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Builder's bankruptcy puts home buyers in limbo

With Village Homes reorganizing, some between 'rock and hard place'

By James Paton, Rocky Mountain News (Contact)

Published December 4, 2008 at 12:05 a.m.

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This house on East Hidden Trail Drive in Parker stood empty Wednesday. Scott and Marie Gilfert can't get back their $8,000 earnest money on the home because Village Homes is in Chapter 11.

Photo by Ken Papaleo / The Rocky

This house on East Hidden Trail Drive in Parker stood empty Wednesday. Scott and Marie Gilfert can't get back their $8,000 earnest money on the home because Village Homes is in Chapter 11.

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Scott and Marie Gilfert fell in love with the Parker community of Idyllwilde after visiting in April.

They agreed to pay about $489,000 for a new Village Homes residence, signing a deal that hinged on the sale of their current house. The company explained that the $8,000 they put down in earnest money was refundable.

But the move has not gone according to plan.

Village Homes filed for bankruptcy protection last month, blaming the weak market and the credit crisis. And the housing sector has slumped, making it harder for the Gilferts to unload their place.

"Now I'm stuck between a rock and a hard place," said Scott Gilfert, who is 37 and works as a regional sales director at a small shipping company.

Village Homes has been unable to refund the $8,000 now that it is in bankruptcy court, and Gilfert said that he does not want to walk away without the money. At the same time, he said the idea of selling his house for an unacceptably low sum and buying a new one from a bankrupt builder is not appealing either.

The Gilferts are among the Village Homes customers who are in an awkward position as the home builder proceeds in bankruptcy court. Some people may seek refunds. Others are in limbo for a different reason. They do not want any of their deposit money back. They want to move in.

"I've watched it being built," said Carol Ackley, a 69-year-old retired accountant. "I've taken rolls of film. I've visited once a week. If they let me I'd probably put a mat on the floor and move in."

When Village Homes filed Chapter 11 on Nov. 6, her new home in Westminster was three weeks from the finish line. Ackley had planned to close on the house this week, just in time to host her younger sister who is gravely ill and coming to Denver any day for treatment.

"I told her she could stay at my home," Ackley said. "Well, I don't have one. I'm very disappointed."

Another customer, Carolyn Baker, sold her house in Castle Pines North in June and prepared to make the leap to a new $330,000 townhome in the same neighborhood. But she has been bouncing around for months, taking trips, house-sitting for friends and now rooming with her son in his apartment.

"I'm not thrilled about it," she said.

Baker, 62, said construction was delayed as Village Homes encountered economic problems. Finally, the home is nearly finished, in need of only appliances and electrical work. Baker said that she hopes to have Christmas with her family in the new house.

Village Homes struggled to secure financing from lenders in the months before filing bankruptcy. In some cases, the company could not get funding until it sold a certain percentage of townhome units, according to Matt Osborn, son of company founder John Osborn.

The company now is seeking approval to access about $2 million in cash over the coming months and to continue closing on new- home sales, Osborn said. Village Homes, which has built more than 10,000 homes in Colorado since it was founded in 1984, hopes to resolve those issues "fairly quickly," he said.

"It has been frustrating I know, for them and for us, to continue delaying these houses," he said. "We want to get back to operating under normalized business conditions, but we haven't been able to get there yet."

Work on homes under construction and the building of new houses has been frozen since the Chapter 11 filing and will be on hold until the company arranges financing necessary to pay contractors, according to the company's lawyer Garry Appel.

"We're working hard to line up those funds," said Appel, adding that the company cannot use the $2 million in cash for construction costs.

Osborn said it could take at least a couple of weeks.

Even though they are upset, some buyers are understanding of the situation. Ackley said she "is standing by the company" and has faith in its ability to emerge from Chapter 11. Ackley added that Osborn has called at least a couple of times to provide updates.

"I was very satisfied with the deal they made, the product, the quality," said Ackley, who bought a $313,000 home and is staying with a friend in Aurora. "I want to live out my years in this home."

Court documents list more than 40 customers with deposits totaling roughly $430,000. Those who want to close on new homes should be able to before long, but customers such as the Gilferts who want their refunds back may have to wait awhile as the company restructures and works out a plan, Osborn said.

The lawyer, Appel, said the company is "hopeful" it will be able to repay people who want their earnest money back.

"It's a very important issue," he said, "and we're doing everything we can to work through it."

The place the Gilferts picked out needs only appliances and window screens. But Scott Gilfert said he cannot sell the house in Parker where he lives with his wife and three children. He put it on the market for $700,000 and has lowered the price to $649,000.

Even if he were to sell the house for a decent amount, he would be reluctant to close on the new one, partly because of concerns about the warranty.

Osborn said that Village Homes "has every intention of fulfilling those obligations" and is in talks with an outside company that would back up the warranties should the metro region's largest privately held builder fail. Still, the company hopes to restructure and emerge from the process.

Customers, for now, may need to be patient.

"I guess it's a sit-and-wait game," Gilfert said.

Comments

  • December 4, 2008

    6:58 a.m.

    Suggest removal

    Rangerjoe1 writes:

    Hey Village Homes, what did you do with all the extra money you made hiring Illegals that worked at 30 year low in wages? People you get what you pay for.

  • December 4, 2008

    10:05 a.m.

    Suggest removal

    knr writes:

    Ranger,

    So Village Homes should only work with union labor with its bloated labor costs, another layer of management in the union leadership, forced political contributions taken from union members and given to politicians to further entrench the union leadership in the political process, etc? If you think housing is not affordable now, just wait until you try to purchase a home constructed under "union rules". Have you looked at the price of real estate in New York City or Chicago recently? While union costs are not the sole reason for the high costs in these markets, they are a significant contributor.

    BTW, where do the picketers come from that like to hang out for months at a time, protesting builders who do not use union labor? Where is the money coming from to pay these picketers? Union dues? Isn't this a hidden tax on any union project - a cost that must be passed on to the final purchaser?

    The unions have already sunk the US auto industry by forcing management's hand and preventing the automation and higher productivities that the German and Japanese manufacturers in the US enjoy. How many other industries do the unions need to encumber/endanger before the public says "enough"?

  • December 4, 2008

    10:08 a.m.

    Suggest removal

    mswalley writes:

    Good Luck Village Homes, You Have a GREAT Product.
    Rangerjoe do you have proof of your statement, or is it just some more of the negativity that is rampent on this site from the comments.

  • December 4, 2008

    2:40 p.m.

    Suggest removal

    Marshdale writes:

    I don't care what the deffinition of a depression is. We are in a depression. We have seen mortgage companies and banks go down. We have seen Developers and Contractors go down, We are watching car companies possibly going down. Wait until Cities and Counties start collecting on Letters of Credit because developers can't afford to renew them and/or they can't afford to finish the required public improvements for the development projects. Some LC's are for millions of dollars. I think this shoe is just now beginning to drop. We will hear more about this in the next 6 months. Mark my word. These LC's nation wide are in the untold Billions of dollars. When Cities and Counties start making a run on these banks that offer Letters of Credit, look out!!! This is bad people, really bad. I am optomistic though that with the right economic stimulus package we can alleviate some of the woe's people are suffering, but it takes time for a stimulus package to filter its way through the economy. It must be done though.

  • December 4, 2008

    2:58 p.m.

    Suggest removal

    Marshdale writes:

    I'm so sick of hearing "it's the Unions fault". That is such a bunch of BS I can't believe it. The UAW gave up almost 70 billion dollars in concessions in the last negotiation. They opperate on a two teered wage system. New hires start at $14.00 per hour. Contrary to popular belief the average wage of auto workers is about $26.00 per hour, $54,000.00 per year. A decent wage, but by no means one which spoils the worker or allows them to retire wealthy. Why do we vilify those who have fought for increases in minimum wage so people can eat. Name me one union worker who is responsible for the crappy warranty's and gas mileage these car companies offer. Sure American car companies do build a quality product, but it is the wrong product for the times. This is not a union workers fault. When things were fat for the auto maker, they new what the future was telling them and they failed to retool for that. This is not a union workers fault. These auto makers were in bed with big oil and road the SUV wave way to long. Shame on management for jumping into bed with these oil companies. Union workers are Americans. They built the equipment that helps us in national security. They are patriots and deserve our support. So quit vilifying the worker and lend them your support!!!!

  • December 4, 2008

    10:14 p.m.

    Suggest removal

    jlgraybill writes:

    Marshdale...it's impossible for the rest of us in non-unionized industries to feel sorry for Union workers of the Auto Industry. We're seeing our jobs go away as well...are we seeing a bailout? No. Where's the bailout for the construction workers in housing industries, or retail workers in the retail sector? Why should the rest of us pay to bail out Unionized Auto workers when we're suffering? And don't tell me that Union workers don't receive good benefits? What about the job bank which pays them when they're laid off? What about retirement benefits, pension, healthcare, etc? You think Walmart workers receive any of that? I'm not saying it's all the Union's fault. But I also don't feel sorry for the Union workers...they have it better than many people in other industries who work just as hard, and those are the people that the Union workers are asking to help bail them out. I don't care if it's management's fault or the union's fault, I'm not for bailing out poor decisions. So you're barking up the wrong tree trying to get support from the average worker (who is NOT unionized).

  • December 5, 2008

    9:49 a.m.

    Suggest removal

    sandk writes:

    Anyone in this predicament with Village Homes would be wise to cut their losses, and purchase one of many available newer homes in finished communities. There are SOOO many resale homes, especially in Parker, from three to one year old, that already has landscaping, window treatments, etc. Even if these builders try to bounce back, they most likely will sell their company if they can...and at that point, good luck getting common areas landscaped as promised. Also, food for thought, who will be paying for the additional HOA fees that aren't being paid by the unfinished home sites within this new community if not completed?