Homebuyers can prepare for the worst
A Kimball Hill bankruptcy -- and the company has not said it is planning to do that -- could spell trouble for buyers or owners of the builder's homes.
Wheeling attorney David Siegel says it is too early to tell exactly what the outcome will be, but residents can be proactive and should prepare for losses or inconvenience.
Q:What can those waiting for homes to be completed do?
A: You should ask for a detailed update on building status and a fresh timeline for construction. You need to know how much work is left on your home if the company files for bankruptcy.
Q:Will construction continue if Kimball Hill files for bankruptcy?
A: Generally, no. You will have to work with the bank that owns the land and development to see if it will finish the work. The only way the bank gets paid is if the homeowner can close, and the lender might take a little bit of a loss to let them finish construction and get to closing.
Q:What are the chances the lender will finish construction?
A: It really depends on what the state of completeness is on the home. If work has just started, the lender may not want to continue. If there is $50,000 or $100,000 of work left, they may want to finish.
Q:Will my warranty still be good if bankruptcy is filed?
A: It would depend on what type of bankruptcy is filed. If they file Chapter 7, or shut down, then no. If they file Chapter 11, or reorganize, then the warranty may still be good.
Q:If I have put down earnest money, will I lose it even if construction isn't finished?
A: It is on a case-by-case basis. If the lender doesn't want to continue construction, then you will likely lose it. If the lender wants to finish construction, then it doesn't matter.
Q:Should I be talking to a lawyer?
A: I think you have to wait and see. You don't want to put the cart before the horse. They haven't filed bankruptcy. But, if they do, it may be wise to consult an attorney. You would want a real estate attorney who deals with new construction homes.
Q:What if my subdivision isn't finished and the neighborhood is not what I envisioned when purchasing the home?
A: There is nothing you can do about it. You have to wait until the rest of those homes are built and eventually they will be. A new developer will come in. The lender will want to salvage the project.