Multiple times a year, I get a call from a seller with the question, can I subdivide my land?
They have a large lot and think there is a buildable lot or lots that can be cut out of their tract of land. Here in the greater Boston area a lot that can be built on is scarce, so if you are sitting on a lot that can be built, it can be turned into cash.
But more often then not, it is not possible for the seller to do so. Depending on the circumstances it can be a very simple process to very complicated to determine if your land can be subdivided. Because of the high cost of lots for new construction homes, it is certainly worth a little effort.
Here are points to bear in mind along the way that will help you make the decision about where to head with the possibility of subdividing your land.
The Simplest, Easiest Way to Subdivide Your Land
If you have a lot that conforms with all the town zoning for a buildable lot, it is called a Form A lot. A “Form A” lot technically requires no approval, though you will still have to go in front of the planning board.
But, as long as you meet the requirements they have no basis to deny the subdivision. A Form A lot or lots must meet the town zoning requirements as follows:
- It must be in the proper zone for the proposed project. For example you cannot build a residential home in an area that is zoned commercial.
- It must have the proper street frontage and acreage. Every town will have a required minimum street frontage and acreage for a a lot to be built upon.
- It must have the proper front rear and side setbacks.
If you have a Form A lot you will still have to pass by the conservation commission to make sure you comply with all the conservation commission regulations involving wetlands.
Do not make the assumption you have no “wetlands”. Don’t be surprised if they come up with wetlands on your property. If wetlands are found their will be wetland set back requirements. It is not unusual to have a Form A lot to find out that the wetlands make it unbuildable.
When I say subdivision, it could be cutting off one lot out of a bigger lot or several to many lots out of a bigger piece of land.
If your land is not a Form A lot all is not lost, you still may be able to get a variance to build on that land. The planning board is the place to start to see what the possibility is to get a variance
If You Would Like to Subdivide Your Land, Start with Your Town Hall
If you really have an inkling you would like to sell off some land to a builder for a subdivision or a single building lot, a REALTOR with experience in subdividing land will work with you to do all this upfront research. But if you would like to do some research on your own, start with going to your town website or go right to the town hall.
- Start with the Zoning department and see if you can get a plot plan and find out where the property is located on the zoning map and what the requirements are for that particular zone. Just because you don’t have a Form A lot doesn’t mean you can’t get a variance.
- If all looks good head over to the planning board. The planning board will give you an idea of what may be possible and what hurdles you may have ahead of you.
Some Thoughts on Selling Your Land to Subdivide
So I just gave you a quick, really simplified overview of subdividing your land. It can be quite complicated and can get quite expensive if you are talking about multiple lots with a road for a subdivision. There will be a decision that will be made once you feel that you have land that is sub-dividable:
Decide to subdivide the land yourself
This means hiring surveyors, an engineer, a botanist, an attorney, etc… to prepare the documents and subdivision plan you will need to present to the town for approval.
On a simple sub-divided lot it could run you several thousand to upwards of $70,000 or $80,000 on a complicated 4 or 5 lot subdivision. The up shot of going this route are if you are successful you will make more money, you have eliminated the risk for the builder if you are providing a subdivision with permits in hand or the guarantee of permits.
The con is you can spend all of this money to fall flat on your face and lose all your development costs, you take the risk. The higher the risk the greater the reward.
Decide to sell the land raw and let the builder subdivide subject to…
Most homeowners will opt to go this route. They will sell the land as raw land subject to final approval from the town. Meaning a builder will agree on a certain amount and put down a deposit.
The builder will have a contingency clause in the contract saying that the sale is subject to final town approval and permits on a….. a certain type of building, number of buildings, etc…
The benefit for you is your are taking no financial risk, the builder will carry the risk. The con is you will have to wait any where from 6-18 months for final town approval depending on the project and you will get paid less for the land.
The farther you bring the land into development the more money you can make.
What is My Land Worth If I Subdivide?
This is the million dollar question. It is hard to give you a hard and fast rule so I will give you a ball park rule that will give you a rough idea.
Typically a builder will pay around 1/4 to 1/3 the cost of the new home that can be put on an approved and permitted lot. Meaning there is no extensive engineering or permitting process. So for example, if the lot can handle a finished house selling for $600,000 dollars they may be wiling tol pay around $150,000 to $200,000 per lot.
Please remember this is just a simple formula to get you into the ballpark of what your land could be worth. It is certainly not written in stone.
There are many other factors involved including the length of the driveway, how far a builder may have to go to connect to sewer and water, if it is on septic plus any other number of variables that will increase the cost to build a specific location.
For example, our MLS is filled with large tracts of land, with tons of acreage, where you can put maybe two possibly three houses but it requires a 800 foot road going over wetlands to just to get to those buildable lots. It could cost $400-600 a foot to build the road. So just to get a road in you are talking the builder needs to spend $320,000 dollars just to build a road for two houses. In many moderate to lower priced towns where a builder might only pay $150,000 for a Form A lot this makes the project unfeasible.
If the lot is not approved and ready to go then a builder will start subtracting the costs from there. So if they have to do engineering, rip down an existing structure, build a road, they start subtracting the cost of such from the maximum that would be willing to pay for a lot approved and permitted.
For example I had a piece of land I recently sold. We estimated that a builder could get four lots, one would be an existing structure that would be rehabbed, on about a 4 acre parcel of land.
There were a lot of wetlands to contend with. The finished houses were worth about $2,250,000 sold to the end buyer. We take that $2,250,000 and divide by 3 and we get $750,000 dollars. There would be roughly $90,000 in legal and engineering then about $160,000 in building a road with a cul-de sac.
This brought the land basis down to about $500,000 ( ultimately we added $75,000 more for the existing house, the cost of rehab was far less then a new construction). We had builders with competing offers and it sold for just around that amount.
Final Thoughts On Subdividing Your Land
This article, Subdivide Your Land, was provided by Kevin Vitali- 978-360-0422. If you think you have land that can be subdivided, is a possible building lot, or you have a home that could be a tear down for new construction, call me. I can start the research to see if we have a building lot or lots for you to sell.