Florida Buider Mercedes Homes Bankruptcy May Affect Warranties
Mercedes Homes has built a lot of Daytona Beach homes over the past decade. Now they’ve filed for bankruptcy, and depending on how a bankruptcy judge rules, current warranties may be voided. That would put quite a few people in a bind.
The company is stressing that warranties on homes that close after the filing will not be affected, but that’s only if the company survives.
Mercedes is based in Melbourne and filed for Chapter 11 Bankrupcy protection in West Palm Beach at the US District Bankruptcy Court. Thousands of creditors are involved with the largest being Fifth Third Bank that is owed over $7 million.
A home builder in financial trouble is no big surprise. New home starts are at record lows and sales are still very low. Many have filed for bankruptcy or gone out of business. Most will be back in some form when the housing recovery is complete some years out.
The housing market for Daytona Beach and Ormond Beach homes will recover over the coming years, and Mercedes may be able to struggle long enough to make it in the end. Some would say that they should have been in a better position and put money aside for the bad times, but I don’t think anyone planned for a drop in sales of 60-70%, I know I didn’t. Take a look at the sales graph for this decade from my post Daytona Beach Real Estate Annual Sales 2000-2008 to see how dramatic the drop was.
Everyone who service the Daytona Beach real estate market is struggling. Many have left the business and more probably will again this year. I’m not leaving the market and I have plans to grow my business this year just like I did last year. Yes, it’s more hours and more work, but I will be here to the end.
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1 response so far ↓
1 Adria // Mar 9, 2009 at 10:35 pm
Actually, the bankrupt builder has authorization to honor home warranties prior to the bankruptcy filing (though it is not obligated to do so). There is a limitation to this authorization – Mercedes Homes cannot spend more than 1% of a home’s final sale price on warranty claims. However, for home owners facing severe construction defects, the limitation essentially means the warranty is void.
http://www.homebuilder-bankruptcy.com/2009/02/mercedes-homes-to-honor-warranties/
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