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38 Brief 52 (2008-2009)
Watching out for Sweetheart Deals - How to Avoid and Minimize Surety Loss on Subdivision Bonds

handle is hein.journals/tbrief38 and id is 266 raw text is: WATCHING OUT FOR SWEETHEART DEALS 'low .to AvToid and wm 1, 0 BAin C.ze Sure Loss on oubdivisILn Bonds BY DAVID C. VEIS AND DAVID L. LYNCH T he housing boom of the early 2000s saw a feverish buyer's market, stoked by historically low interest rates. Houses sold in a matter of days, and it was common practice for real estate brokers to advise buyers to submit an offer greater than the asking price. Attempting to capitalize on these market conditions, developers began building hundreds of thousands of homes in new housing developments throughout the United States, particularly in California, Florida, Arizona, and Nevada.' The collapse of the subprime market in 2007 and the result- ing tight credit market and economic downturn have brought the housing boom to a screeching halt. Limited access to credit,2 record numbers of foreclosures,' and lower consumer confidence have drastically decreased the number of new home buyers. Large numbers of preexisting homes have resulted in large inventories, further reducing prices. This glut of homes, lack of buyers, and lower selling prices contribute to increased risk that work on uncompleted new housing subdivisions will slow or cease. A downturn in sales will inevitably cause developers to default on their obligations to their respective public agencies to complete promised subdivision improvements. These defaults will result in claims on the developer's subdivision bonds. Since the middle of 2007, several developers have filed for Chapter 11 bankruptcy protection, including Dunmore Homes, Levitt & Sons, TOUSA, Inc., DKJ Residential, Inc., Kimball Hill, Inc., and Empire Land LLC. On April 16, 2009, Chicago-based 52 THE BRIEF m SUMMER 2009 IPiII~he 40-1 ..............

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