What happens when the builders go bankrupt?

NEW -> Contingent Buyer Assistance Program
Lending. . .naive is a word I would never attribute to you.

I give it my best shot (remembering bk law)

If the house has been sold . . .no issue since the house is already out of the builders' control.

Unsold houses are treated like any other assets with a trustee coming in to auction them off in order to pay of the creditors. The creditors can credit bid the properties if they like the property more than the money. Alternatively, the builder may seek temporary protection and sell the houses itself (depending on the type of BK).
 
A better question, is what happens with all the outstanding warrantly repairs for the previous direct from builder buyers?

Doubt it would affect comps, I'd suspect the homes would drop out of circulation for a good year, maybe more.
 
Generally, if a builders goes under, you're out of luck on the warranty. It's no different then if you had a bad contractor.

You're welcome to sue them but there is generally no money. . . that is unless they have insurance!!!! You can also sue the subs and the general contractor (if they're different from the builder).
 
Yes, but it's very different. . . bk buyer take the property free and clear thus generally no liability for the new buyer. The trustee's main interest is to maximize return for the bk estate and thus want to give buyer incentives.
 
Thanks, but I am not really worried about liabilty. I am trying to gauge the effect it would have on comparable values. When a property is appraised, the appraiser must use recorded sales, not listings, as comps. If you have builder-owned properties being bought en-masse through BK proceedings, aren't they going to be recorded like any other purchase at the county recorder's office?

If so, we'd have a monumental influx of comp killing recorded sales.
 
Well generally if a builder goes bankrupt it is going to be sold in regional batches to avoid self selection. So lets assume say Lennar went under. You would sell all of their land holdings and unfinished/completed homes in a particular area as a group. For example: Florida as one tranche, MD/DC/VA as another tranche, all of the SE excluding FL and DC suburbs as another tranche, mountain states as one tranche, likely SW excluding CA as another tranche, another tranche for OR/WA, then two tranches for northern CA and southern CA. Lennar's land holdings in Florida are massive so you probably would split it up more for that state. In order to bid for any of these pieces on a deal of this size you're looking at multibillion dollar prices for each piece. The auction will be held by a Wall Street investment bank and hedge funds and investment bank RE firms either by themselves or paired with homebuilders will likely be the buyers. I'm not sure how this transaction would work from a recording perspective. But given the enbloc nature of the sales it is unlikely they would be used as comps by almost any appraiser but there may be property tax implications.
 
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