Fight between Lenders and Home Builder Over Short Sales
Village Homes of Colorado filed for Chapter 11 in Nov’08. One of the first few significant actions is to continue selling homes in the ordinary course of business. The home builder had 142 homes in inventory, 11 being completed homes under contract with a buyer, 79 being completed homes not under contract and the remainder being incomplete work-in-progress.
Since the market value of residential real estate kept declining, the home builder also requested to undertake Short Sales (ie, the sale proceeds might not be sufficient to fully repay lenders). If it were unable to close such sales, its holding costs would increase and they might not be able to pay off contractors’ liens.
The group of lenders had vehemently objected to this request! In fact the court ruled against Village Homes on this matter. Perhaps as a quid pro quo, Village Homes filed a Complaint against the Lenders Group to challenge the extent, validity and priority of interests regarding funds in its bank accounts.
Anyway, given the adversarial context in this case, be very careful when thinking of purchasing properties from Village Homes.
