INTRODUCTION
The development of real estate provides a portion of the inventory that a real estate broker utilizes in his or her
business. Just as any retailer or wholesaler must stock adequate inventories of their products, the real estate
broker stocks listings of real property. The broker constantly replaces sold or expired listings with new listings,
some of which may come from developers in the form of “new homes or lots.”
Real estate developers usually function in a larger business “arena” than do real estate brokers. Developers
“manufacture” residential, commercial or industrial sites, either as vacant lot subdivisions or as improved or
partially improved subdivisions. Their goal is to supply the type and price range of product that will satisfy the
market.
In the course of business, a developer often:
• carries inventory of raw land, semi-finished and/or finished products, often for lengthy periods and for
several widely separated, ongoing projects both “spec” (for sale) and custom (pre-sold);
• uses personal funds or negotiates loans from land sellers, joint venture partners (private investors) or
financial institutions; and
• assumes large risks because of land planning uncertainties and possible misjudgment of the market which
result in delays and losses due to interest payments, carrying charges, overhead, and other costs.
Some developers specialize in converting raw land to finished lots, suitable for builders to buy and begin
construction of off-site as well as on-site improvements. Often the land developer will also install the principal
off-site improvements and infrastructure (roads and utilities). Other developer-builders plan and complete the
entire subdivision from raw land through construction and sale of homes. Developers can be national, regional
or local and many parts of California have historically had some or all to varying degrees. Developers tend to
be very entrepreneurial and usually are very market anticipatory. Interestingly, there are no state requirements
such as licensing for developers or subdividers.