According to an article in the Arizona Republic, Woodside Homes has been forced into chapter 11 bankruptcy by its’ creditors. Woodside has several housing developments in the Phoenix area, including south Tempe.
According to uscourts.gov,
Chapter 11 is typically used to reorganize a business, which may be a corporation, sole proprietorship, or partnership.
The creditors are trying to protect their interests by forcing chapter 11 on Woodside. This will allow them to closely monitor and guide Woodside in their reorganization and the repayment of their debt.
I have written here about Woodside as one of the rare new build developments in Tempe. As a buyer, you should review this situation if you are considering a purchase of one of their homes. We will have to wait for Woodside’s comments as to how this may affect their operation and the potential impact on their home buyers.
Update 8/30/08: Here’s comments from Woodside in the Arizona Republic. They say they have cash in the bank to continue operations, building homes and paying employees.
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Under the Chapter 11 bankruptcy code and court rules, anyone who closes escrow with any of the Woodside Homes entities, before the actual effective date of the bankruptcies (9/16/08), will find that their new home warranty has been rendered an “executory contract” which the bankrupt entity is deemed to automatically reject, i.e. cancel. The only remedy the pre-bankruptcy buyers will have is to file a claim for damages in the bankruptcy, and actually prove those damages to the court. Given the large dollar volume of unsecured creditors claims (in excess of $650 Million) it is highly unlikely that any homebuyer will get 100 cents on the dollar for their warranty claims.
As to people who are in escrow with Woodside Homes now, with respect to the disappearing warranty problem, the much smarter course to follow is to wait until after 9/16/08 to close escrow if waiting will not jeopardize the cash deposit the buyer has made.
Thanks Jennifer, I appreciate your advice. I also recommend that anyone considering a purchase from a home builder in bankruptcy consult with legal counsel to fully consider the specific situation and their options.
Any news on the woodside homes bankruptcy? Any updates?
None at this time. I’ll check with a contact there to see if anything new.
Here’s what I got from my Woodside contact:
“It’s business as usual. They reorganized with the Chapter 11. We are still selling, warranting the homes, closing them, etc. (Engle Homes has been in Chapter 11 for a year now and nothing has changed with them either.) Woodside is not going out of business.”
Of course, employees of Woodside are biased to be optimistic. You have to decide if a purchase is worth any risk you may feel is involved with a a builder in this situation. To me, it’s not much different than buying other distressed properties, such as bank-owned homes. The basic question is, are you getting sufficient value for your money?
I recently had a chance to visit Tempe Village with a client and found out that in addition to the standard Woodside Homes warranty, they also provide “backup” warranty coverage with a third party warranty company. So if for some reason Woodside is ever unable to continue warranty service, you will have another source of independent warranty support.
Rod,
Do you anticipate Woodside lowering their prices on the Tempe Village development as it gets closer to completion?
Steve, they have been fairly aggressive on pricing so far, and are open to “reasonable” offers. They are about half sold out at this point, and they need to keep momentum especially with the bankruptcy issue hanging over them. I think they will adjust pricing as needed to bring in sales.
The best deals are the spec homes – you can check out the ones they put in the MLS on my RE website Neighborhood Listings page.