What are Grading Risks?
Based on my experience, I would venture a guess that most homebuilders prefer to buy finished lots, which means fully improved with the grading, utilities, and street work completed. In addition to shortening the project life, the builders can avoid site improvement risk and do what they do best – build homes. But in certain markets, where the competition for land is more intense, the homebuilders many times take on the grading and site improvements, which has a lot to do with the land developer and investor side of the business. But that’s another topic in and of itself.
If finished or fully improved lots are not available in the market, the homebuilders next choice would be to have the grading completed. The terms “blue top” or “rough graded” lots typically mean the lot pads and streets have been graded, but no underground utilities or street improvements have been started. Fyi, you may also hear the terms “mass graded” or “superpad”, which mean a significant amount of grading has been completed, but the streets and lots have not been cut to finished form. Many believe the grading has the most uncertainties, and therefore risk, which is why the builders enjoy receiving a graded site done by others.
For the most part, installing underground utilities and street improvements have less unknowns. The utilities installation involves the digging of trenches and laying pipe, while street improvements involve gravel base, asphalt, and concrete curbs. It is not to say that no risk is encountered with these improvements, but the grading risks are generally higher because you really don’t know what lies beneath the ground. Extensive soils tests and reports are very critical in assessing the risks, but you still never know what you might encounter.
So what are these grading risks? One of the primary issues is rock, which can vary from site to site. Some grading efforts require the rock to be blasted, and then there is the question of whether you can bury boulders in deep fills or need to haul off the rock. Rock handling can be costly and you do not know the extent of rock issues, even with a good soils report. Another issue is alluvial soils and compaction. Alluvial soils are generally softer soils, maybe as a result of water runoff over centuries, and are not stable enough for construction. The solution may be to remove and recompact, which might entail digging up 5 – 10 feet of soil and recompacting in place. Again, a process that adds to costs. Another potential grading cost impact is slope stability. In certain cases, slope remediation may require buttresses or keys to be graded into a slope, which again adds to grading costs.
One last grading issue is the “balancing” of a site, which means the cuts and fills balance out. This means that no exporting or importing of soils is necessary. A competent civil engineer will focus on the grading design to maximize the potential of the site balancing. The import or export of soil is done in trucks, with costs adding up depending on the number of truckloads and how far away the export/import is traveling.
To all you grading experts out there, we welcome your comments and experiences below. Or if you have questions, feel free to ask.