Meritage Homes Corp. (NYSE: MTH) became the proud owner of 80 finished lots in Chandler, Ariz. after it closed a recent note-purchase deal.

Michael IlesCremieux, vice president of land acquisition for Meritage's Phoenix division, spoke with Big Builder about the deal, saying the company heard that the developer was about to go into foreclosure, so they contacted the bank and purchased the lots for $35,000 a piece, compared to the $188,000 the developer had originally bought the lots for. The deal closed two weeks ago.

While the inked deal was a bargain for Meritage--an 81% discount--IlesCremieux said, "as good as that deal was, values are still dropping."

IlesCremieux said in the last 18 months in the Phoenix area, there have been 17,800 lots sold, making up roughly $450 million in finished lot transactions. "There is a significant amount of investment, and we are just now starting to see reasonable values."

Of about 88 transactions that occurred during that time, only 15 were builder transactions, with Taylor Morrison, Richmond American, and Blanchard Homes also getting in the game, he said.

Private investors--some former home building division managers now working for hedge funds--seem to be the ones leading the charge, not only in Phoenix, but also in the Chicago market.

Peter Tremulis, managing principal at National Asset Management Group, said while he can't speak on specifics, he has seen "private equity centered on buying notes from banks, who then recast the notes."

While Meritage will continue to be conservative, CFO Larry Seay, in the company's fourth quarter conference call, eluded to these types of deals moving into the future: "We are having conversation about innovative new financing structures. We could potentially tie up a lot of land with relatively little investment."

The Phoenix deal had rolling options in order to preserve cash, according to IlesCremieux.

"A vast majority of really good deals are coming," he said. "Public [builders] will have the advantage because they can pay cash. It's all about cash and capital."

Learn more about markets featured in this article: Phoenix, AZ.