Development and construction involve a complex process consisting of many stages requiring the participation of  numerous parties and entailing many financial risks. The physical process consists of a sequence of events from land acquisition through subdividing, land preparation, construction, leasing, and sale,

Land acquisition

Before land is located for a development, the developer undertakes a strategic analysis of what uses the area requires, the market demographics, potential trade areas and locational features for users, whether the use is to be commercial or residential, competitive projects in the region, supply and demand, and financing options. Careful study of the features of the potential site and a highest and best use and feasibility analysis go into creation of a master development plan.

An estimate of  land and development costs representing the developer’s outlays, including site preparation, engineering and design, commissions, construction, permits, financing and other items will guide how much the developer can pay for the land. These costs will vary depending on whether the developer intends to proceed with the entire development to finished product or will re-sell the land at an earlier stage of the process to another developer or builder.

Subdividing and development

A division of land into two or more lots, units, parcels or interests may or may not include a plan for streets and utilities. Subdivision is regulated by state and municipal laws concerning zoning, permissible uses, construction standards, and environmental constraints, among other things.  One essential step is the creation and recording of a subdivision plat map. This map lays out the proposed building sites, streets, and public utilities.  Also, improvements that will not be sold to individuals, such as parks, streets, sidewalks, and curbs, are typically donated to the local municipality or county by means of a recorded dedication. This dedication ensures that the local government will be responsible for maintaining those improvements


Residential construction falls into three general categories.

Spec homes. Speculative or spec homes are those that are built without a prior commitment from a homebuyer.

Custom homes.  When there is a contract with a buyer for a particular home before there is any construction, the builder constructs a custom home, usually according to a plan presented by the buyer or an architect.

Tract homes.  Here the builder offers a choice of floor plans and designs, often represented by one or more model homes, for the buyer to choose along with a particular lot.