What are some signs that a homebuilder may be going bankrupt?
There are several warning signs a homebuilder may be in financial trouble. These include large spikes in completions or drops in volume. You can also look at the QBCC website to see if a homebuilder has filed for bankruptcy.
Delayed build times
If you're thinking about buying a new home from a local builder, it may be worth looking at their build times. If the builder is constantly delaying their completion times, it could mean that they're going bankrupt. It can also be a sign of internal problems. If a builder is unable to follow through on its commitments, you might want to consider using a building broker.
Unpaid subcontractors
While the unpaid subcontractor may not have the legal right to sue the home builder or owner, it could bring about cash-flow problems on the job site. If the subcontractor does file for bankruptcy, he or she could have grounds to pursue payment. In this case, the homeowner or general contractor must take proactive steps to protect their payment rights by putting in place a lien notice.
Unfinished homes
A home builder can go bankrupt for a number of reasons. Unfinished homes are one of them. Oftentimes, these houses have been unoccupied for months or even years. They may even be uninhabitable, lacking gutters or a garage door. If you're in the market for a new home, it's important to pay attention to these warning signs.
Changing company name
If you're planning on purchasing a home, you need to be vigilant and aware of changes in the name of the builder. If the builder has had several names, it's possible that it may be facing bankruptcy. Also, it's important to research the builder's financial records and current projects. If the builder has not paid you on time, they might be on the verge of bankruptcy.
Licensing requirements
If a builder has a difficult time keeping up with licensing requirements, they may be headed towards bankruptcy. It's important to keep an eye on the financial stability of a builder, especially those that are operating in a down economy. Home builders are required to be financially stable before they are licensed to conduct business. However, the state does not pursue builders that have gone bankrupt unless there's been a complaint from a homeowner.
Requiring joint checks
If you're a contractor and you're working with a home builder that requires joint checks, be careful. The United States Bankruptcy Court has ruled that joint check agreements are ineffective in protecting payments to troubled subcontractors. This is because they are effectively an assignment of property.
If you have any questions, you can get a free consultation with Ascent Law LLC:
Ascent Law LLC:
8833 South Redwood RoadSuite C
West Jordan, UT 84088
(801) 676-5506
