Is This Home Builder Going Bankrupt?

Recently I drove into a new community that had no models open, no amenities built, and no open house hours. There was a lawn sign half leaning over that said "model homes" with an arrow pointing but I could find no model.

This is a reminder that there are home builders that are still seeing bankruptcy. I then came across a homeowner who said the builder may be going into Chapter 11 and that the homeowners were "keeping an eye on it." Some of the signs to watch for:

• no agent on the property,
• no security guard, no models, no amenities,
• maintenance not kept up
• more obvious things like construction stopped, employees laid off, no workers showing up
• home warranties not honored.

This community seemed had those signs. I don't think the builder is bad or scamming. They may be caught in today's poor economy. A builder can do their best to keep promises but if their homes aren't selling and they can't get loans, they can go broke. Be very observant.

Reminder: if there are amenities promised that you really want and they aren't built yet, you may wish to wait until they are. Some people have opted to wait until amenities are completely finished. Look for positive signs also. Today's builders advertise heavily when the amenities are built.

They aren't bragging; they just know it will be a good sign to buyers that the project is moving along as promised. (This is not a 100% guarantee either.) So "snoop" around. Sometimes the current homeowners are the best ones to ask. While a bankruptcy can have disastrous consequences, keep in mind that some communities have gone through this and survived.

The National Association of Home Builders market index hit 40 in September, a high this year and the most since 2006, but still has not gone to 50 which signals a good rating. This ranking shows the confidence of home builders in the market. We do not make recommendations of communities. Always do your own research.