebuilder has been reduced substantially.  Unlike the development of the lots, building a home is very predictable, absent perhaps, some relatively minor material and/or labor cost increases between construction phases.  Or stated differently, significant cost busts are common in land development; whereas, in house construction overruns are generally within a reasonable tolerance.

Another issue is the financing of the shortfall between the approved construction loan land development budget and the “actual” cost of constructing the lots, given the budget overruns.  The reality is that the lender will typically not increase his loan amount due to certain loan-to-value requirements, underwriting criteria and going back to the senior loan committee or Board of Directors for approval.  Therefore, the only source of funds to cover the land development overruns is that dreaded term — “partner capital call”.  Sometimes partners elect to spend their money on litigation as opposed to putting more funds in a real estate investment that may start to show signs of “going south”.

Mr. Ryan is intimately familiar with the various issues that can arise when constructing lots for residential purposes.  He has developed over 3,500 lots (in Orange, San Diego and Riverside Counties) during his 40 year career in the Industry and is well qualified to render professional opinions and testimony as a real estate expert witness on this topic.

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