Is your developer in financial trouble?

I recently took a cursory look into the history of a developer offering a to-be-built single-family home for sale, and wasn’t encouraged by what I found.

The unsold units at four of the developer’s recent projects were in foreclosure, and the court had appointed receivers for all four. The appointment of a receiver may indicate nothing more than that the outstanding mortgage amounts exceeded the value of the underlying property, or it may be an indication of a more deeply troubled situation.

In times like this, bad things happen to good people. Problems at some of a developer’s projects may or may not impact his other projects.

When you’re buying new construction, the developer’s track record should be your prime consideration, and you should always research your developer carefully.

It’s somewhat arbitrary, and it may be unfair, but if I were making a purchase decision I wouldn’t consider dealing with a smaller developer who had four current projects in receivership. There’s no shortage of less risky deals available in today’s market from developers who have unblemished records.

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