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Accounting for Real Estate Transactions: A Guide For Public Accountants and Corporate Financial Professionals, 2nd Edition by Maria K. Davis

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Chapter 8

Retail Land Sales

8.1 Overview

Sales of real estate can be categorized into retail land sales and sales of real estate other than retail land sales. The accounting for sales of real estate other than retail land sales is explained in Chapter 3. Retail land sales are lot sales on a volume basis to retail customers as opposed to homebuilders. Sales of real estate other than retail land sales include the sale of land (not classified as retail land sales) and buildings (commercial developments, office buildings, shopping centers, homes, etc.). Wholesale or bulk sales of land and retail sales from projects comprising a small number of lots also fall within the category of sales of real estate other than retail land sales.1

Retail land sales companies typically acquire large tracts of unimproved land for subdivision into lots;2 they develop master plans and commit to construct or construct improvements (roads, utilities) and amenities (golf courses, lakes) to make the lots more attractive. These lots are sold to retail customers through intensive marketing programs and may be purchased with relatively small down payments; often the down payment is less than 10% of the purchase price, and it may be as low as 1%. The balance of the purchase price is typically financed directly with the retail land sales company rather than a financial institution and paid over several years. Under the terms of a typical contract, the buyer may discontinue payments at any time. If payments are ...

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