The housebuilder last year failed to buy Tay Homes after its £31m all-share offer was rejected. Tay was later snapped up by rival Redrow.
C&M made a profit of £1.25m when it sold its shareholding in Tay to Redrow and City sources say it is keen to use the money to make an acquisition.
If the deal goes through, it will double Country & Metropolitan’s size
One source said: "If the deal goes through, it will double Country & Metropolitan's size to £30m and give it greater presence in the North."
The source added that a deal could be finalised by July, but that talks were still in the early stages.