Receivership of Residential Real Estate Development

The Bottom Line: 

After a home builder was unable to complete three large track home developments in Arizona due to insufficient capital and a weak market, Stapleton successfully finished construction and sold the homes in 8 months, generating proceeds exceeding the lender’s expectations.  Many of the homes sold for more than appraised value, despite a weak market.  The lender avoided negative press that would have resulted from a foreclosure.

The Business Issue: 

With several finished home lots and half-constructed homes, the creditor had permitted forbearance on the loan so the developer could complete unfinished homes.  The developer failed to complete the homes due to lack of capital funds combined with a weak sales market.

Genesis of Stapleton’s Engagement:

The creditor appointed Stapleton Group as receiver to complete construction, manage the development and sell the homes.

Obstacles and Stapleton’s Solutions:

• The builder had not obtained the appropriate construction permits and the required Certificate of Occupancy (CO) to sell the homes.
  • Stapleton successfully managed all permit issues with cities and obtained all necessary permission to complete construction.

• Numerous creditors, including vendors, had filed liens on the properties.
  • Stapleton negotiated and cured all debts to vendors, thereby clearing all liens and the risk of any future liens on properties.

• The receivership estate consisted of several units within a community of homes. The HOA was displeased that the uncompleted homes were delinquent on HOA fees and threatened foreclosure.
  • Stapleton met with the HOA board and homeowners to stop the threat of foreclosure, keep the project on schedule for the takeover developer, resolve accounting-related issues and reconcile outstanding fees.
  • Stapleton worked with the HOA manager and homeowners to stabilize all project financial activity, regaining the support of existing homeowners.
  • Stapleton ultimately paid the HOA to rectify all homeowner-related issues.

• New contractors were not interested in completing the partially-constructed homes due to the risk of providing construction defect insurance.
  • Stapleton identified a contractor willing to manage the completion of the homes and negotiated with the lender to place appropriate construction defect insurance, then coordinated the completion of construction.

• The residential real estate market was weak.
  • Stapleton hired and managed a sales team to sell the completed homes. All homes were sold, subject to court approval and free and clear of liens, some for more than the bank’s appraised value and more quickly than other properties in the market.

• Without the original builder involved, actions were required for the receiver to be able to convey the homes and obtain title policies.
  • Stapleton worked with the Arizona Department of Real Estate to confirm that the lots in receivership were legal lots that could be sold, requiring us to bring the unfinished homes to a legal standard.
  • Stapleton confirmed with AZDRE that they would sign off on HUDs and that title would issue a title policy.

View All Results