Toll Brothers underwrites lots for tomorrow’s market, not yesterday’s

As margins for error narrow in homebuilding’s land rules of engagement, boundaries between strategy and tactics have begun to blur.As slower sales, weaker demand, moderating sales prices and declining margins continue to look for a stabilizing floor, homebuilding land acquisition decision-makers now typically take a more discriminating, granular and real-time look at each deal to ensure it measures up to indefinitely challenging selling conditions. While many builders contend with land bought in a stronger market that is now becoming a liability, Toll Brothers has spent the last few years raising its underwriting bar and tightening it further. That approach is shaping more than what the builder will pay for land. It is influencing where Toll considers building, how it structures deals and where it finds opportunity as competitors reassess older purchases.Rob Paul, Texas and Arkansas group president, and Dustin Bowersett, VP of land acquisition for Toll’s Central Florida division, elaborated on the company’s land strategy during a session last week at the HousingWire Homebuilder Summit, moderated by longtime Wall Street housing analyst Dan Oppenheim. That strategy follows a clear th...