Glossary

Water terms follow the administration of theColorado Division of Water Resources. Licensing and brokerage terms follow theColorado Division of Real Estate. Construction and warranty conventions reference guidance from theNational Association of Home Builders.

Absorption rate

The number of homes a community sells per month. Absorption drives carrying cost, so a project that sells one home a month slower than planned pays interest, taxes, and overhead for proportionally longer. Price and absorption have to be solved together rather than separately.

Accessory dwelling unit (ADU)

A secondary self-contained living unit on a lot that already has a primary home, such as a basement apartment or a unit over a detached garage. Whether a jurisdiction permits one materially affects what a lot is worth.

Architectural review committee (ARC)

The body that reviews and approves home designs, materials, colors, and site placement against a community's design guidelines before construction begins. Its function is to protect value for every owner by preventing individual choices that reduce what the neighborhood is worth.

Augmentation plan

A court-approved plan in Colorado water law that replaces water depleted by a well so that senior water rights are not injured. On parcels without district water service, whether an augmentation plan is available often determines the achievable lot count.

Base price

The price of a home plan before lot premium and options are added. Base price is the number used in advertising and comparison shopping, which is why it is set separately from the price the buyer eventually pays.

Build job

A home sold to a specific buyer and then constructed for them, as opposed to a spec home built before a buyer is found. Build jobs carry less inventory risk and require the buyer to commit to something that does not exist yet.

Cancellation rate

The share of written contracts that fall out before closing. High cancellation is more expensive than low traffic, because the lot was held off the market and the sales team spent months on a buyer who never closed. It usually indicates a qualification problem rather than a product problem.

Carrying cost

The ongoing cost of holding a project while it sells, including interest, property taxes, insurance, and overhead. Because carrying cost accrues per month, it is the mechanism by which slow absorption destroys returns.

Certificate of occupancy (CO)

The jurisdiction's certification that a completed home meets code and may be legally occupied. Closing is typically conditioned on it, which makes CO timing a direct input to a builder's cash flow.

Common interest community

A development in which owners are obligated to pay for maintenance of shared property, governed in Colorado by the Colorado Common Interest Ownership Act. The structure creates the HOA and the mechanism by which design guidelines are enforced.

Covenants, conditions, and restrictions (CC&Rs)

The recorded document governing what owners in a community may and may not do with their property. CC&Rs run with the land, meaning they bind future owners regardless of whether they were party to the original agreement.

Defensible space

The managed area around a structure in a wildfire-prone area, where vegetation and materials are controlled to reduce ignition risk. Increasingly a requirement rather than a recommendation on Colorado foothills and mountain parcels.

Design guidelines

The written standards a community uses to govern home design, materials, colors, and siting. Guidelines are enforceable through the architectural review committee, and their clarity determines whether review protects value or obstructs sales.

Due diligence period

The window after going under contract during which a buyer can investigate a property and terminate without penalty. On land, the length of this window relative to the time required for real feasibility work is often the single most negotiated term.

Entitlement

The process of obtaining the governmental approvals required to develop a parcel, including zoning, platting, and site plan approval. Entitlement risk is the risk that approvals take longer, cost more, or come with conditions that were not underwritten.

Finished lot

A platted lot with streets, utilities, and drainage in place, ready for a builder to start a home. The gap between raw land price and finished lot cost is where most land development profit and most land development risk live.

Horizontal development

The land work that precedes home construction: grading, streets, utilities, and drainage. Called horizontal to distinguish it from the vertical construction of the buildings themselves.

Infill development

Development on vacant or underused parcels inside an already built-up area, rather than at the edge of it. Infill trades lower land carrying risk for higher complexity in access, utilities, neighbor opposition, and existing conditions.

Lot premium

An amount added to base price for a specific lot's attributes, such as a view, a walkout basement, a larger yard, or backing to open space rather than to another home. Premiums are a pricing instrument, and communities that set them once and never revisit them typically leave money on the table.

Merchandising

The deliberate furnishing and staging of a model home to answer the specific objections that stop a given community's buyer from signing. Distinct from decorating, which optimizes for how a room looks rather than for what a buyer doubts.

Model home

A completed and merchandised home used to demonstrate a community's product. A model resolves the two objections most common in new home sales, difficulty visualizing an unbuilt home and doubt about finish quality, which is why it usually pays for itself on communities large enough to amortize the cost.

On-site sales agent

A licensed agent who sells one community full time from its sales center, rather than listing properties across a market. The role requires complete knowledge of a single product and the ability to hold a buyer through a long build cycle.

Plat

The recorded map that divides a parcel into lots, streets, and easements. Recording the plat is the point at which lots become separately conveyable, and it is a milestone most land financing is structured around.

Pro forma

The financial model projecting a project's costs, revenues, and returns. Every pro forma rests on assumptions about absorption pace and price, which is why those two numbers deserve more scrutiny than any other line in it.

Semi-custom home

A home built from a builder's plan set with meaningful buyer choice over finishes, some structural options, and occasionally elevation. It sits between a production home, where choices are limited, and a true custom home, which is designed from scratch.

Spec home

A home built on speculation, before a buyer is under contract. Specs carry inventory risk and financing cost, and in exchange they serve buyers who need to move quickly and cannot wait out a build cycle.

Stormwater detention

On-site facilities that hold runoff and release it at a controlled rate to meet drainage requirements. Detention is a frequent source of land budget surprises because it consumes acreage the yield calculation may have assumed was sellable.

Tap fee

The charge a water or sanitation district levies to connect a property to its system. Tap availability and cost can determine whether a parcel supports the density a pro forma assumed, particularly on the eastern plains.

Traffic

The count of prospective buyers visiting a sales center. Traffic is the top of the sales funnel and is usually not the binding constraint on a community that is behind plan. Communities that miss their numbers more often convert poorly than draw poorly.

True custom home

A home designed from scratch for a specific owner and site, typically with an architect engaged directly by the owner. Distinct from semi-custom, where the buyer selects from a builder's existing plans.

Vertical construction

The construction of the buildings themselves, as opposed to the horizontal land development that precedes it. The distinction matters in financing, because the two phases are usually funded separately and carry different risk profiles.

Water rights

The legal right to divert and use water, administered in Colorado under prior appropriation, where earlier rights are senior to later ones. In much of the state water rather than zoning is the binding constraint on residential density.