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View Full Version : Housing development has gone bankrupt -- what do you think?



Eric Larsen
06-27-2009, 8:38 PM
We bought our house 1.5 years ago from the developer. (We bought the house unfinished, and I've spent all my time putting custom everything in the house.)

The developer (who shall go nameless) was supposed to build 300 homes in a one-mile square area over the course of four years. They built less than 30.

Today, LOML and I were driving over to my mother-in-law's place. As we were about to leave the development, there was a line of pick-up trucks in front of the three model homes. People were picking through the models, buying everything that wasn't nailed down.

We pulled over, and bought a few pieces from the model of our home -- after all, it's basically the same house. We got some great deals.

We learned that the developer is calling it quits in Nevada, and is ceasing all operation here. This means:

1) 270+ empty lots behind us.

2) HOA fees will probably skyrocket. We have common landscaping and a park to pay for -- irrigation, landscaping, etc. This was supposed to be spread over 300 families. The fees were subsidised by the developer while the community was built out. Now, 30 families are going to pick up the tab. (And the common "pretty" stuff was built first to help the developer sell the community. There's no real way to cut back.)

3) There are a couple miles of unimproved roads and partially completed walls. I'm worried this area is going to become an "off-road paradise" for the four-wheeling enthusiasts.

4) No more customer service. (No big deal, we're out of warranty, anyway and I do better work than the monkeys they sent to "fix" things.)



I don't really have any questions for you. But I would appreciate it if you would put on your thinking cap and tell me if there's anything else I haven't thought of. I have a gut feeling that the 30 of us are in for a fight. A little extra foresight would be helpful.

Thanks!

Julian Nicks
06-27-2009, 9:23 PM
I see that ALL over the Chicagoland area. Just on my road alone there are about 30 subdivisions that had just been started in the last few years, most having only a few houses out of a few hundred that were slated for each. It's a sad state right now, and the people saying were pulling out of the slumping economy are crazy. I am a carpenter by trade, and ALL of the 15 builders that I did work for in the past are all belly up. The housing market isn't done hitting the bottom yet.....

Mike Henderson
06-27-2009, 9:27 PM
I don't have any advice, Eric. But I would like to hear more about your situation as events unfold.

Who owns the empty lots now? Any chance they'll be sold for next to nothing and trash houses will be built on them? Will your CC&Rs still apply to those lots?

Good luck. Perhaps the 30 of you can make something good out of it.

Mike

Jim O'Dell
06-27-2009, 10:20 PM
Who runs the HOA? Can't the existing home owners get together and disband it? Or at least stop the other improvements until a time when the economy gets back on it's feet and the lots are being developed again? I can't imagine having the HOA fees go up 10 times what they were supposed to be.
As a thought, if the lots get sold dirt cheap and you have one beside or behind you, grab it and build a shop!! :D Jim.

Dan Friedrichs
06-27-2009, 10:29 PM
You should be worried that the city (or other jurisdiction) will levy a special assessment to finish off those roads, etc.

Joe Pelonio
06-27-2009, 10:37 PM
This happens a lot lately, and often the unsold homes are auctioned at a fraction of the original price, reducing your property values below your taxed rate.l You might consider that in case there is an appeal process for reduced taxes if it happens.

Here I know of several cases just like yours, and others where no homes were built, simply fenced areas with lots, streets and utilities. Hopefully the economy gets better and they eventually get built.

Mitchell Andrus
06-27-2009, 10:45 PM
HOA usually has an agreement (or more) with the local government for things like common maintenance, run-off control, water, sewer, property maintenance, trash pick-up.... etc.

Check to be sure that if you ( the HOA) don't perform that the town won't come in and fine you or worse, do the work at your expense.

Be sure also that you are severed from the builder's obligations, ie: build 50 units/year or loose any tax reductions/holiday, self-governance, etc. Hire an attorney to check this stuff out.

Also, how will you decide who comes back in to complete the project. Can you keep the balance of the homes up to the same level as yours.... trailer park across the street?
.

Joe Pelonio
06-28-2009, 12:09 AM
Here' an interesting article, listing las vegas as the 4th worst area for home prices, due to the number of foreclosures flooding the market with existing homes which means fewer new ones to be built. This is from Friday. BTW this weekend I was in Pasco, WA where new homes are selling for $115,000-155,000 for 1,400sf to 3,600 sf. It's desert, much like Las Vegas in climate.

Here similar homes are still priced at $450,000-600,000 though that's discounted from the original prices.

http://www.lasvegassun.com/news/2009/jun/26/homebuilders-real-estate-news-isnt-all-bad/

Don Abele
06-28-2009, 12:19 AM
Eric, we saw a similar thing happen near my house in Massachusetts.

They cleared a large tract of land and set it up for 15 houses about two year ago. They built a model home about 18 months ago and wound up selling three additional lots and building the homes. It looked like it was going to be a nice development.

Late last year, the development company "dropped" the development and basically moved on. The three people who bought homes were left in the lurch as the street and cul-de-sac were not paved (crushed gravel), none of the landscaping had been installed (including grass in their yards), no street lights, no sidewalks, nothing. And the model home was left vacant.

They sued the company who immediately went backrupt so they got nothing. The model home was sold for 20% of what the others paid for their homes, which greatly depreciated their value. They now owe significantly more on their homes than what it is appraised for.

Now the development sits with four houses in a cul-de-sac that has 15 lots. All are dirt, no trees, no lighting, no pavement, no sidewalks - nothing. Oh and there are no public services like snow plowing or trash pick-up because it's a private development, not a city street/development - it was never incorporated. Don't know what they are doing about their trash. Their mail gets delivered to a large PO Box like thing at the end of the street.

I really hope things work out better for you. I really feel for my neigbors, none of this was their doing and they really got the short end of the stick.

Be well,

Doc

Karl Brogger
06-28-2009, 12:30 AM
Its happening all over the place. One development by DR Horton in the town I grew up in was planned to have 980 units in it. A mix of townhomes, and a mid-range homes. They built about 300 units and all the infrastructure is in. The rest is sitting unused. Not a real uncommon sight at this point and time.

Mitchell Andrus
06-28-2009, 10:22 AM
When I was on my town's planning board, the common improvements were either installed first - or - bonded to 150% before the first sales contract was signed. This protects the early homeowners. Luckily, we've never had a problem like the ones described here.
.

Brad Wood
06-28-2009, 11:37 AM
find out who the HOA management company is and talk with them about the situation... just to get their take.

I moved after a couple years of an HOA that I just couldn't sit around and be a part of any longer. while I have no proof, I am pretty convinced the management company was getting kickbacks from the companies it was contracting with to maintain the common areas... specifically the landscaping company.
We had very little common area the landscaping company was responsible for and the annual fees in the contract were astronomical.... I mean seriously out of this world... for a couple minimum wage guys to come buy once a week and mow the lawn for a half day, someone was making money on this deal behind the scenes.
My wife got on the board so she could get a more insider look to what was going on but it was brick walls around the management company. At the annual meetings we insisted on reviewing the landscape contracts... but again brick walls.
between that and a variety of other things, we just got out and moved to the country...

my point here is that you should get an idea of what the management company has up their sleeve as this bankruptcy unfolds and make sure you and your neighbors take control of the HOA and fire the management company if needed...

Eric Larsen
06-28-2009, 11:59 AM
Who owns the empty lots now? Any chance they'll be sold for next to nothing and trash houses will be built on them? Will your CC&Rs still apply to those lots?


The developer bought the big parcel from the Nevada Bureau of Land Management. Because of the view these lots command, I doubt they'll be sold for next to nothing. (We're up the side of Frenchman's Mountain, with an unobstructed 360-degree view of Las Vegas. I'm hoping that provides us some protection against junk being built in our back yard.)




Also, how will you decide who comes back in to complete the project. Can you keep the balance of the homes up to the same level as yours.... trailer park across the street?
.

According to the developer, all of their projects are "on hold." And they'll be back Very Soon Now (TM) to finish the job. I'm understandably skeptical. If the developer goes under, the lots will likely be auctioned off. I don't think the CC&Rs provide for this scenario. I'll have to call the HOA manager. We pay them $30/mo. May as well get some answers about this.


Its happening all over the place. One development by DR Horton in the town I grew up in was planned to have 980 units in it. A mix of townhomes, and a mid-range homes. They built about 300 units and all the infrastructure is in. The rest is sitting unused. Not a real uncommon sight at this point and time.

You've described exactly what we're going through. Except in our case, it's 30-out-of-300 instead of 300-out-of-1000. There are some pro's to this -- All the neighbors get along fairly well, and we're in agreement that it's nice to have what amounts to our own private little community. I'm just trying to be like a good chess player, thinking several moves ahead.


Here' an interesting article, listing las vegas as the 4th worst area for home prices, due to the number of foreclosures flooding the market with existing homes which means fewer new ones to be built.


We're only fourth-worst? I have to pity the top three. It's really bad here. Depending which report you read, up to 20% of all homes in the valley are sitting vacant. The only "growth" industries in this town are the companies that run squatters off bank-owned homes, and the pool companies that are paid by the government to drain the unkempt swimming pools so that we all don't catch West Nile Virus this year.

I know people whose homes have lost two-thirds of their value over the past couple years. Granted -- Las Vegans did this to themselves. In 2004 and 2005, people bought second, third and fourth houses they couldn't afford because everyone with a decent credit score was speculating.

Well, the music stopped. Almost half of Las Vegas found themselves without a chair.

Ken Fitzgerald
06-28-2009, 12:03 PM
Hey folks,

It really seems to be a regional thing.

While housing sales are slow here, we have never had a "housing boom" but at the same time we aren't having a "housing bust".

Pat Germain
06-28-2009, 1:08 PM
My parents recently retired in Pahrump, Nevada. It's an hour outside of Las Vegas and it too was hit hard by the housing implosion. This was good news for the folks. They were able to buy a home for significantly less than it would have been a few years ago.

I was visiting my parents last weekend. We took a day trip to Las Vegas. On the way, witnessed the ruins of the housing boom and bust first hand. There were housing tracts which had raced out into the desert. Homes were stacked together like Philadephia row-houses. Then, suddenly, it all stops. Many of the homes look empty.

I'm sure things will turn around again in the not-too-distant future. Let's hope the recovery is more sensible than our recent past.

Curt Harms
06-28-2009, 3:40 PM
Hey folks,

It really seems to be a regional thing.

While housing sales are slow here, we have never had a "housing boom" but at the same time we aren't having a "housing bust".

It looks like the same in S.E. PA. There was one local builder file chapter 11 but I think they're sorta back in business. Things are slow but there's no widespread foreclosures or 25%+ property vacancies like some places. It's probably not a good time to be trying to sell (what was ) a $600,000 cookie cutter McMansion however.Sometimes the Quaker ethic is a PITA but this is one time it has panned out.

Some say this is the worst its been since the great depression. My personal feeling is that it's the worst it's been since the late '70's-early '80's. Anybody remember what the economy was like by the middle '80's though?;).

Dave Lehnert
06-28-2009, 4:02 PM
[QUOTE=

Some say this is the worst its been since the great depression. My personal feeling is that it's the worst it's been since the late '70's-early '80's. Anybody remember what the economy was like by the middle '80's though?;).[/QUOTE]

Saw an interview on the news last night about a husband and wife that worked on wall-street and lost their jobs. How bad this was for them right now. Had to give up their personal trainer and exercise on their own. and grow a vegetable garden.:eek:

Craig Coney
06-28-2009, 6:26 PM
You should be worried that the city (or other jurisdiction) will levy a special assessment to finish off those roads, etc.

Get together with your other homeowners and have a meeting with your HOA. They should have an attorney on retainer they can consult. Also, check into the possibility of a performance bond on file with the City from the developer. Many times these are required to be posted by a developer to protect the municipality and homowners from such action.

Jim Becker
06-29-2009, 10:23 PM
Late last year, the development company "dropped" the development and basically moved on. The three people who bought homes were left in the lurch as the street and cul-de-sac were not paved (crushed gravel), none of the landscaping had been installed (including grass in their yards), no street lights, no sidewalks, nothing. And the model home was left vacant.

That's why around here, the roads and other "common" improvements have to be completed, outside of the final, finish coat of asphalt, before the first house can be built in a section of a development. That includes required improvements to the highway where new roads intersect it. Builders cannot wait until they have homes built to do this work. It's been the one "bright light" in an otherwise very pro developer legal climate.
--------

Eric, I do hope things work out that you don't get hit hard for those common areas.

Eric Larsen
06-30-2009, 1:19 AM
Eric, I do hope things work out that you don't get hit hard for those common areas.

The common areas were built first. And the developer subsidized the monthly fees. Now that the developer is "out" -- we'll have to see what happens.