For two years Starwood Land Ventures methodically built a national network of local land experts poised to snatch up residential land at bargain basement prices. The plan was to resell the lots to home builders as the market climbs out of recession.

Now that distressed land is finally hitting the market, Starwood has found itself in fierce competition for the best finished lots, bidding against the very builders it had expected to supply.

"They're trying to alleviate the middle man," said Mike Moser, East region president for Starwood Land Ventures. "They are driving price up, obviously."

Starwood's not alone. Other potential land buyers also report that the large well-capitalized public builders are providing stiff competition and creating price appreciation in land auctions across the country.

Because builders are the end users of the lots, they can afford to pay more for them than companies like Starwood, which need to buy low enough to make a profit after reselling. Private equity fund buyers, too, have a tough time competing with the voracious appetites of the well-capitalized builders for the same reason.

Builders have not hidden their hunger pangs. Most have announced during their recent quarterly earnings conference calls that they are out hunting for finished lots they can build out quickly to bring in cash flow and, hopefully, stronger margins than the more expensive raw land sitting on their books now. Several builders said they are aiming for 20% margins on any land deals they are writing, but some other land buyers question whether that's doable with the prices they are paying in some cases.

John Peshkin, a former Starwood executive who runs his own land buying company, Vanguard Land in Sarasota, is familiar with the public builders' appetites.

"I'm seeing it every day in talking to the various divisions of the public home builders," he said. "They are looking to buy A or B location finished lots. They may have land, but two-thirds of it is undeveloped or in C or D locations."

They need land they can build on now, he said, and they're sometimes willing to pay what many would consider premium prices. "They are doing deals that maybe will only help them cover [10%] for overhead," Peshkin said.

"It would be very difficult to compete with the public builder with the appetite we just described," Peshkin added.

In need of buying help, builders have begun repopulating and beefing up their land acquisition departments, which were effectively shut down since 2007.

An example of the increased focus on land buying is Toll Brothers' recent promotion of Douglas C. Yearley Jr., who has been with the company for 19 years, has expertise in the land market, and has been given more of a role in involving corporate strategy including land acquisitions.

The increased demand for land buying experts is manifesting itself in Veronica Ramirez's business as president of Joseph Chris Partners, an executive recruitment firm that specializes in the home building industry.

"The guys who were in land were some of the first groups to be laid off, and now they are among the first to come back," said Ramirez, adding that land experts constitute about 20% of Joseph Chris Partners' search work.

"We are starting to see land positions [become available] in Texas and Florida and up in the Mid-Atlantic region," she said.

And it's not just home builders doing the hiring. "We are starting to find business with these investment companies that want to start up their own little home building companies," she said. "There are companies moving into new markets looking for operators."

While the public builders may be dominating the finished lot market, they probably will stay out of the market for larger tracts of land that still need some development work, said industry experts. Any foray into buying land that isn't ripe for houses yet or would require a significant amount of time to develop would likely bring a hit to stock prices by analysts quick to criticize and penalize public builders who they perceive to be too heavily invested in land.

That presents an opportunity for private builders to profit, but most can't find financing for small, quick turnaround projects, much less large, longer-term acquisitions.

Those who are able to tap into the capital markets for acquisitions stand to profit, suggested Steve LaTerra, senior director for Land Advisors Capital, which puts together home builders with developers and capital sources. LaTerra points to a recent deal between William Lyon Homes, which has set up a partnership with Colony Capital and Colony Financial real estate finance companies. Colony is loaning Lyon $206 million for operations and land acquisitions.

"That's a fantastic deal William Lyon did with Colony," said LaTerra, who had no connection with the deal. "That's what I think the market is going to evolve to."