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This is an actual example of what I saw in Playa Potrero. In the first heavy rains, the loose soil will lose its grip and slide down the mountain. You can see how it can create a cascading or snowball effect and take out a whole development.
This is how the unscrupulous developer makes lots. They cut out the mountain and push the dirt out without compacting it and tell you that you have a huge lot to build on. Well heck, even if they compacted the soil, it is still useless for the next 10 - 20 years as the virgin mountain soil is the only safe place to build.
The only way to build on a lot like this is to remove the back fill, install piers going deep into the virgin soil, and back fill with a stable combination of rock and crushed rock. You cannot safely build anything on the back fill. Sure, you can find a builder to do it but you are the ultimate looser. Next, you will need to build retaining walls to cover the area that has been carved out. A proper retaining wall is not a cheap endeavor.
Do developers sell these types of lots? - Every day!
Do people actually buy these types of lots? - Sadly, every day
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