Evaluating Land for Sale Austin, TX
When it comes to evaluating Austin land for sale, there are many factors to determine. Particularly in this writing, we are speaking about determining the value of your lot to a new home builder or a homeowner who is intending to buy the land to build their dream home. The most common buyer is going to be a new home builder. In many parts of Central Austin, 78704 or North Central Austin, there are lots with older homes that have not been updated. A homeowner may find that the lot is more valuable to a spec home builder in Austin than someone who is interested in buying the home and renovating it to current standards.
Most real estate agents in Austin would pull comparables for homes that are sold in the area and give a value of the lot and guess what the homes would sell for. We’ve found a better way to evaluate lot value and determine how much your Austin land should sell for.
I’ve been studying this a lot lately because of all the new construction going on in Barton Hills. I had lunch with a builder a few weeks ago and one of my agents is a builder and they both say the same thing - lot value (for a spec home builder) is no more than 1 third of the exit price. So if builders are selling a home for $2.5M, the highest a builder would pay is $8,333,333. Now obviously that’s with a give or take of $20k to $50K, depending on the margin of profit the home builder is willing to make. Some are willing to make less money and it stands to reason that an end-user would be willing to pay a little more for a home they are going to stay in for a long time. If you’re buying a lot in Austin to build your dream home, the amount you’re willing to pay isn’t going to be based on a profit and loss formula.
I just tested this theory in Barton Hills by selling two homes. One was a home that was functionally obsolete and not an attractive layout for today’s standards of buyers. It sold for $690,000 Another was a very dated home that could be remodeled very nicely for $100k or so and it sold for $675,000. Sure enough, there are a number of homes being built now that are projected to list at $2.2M.
This is not to say that you should value your lot based solely on what the newly built homes are selling for. It’s one of many factors that should come into play but its a very important one. The agents that work at the best real estate companies in Austin are going to look at what your home would sell for in its current state and compare that with minor upgrades as well as major renovations and then compare that price to what builders pay for a lot.