Interest Rate Roundup

Thursday, January 03, 2008

What happens when your builder goes broke

It's been a few months since Levitt & Sons filed for bankruptcy. Today, the New York Times wrote about what happens to home buyers when their builders go broke (not sure why it took so long, but so be it). Have a gander if you like, because we will be seeing more bankruptcies over the coming months and quarters. A few excerpts:

"Ettore and Larisa Costanzo are showing off their new house, which they love madly.

“Notice how we upgraded so there’s tile on all the floors,” said Mr. Costanzo, a retiree from Brooklyn. He pointed to the Kashmir granite in the kitchen. “It’s nice, no?”

"Now if only they could get the keys and go inside, instead of peering in the windows like a couple of Peeping Toms.

"The house, on which the couple made a down payment of $88,820, is empty. Their belongings are in storage. They live, unhappily, in a hotel."

“It’s very upsetting, not to be allowed in our own house,” said Ms. Costanzo, a Russian immigrant. “Please take our money and let us move in.”

Their builder is Levitt & Sons, a unit of the Levitt Corporation, which ran out of cash in October and declared bankruptcy in November. All work on this planned 460-home development for retirees, grandly named Seasons at Prince Creek West, has ceased. The Levitt employees were laid off, the subcontractors put down their tools, and the Costanzos found themselves in limbo."


Nancy Darr, who had once watched her condominium developer go bankrupt, asked her Levitt salesman whether the company could fail.

“This is Levitt & Sons, America’s oldest home builder. We built Levittown,” Ms. Darr remembers him replying. “It’s a solid company. It’s listed on the stock exchange. This could never happen.”

Gary Drejza, a former Seasons salesman, confirmed that such assertions were routine. “We felt they were the truth,” Mr. Drejza said. “We believed.”

He must have, because he bought a house himself. “Want to see it?” he asked, pointing from the window of his Mercedes-Benz at Lot 49, still a pile of dirt.

Mr. Drejza now has a somewhat different view. “A name was purchased, that’s all. There’s really no remnant of the old Levitt. None of the family,” he said.

Another builder that's at risk is TOUSA. The company just failed to make some interest payments that were due January 1. It's considering some form of restructuring that could include a Chapter 11 filing. TOUSA delivered 7,824 homes in 2006, compared with 1,660 at Levitt.


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