Wednesday, April 30, 2008

Empire Land goes Belly Up

Empire Land has gone bankrupt. You may have never heard of them but they are a large outfit and have some very large developments in Southern California and Arizona. Many of these are not finished. One of my favorite whipping communities is an Empire Land development. It's The Retreat is south Corona. What happens now in that community? Would you buy a house in there now?

Blaming the national real-estate market's blowout, a local housing-land developer has gone bankrupt and left more than $5.1million of unpaid loans in the lap of its largest creditor, Rancho Cucamonga-based PFF Bancorp Inc.

There are other loans, but Ontario-based Empire Land LLC left PFF's Pomona First Federal Bank & Trust holding the bag on the unpaid loans.

Other big-name creditors listed include homebuilder D.R. Horton and Charlotte, N.C.-based banking giant Wachovia.

The documents, filed recently in U.S. Bankruptcy Court in Riverside, show that PFF Bancorp holds the largest unsecured claim in the Inland Empire.

More than a dozen other creditors and consultants to Empire Land - several of which are located in the two-county region - are being left with thousands of dollars in unpaid loans and debt, according to court documents.

The company owned or had interests in 11,800 properties across 14 California land projects as of March 31, according to court documents.

Its sister company, Aviat Homes L.P., owned 330 residential properties - some unfinished - in California, with projects in Hesperia, Moreno Valley and Brentwood.

This brings to light one of the major pitfalls of buying a home in an unfinished development when the market is tanking. What happens if the builder goes belly up. You might very well be stuck in a half finished development for years. If the developer has unpaid bills often times the contractors or suppliers will file a mechanics lien against the finished homes. This has been happening quite a lot lately. Much of this same stuff happened in the last real estate bust. Many tracts of homes were left half built. Parks were not built as promised, roads were not finished and is some cases flood control work and drainage was not finished. Not to mention, if the builder does go kaput so does your home warranty! It's not hard to find nightmare stories about all these situations and many that are worse.

Buying a home in a new tract in these conditions is a gamble. If anyone is thinking of making that bet be sure to check out the financial standing of the builder or developer. Try and stick with larger builders. Small builders can go from solid to vapor in a matter of weeks. And if your home is not finished when that happens you can find your deposit money has also turned into vapor.

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