Many developers here in
the Beaverton, Oregon, area were
building homes left and right in 2008 and 2009 and they
thought these homes
would sell and they would make big profits. But, when the market
started to
turn and their homes weren’t finished yet, they saw their profits all
disappear.
Some of these builders have enough money to finish the project and sell the houses at less than they originally wanted, but still not depleting their bank accounts. While others bet the farm on the future sales of these homes and ended up losing everything.
But, what we are finding now is many of these developers were so money hungry that they weren’t just betting their companies money, they were betting with their own. What was happening is they were going to the banks and getting business loans to build homes and then going back and saying, “If we had more, we could build more and make more.”
At least the banks were smart enough in some cases to not lend to the business, but to require a personal loan from these developers. The developers were more than happy to sign these loans because they saw it as a no lose situation with homes flying off the market at record prices. But, they weren’t looking at build times and weren’t really looking at what was happening in the market. (Home sales were slowing)
So, when they finally started to get done with
some of these
projects, home sales had, in some areas, come to a screeching halt and
left
them with homes that could not sell. Their solution was to
file bankruptcy and
close their doors and start all over again, but they had forgotten that
they
had taken out personal loans and not a business loan.
These developers were now on the hook for millions and the banks weren’t going to look the other way! So, who were the foolish ones here? Was it the developers for not looking into the near future and predicting what was happening or was it the banks for being greedy and hoping these developers could keep their promise despite having no actual collateral to back these loans?
It should be interesting over the next couple months to see what happens in court on these homes, especially when many home owners from these unfinished sub-divisions, promise to be in the court room looking at the builder, with their hands out, as well wondering why what they were promised was never delivered either.
Todd Clark and the Friendly Home Team
Capstone Real Estate
Todd@IFoundYourNewHome.com
Phone: (503)524-9494
Fax: (503)622-8739
Todd Clark is a licensed Realtor who specializing in Washington County, Oregon and also works both Clackamas and Multnomah Counties including the cities of Aloha, Beaverton, Canby, Clackamas, Gladstone, Gresham, Happy Valley, Hillsboro, Milwaukie, Oregon City, Sherwood and Tigard.
All information contained in these posts is copyrighted and cannot be used without prior written approval authorization from the author. If you are looking for an outstanding agent please give Todd Clark a call he would love to help you in all your real estate needs.
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