If you have some cash available and are looking to buy land, call one of the national builders and you may get a huge bargain. The need to raise cash is driving some builders to sell off their land, but the price may be lower thanks to the federal government.

Because they need to take losses from land within 2 years of a profitable year, builders are desperate to sell the properties before the  end of the this tax year. This explains why DR Horton decided to sell 2,000 lots for 7.7 million dollars in Desert Hot Springs, California. The property is worth more than the price, but the tax benefit of a big loss is better for the balance sheet of DR Horton than holding the property.

So if you have cash, go buy a few hundred lots. They may be sold at a price you will never see again.

The fire sales are a silver lining in those clouds. Tax law allows companies to apply losses from land and other asset sales to past profits and reap a tax refund. More sales are expected soon because the companies can apply losses only to profits earned as far back as two years and 2006 was the last profitable full year for most builders.
Horton told investors in June that it expects to receive a tax refund of $519 million over the next two years. At the end of last year, Lennar Corp. pocketed a $200 million tax refund after taking a 60% discount on its sale of 11,100 house lots to a joint venture it formed with Morgan Stanley.
“There’s going to be a rash of builders shedding assets,” said Tom Reimers, executive vice president of O’Donnell/Atkins, a real-estate advisory firm in Irvine, Calif. “It’s all tax-motivated.”
By dumping land, builders are chasing cash that allows them to keep current with lenders and pay overhead expenses. via WSJ.com

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