The on-site homebuilder’s first steps are to determine the geographic areas in which it wants to build homes, and to acquire raw land or lots (land that has been developed for building). In most cases, the builder will buy at least enough land to support a community of no fewer than 50 homes. Homebuilders try to tailor their land purchases to the corresponding market’s characteristics, based on characteristics of the selling community, comprised primarily of developers or landowners, as they also keep in mind what might best serve their ultimate home consumer. Typically, in any given market, most participants are aware (or are made aware) of large land parcels when they become available—either through negotiated sale or by competitive auction. More often than not, the sale is negotiated between the land’s owner and/ or developer and the homebuilder. However, in some cases—especially for unusually large tracts of land—the sale is made through a bidding process. Most land acquired by the average builder in our universe is bought through option contracts, and payment is predominantly made at the options expiration. Especially in areas where available land is relatively scarce or where the entitlement process is comparatively long, option-based purchases can make a lot of sense, based partly on the financial flexibility they provide to the homebuilder. Such contracts require builders to pay only a small fraction of the total lot costs up front, and they tend to have few (if any) performance requirements. These kinds of contracts are often renewable, generally expire on a rolling basis, and have a specified exercise price. During the housing downturn that began in 2006 and continued into 2009, many large homebuilders terminated their land option contracts, thereby losing their cash deposits. Their assumption is that demand in the housing market will not rebound for some time and that they will be able to repurchase land at much lower prices as the economy emerges from recession. Because the decision whether or not to acquire land is the single most important decision a builder makes, considerable effort is made in this endeavor. Land acquisition experts typically scout the market for recent sales of new homes in search of “comparable” properties.