Bankruptcy And Buying A Home

Can Beazer Homes Avoid Bankruptcy?

The Balance Sheet and Asset Impairments

Below, I have a very short and simple version of Beazer’s balance sheet, focusing on debt, equity, and housing inventories.

I post it mostly so we can see how further asset impairments could push Beazer into negative equity territory. It’s an interesting experiment and I’m surprised we haven’t seen more builders resort to unconventional tactics in order to try to weather the housing slump.

How Things Could Get Worse

So we have a firm that has an ugly balance sheet, but that also has a good amount of cash and doesn’t have to worry about debt maturities for awhile. $ 10,000 on repaint, fixing damaged floors, walls etc. If they were to do a 2 to 3 year lease to buy, to match 2015 date of major debt paydown, I would say they would be ahead. Take a larger deposit as a down payment and warranty starts day one with lease, no repairs required after warranty period which mean no repairs versus repairs they would have to do if they rented units. I don't think renting is such a great idea for Beazer. Too many ifs especially when it comes to repairs. You put a renter in a house and you open up to repairs that could cost thousands of dollars. I would take the approach of leasing to buy if the banks would allow Beazer to do so. You start one year warranty from day one of lease, make lease period 2 to 3 years to get out to 2015 date of Beazer debt maturities. Take a sizeable deposit to hook the lessee and cover Beazer. No repairs to unit other than those in warranty period and no repairs needed because lease will become a sale and "tenant" is not moving out. Have penalty clause to cover Beazer if lessee moves out and repairs are needed so they can tap that original deposit required at the beginning of lease. Deposit can also be built up over lease period so you at least have full deposit by the end of lease term. But it's not so much a 'bad idea' because they are renting out properties, per se. Rather, it's a "bad idea" because they are using precious cash to *purchase* properties and then rent them out (as opposed to simply renting out properties they can't sell).

Home Buying After Bankruptcy

With interest rates remaining at record lows, many people are looking to invest in a home before it’s too late. However, there are many people who completed bankruptcy and may be wondering whether they are even eligible to obtain a mortgage loan.

The short answer is: Yes. Many people will qualify for mortgage loans after filing for . The timeline for obtaining the loan will vary by each person’s unique financial situation, but it is possible. In fact, many people qualify for a better type of loan at a better rate after having completed a bankruptcy. If you have been relieved of your debt burden though bankruptcy and considering buying a home, there are a few things you should do before signing that loan application.

Your history is the most important aspect of your financial life post-bankruptcy. Although a bankruptcy is reported on your credit report, your delinquent account status will be eliminated and you will be able to rebuild your credit score much faster than before the bankruptcy. In fact, many people even see an increase in their credit score after bankruptcy, depending on how long their accounts had been considered delinquent. It is important you review your credit report after a bankruptcy to make sure the appropriate changes to your accounts are current and accurate. If your credit report is inaccurate, or does not reflect the debt resolution changes of the bankruptcy, contact your creditor to have the mistake corrected as soon as possible.

Although you may have your debts erased and a fresh zero balance on your accounts, it may be difficult to obtain large loans right after a bankruptcy. Apply for a low limit line of credit or two and maintain a manageable balance while making consistent payments. You should work on rebuilding your credit history for at least 6 months before applying for larger loans such as a mortgage.  This is also the perfect time to begin saving money for a down payment. Lenders are already fairly stringent with their qualification standards, so having a larger down payment will make you less of a risk for the lender.

When looking to buy a home after bankruptcy you might feel lucky to even be considered for a loan, but this doesn’t mean you have to take the first loan that comes along. As with any major purchase, always review your options and compare the terms and conditions of the loans.  After a bankruptcy you may be offered less favorable loan terms, which can influence your monthly payment and cause unpredictable changes to your loan. Make sure you have reviewed your current and projected monthly payments in order to protect yourself from defaulting on your mortgage loan, or putting yourself at risk for foreclosure.

Buying, Owning and Selling a Home in Canada

The Complete Idiot's Guide to Buying a Home

Congressional Record, V. 146, Pt. 18, November 1, 2000 to January 2, 2001

Complete Idiot's Guide to Surviving Bankruptcy

The Bankruptcy Handbook, Everything You Need to Know to Avoid Bankruptcy, Get Rid of Debt, and Rebuild Your Credit