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Monday, January 28, 2008

Living in no-mans land…

One result of the recent malaise in the housing market is the dramatic increase in stalled-out housing developments. Just in our little Village of Milford, Michigan I count 8 out of 10 developments in and around the Village as stopped or stalled. Only two are still building and one is crawling at a snail's pace, hoping to attract a buyer before much more work is done.

The reasons for this phenomenon are easy to understand – there are no buyers for the houses and the builders have (or will shortly) run out of money. In most cases the developers have done what they are expected to do – put in the infrastructure, such as streets and utilities. Many developers then sell off the lots to builders, who might put up a spec house as a sales model. Some developers are also the builders, especially the small local firms. In most of our stalled developments there is at least one spec house or model up. Unfortunately some look like the picture above, because the builder ran out of money before he could even finish it or decided not to go any further without a buyer. We’ve actually had a few companies locally go bankrupt and get out altogether. A couple of the larger companies building in the Highland area sold off the whole development and exited the state. One later went bankrupt at a national level.

So what is the home buyer to do, who got in early and now is living in a wasteland, surrounded by empty, weed-choked lots or boarded up, partially finished houses? That pretty much depends upon whether the developer and builders are still around or have gone bankrupt. Obviously, try to call the builder and developer first (but don't be surprised if the number that you had for them is disconnected). If you can’t get any answers or satisfaction from the developer/builders about maintenance in the development, you can check with the local city, village or township government to see what they know about the project status and the developer/builders. If the developer and builders plan to stay in business in the area, they can’t just ignore these local government bodies.

You can also check with and lodge complaints with the local Better Business Bureau. Most small outfits would likely belong to the BBB and the local Chamber of Commerce, which are other sources for information and outlets for complaints. If the original developer/builder has gone bankrupt or sold out to a new owner, you should also find out what they new owner’s plan is for the development. It doesn’t necessarily have to be the same as the old plan and you may find yourself surrounded by houses of a completely different design and quality level. As long as any changes in the plans don’t move significantly away from the price band of your home, you should be OK. Most local zoning boards wouldn’t let that happen, but you never know for sure.

Hopefully, your builder is not involved in law suits with sub-contractors; otherwise, you might find that a lien was slapped on your home from one of these contractors. If so, hopefully you have a strong Title Insurance Policy that covers that contingency. If you’re buying into one of these stalled out subs, because of the great deals that are available, make sure that you ask for an Eagle Brand Title Insurance Policy, which will cover that issue.

As for what to do about other issues, such as maintenance of common areas and un-built lots, this is where the old “squeaky wheel” theory comes into play. If there is still a developer involved in the project, try to talk with him first. A good developer will do what he can to try to keep the development presentable, so that it can attract future buyers. You can’t ask for the moon, but asking that he send in a tractor with a weed mower once-in-a-while, to keep the weeds under control might be reasonable. If nothing else, you should be able to identify through the developer or the local government, who the builders are that own the lots and how to contact them about keeping their empty lots up.

As a final resort, most local governments have ordinances concerning maintenance of properties and you might be able to get the city/village/township to take the owner to court. They city/village/township often needs to be prodded by unhappy homeowners (and voters) in the stalled sub before they’ll take action. Then they can get the court to order that they contract with a clean-up crew to take care of the maintenance and bill the owner. That process may take a while, but it will eventually work with even the most intransigent owners. The whole process of what to do and whom to talk with may be made worse if the developer/builder(s) have declared bankruptcy and now the development is owned by a bank somewhere.

The hardest thing to do in this situation may be to sell a home that you just purchased recently in one of these stalled developments. If the development is close to being finished or is relatively small and surrounded by finished neighborhoods (a small “in-fill” development) you may be OK. But if your new home is sitting as the only finished house on an otherwise big, empty street, it is just not very appealing to would-be buyers. Hopefully you got a great deal and can afford to let go at or only slightly below your cost.

Eventually the housing market will shift back to a better balance and someone will likely com in and finish your development. Hopefully they will do so using houses that compliment yours and keep the development in line with the developer’s original vision. Until that time, you and what few neighbors you have may have to become “squeaky wheel” activists with the developer/builder(s) and local government to keep up the area surrounding your “country” home.

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