BY MIKE CETERA
Neumann Homes, which has a number of developments in the area, says it will file for bankruptcy. Expect the fallout from this homebuilder's woes to have a ripple effect.
Will schools -- some that had been planning for referendums to accommodate expected new students -- have to revise their population estimates? How will communities, which have been planning infrastructure upgrades and new tax revenue, be affected? What will become of existing developments?
Perhaps its just reading into things a bit, but the writing appeared to be on the wall for Nuemann, which -- if memory serves from tollway billboards -- had been offering some big incentives for buyers in this soft market.
* In September, after residents of an over-50 community on Aurora's southeast side complained of shoddy work at Neumann's Chatham Grove subdivision, company officials expressed surprise at how bad the complaints had become. Denise Crosby spoke with company offiicals. Here's what she wrote: "Much of the problem, officials say, was the fact that a high turnover in personnel at Neumann Homes resulted in a breakdown of communication."
Was the high turnover a routine shake-up at the company, or did employees see what was happening and bailed? That's unclear.
The company last month said it would fix problems plaguing the subdivision, including failing driveways and a pond referred to as a swamp. Will those fixes move forward? Did the company make these promises knowing bankruptcy was inevitable?
* In March 2006, Neumann Homes pulled out of a a 975-acre project in Sugar Grove, citing the village's financial demands (both for impact fees and off-site infrastructure improvements). Company officials said the demands had made the project too expensive.
Another question which is likely on the minds of communities in the area: what happens to Neumann's pending development plans?
In January, Joliet officials announced a plan to annex Kendall County land for a 600-acre single-family home development. An additional 25 acres were planned for multi-family homes, 45 acres for commercial, two elementary schools, parks and a golf course. Much of this development would have funneled into the Oswego School District, which is already seeing fewer new students than it had expected because development is slowing.
Earlier this year, a district study predicted 15,330 students could enroll in Oswego schools in the next 10 to 15 years. Those numbers were based on developers' plans for thousands of new homes, however, and could be affected by the slowdown in residential growth.
Yeah, what the hell will become of Neufairfield subdivision in Joliet when Neumann goes belly-up? The place still has 25% of the lots without houses on them, and many that are standing are in need of various fixes for defects. And who the hell is going to want to buy Neumanns left-overs when most of the streets are only half filled with homes? This is a disaster in the making. Man, am I sorry I ever decided to buy here!!!
I don't think it's gonna be pretty.
Don't panic!! It will take a few years for the housing market to re-gain strength, but it will. Sit tight, don't sell, and wait this out. You will be alright, another builder will do some "in-fill" houses on lots that are not built on. Relax, you have nothing to lose unless you sell at the wrong time.
I think that, yes...there will eventually be homes built on the vacant lots. It sounds like Neumann's financiers have already extended credit beyond what they normally would like to do. The largest challenge may be the homes that have been started. Neumann states that they will be finished, and this is probably so, if not by Neumann, another builder that picks up an investment deal of some sort. I'm not sure how customer service with existing home owners will be maintained. The walk-throughs and warrenty service and so forth. I know the extended warrenties are through another provider, but when all is said and done, how will all of that work? Chapter 11 bankruptcies often pay 10ยข on a dollar to creditors, current down payments are said to be escrowed and will be returned, but how much will be left to maintain service policies? Chatam Grove's examples of driveway problems and pond problems and so forth, perhaps the home owners will have to make do and do more on their own. It may take a few years, but it should work out.
Just to bring you up to speed on Neumann Homes Neufairfield Subdivision. Single family homes are currently 75% built out with the remaining 25% left as vacant lots. Our park is yet to be built by the New Lenox Park District after 3 years, and our streets too, are sometimes hell to drive over. And who in their right mind, will want to assume the job of finishing this project? All that was done here was the creation of an instant slum! What a nasty mess! Thanks for nothing, Neumann Homes! Now let me see someone put a positive spin on this debacle.
Yeah, it does sound bad, the communities will also lose revenue they planned on for infrastructure?
We live in NeuCort lakes and Cortland, and my first response to the Beacon's headline, something like "Neumann Homes lastest casualty of housing crash," made me laugh out loud. They were a casualty of shoddy workmanship, lying salesman, ignoring contracts, and unethical and illegal business practices. They were not a casualty of the housing crash. As in all business cycle downturns, those who provide good service at reasonable prices will survive. Neumann did not do this, and is now finding that "what goes around comes around." The people and communities who are getting a second chance now that Neumann is financially bankrupt and not just ethically bankrupt should be celebrating, not worrying.
Hopefully the various towns where Neumann was developing subdivisions had bonds and irrevocable letters of credit to guaranty the completion of the public improvements. Such guaranties are required in Naperville.
The shake out in the housing industry will have a huge effect on the future course of real estate development in Northern Illinois. Neumann was developing subdivisions with the full knowledge and intention to complete them. Neumann was also going under at the time that they pulled out of the Sugar Grove deal (thank God). When the village insisted on stringent financial guarantees, that must be honored, company officials said the demands had made the project too expensive. The sad fact is that the guarantees have never been worth the paper they are written on. This also applies to many so called home inspection services. Home buyers need to actually read the documents they are signing and understand that no business is going offer a guarantee if they have to pay out. People just get so wrapped up in the emotion of buying a home, that they forget what they are really buying - money!
BUT, the "industry" has always enjoyed a certain protection from paying any money out on guarantees, and homeowners should be aware of these limitations Before they buy a house. Do any of you remember the Mercury homes debacle of the early 1970's? The next builder into those, similarly abandoned, subdivisions found themselves to be the housing outcasts. The next builder built smaller houses, and erased the value from the bigger mercury homes . . .
Just what was the Mercury Scandal and how can I find out more about it?
I live at Tanner Trails in North Aurora. Fortunately our subdivision is 99% complete. Personally, we had a very good experience with Neumann Homes. I'm sure Ken Neumann didn't intend to go belly up and leave everyones investments and futures such a mess. I work in an industry related business and it is really pretty bad right now. My hearts go out to the people that were affected. The banks should take the blame too, why were they borrowing money to people who couldn't afford the homes they were purchasing?
Yes, Neumann would have had to post bonds and/or letters of credit (LOC's) for the completion of the infrastructure in each community. If they did not, the current and waiting homeowners should look to the civic leadsers as to why not. I would first however, go to the engineering dept. of the community you live in, to find out which Surety company provided the bonds, or which banks issued the LOC's. Claims can, and I'm sure will be made against some of the bonds and LOC's. This can only be done however by the municipality as they are the protected party. This should help get streets and utilities taken care of, but the problems with shoddy workmanship, uncompleteded homes, etc. may be another story.
"Just what was the Mercury Scandal and how can I find out more about it?"
Mercury homes, an Aurora area developer, went belly up about thirty years ago. There was no scandal that I am aware of, just a builder that ran out of money and had a lot of spec. houses for sale.
So what's going on with the Neumann Homes filing? Are they filing or not? Updates are being made to their web-site with regard to the selection of homes they're offering. Looks like maybe they are still planning to do business is one form or another. It's also been fairly quiet with no news coming down the pike lately. Hmmmmmmmm!
As an employee of a building material company, who has supplied to Neumann Homes, I can tell you all that they are leaving the scene with a lot of money owed to my company (probably others as well). I'm not quite sure if leans will be involved, but this will be a big mess for everyone affected. It'll take a financially strong builder (or builders) to take over Neumann's projects & let's face it... most builders are hurting right now for many are sitting on houses that simply are not moving. I don't mean to scare anyone who has or is in the process of buying a Neumann home, but the backlash of this builders downfall will not be pretty.