You are a Custom Home Builder and was hit hard by the economic downfall of 2008
ID: 1093994 • Letter: Y
Question
You are a Custom Home Builder and was hit hard by the economic downfall of 2008 in the housing market. You have a 100-acre subdivision with $19,000 a month payments on a land and development loan of$1.8 million. You have already invested $575,000 of your own money in the venture. You also built three houses to sell in your subdivision and have been using the construction loans to keep the land development loan up to date. Needless to say, you are desperate because the buyers have not shown up in this economy and the one home you built has a buyer who had taken a questionable loan she was not qualified for so defaulted. That means a defaulted home loan is sitting on one of your $50,000 lots which you will lose. Over the weekend, a big city bank took over your local bank and called the loans on all builders in your county. It looks like you must consider bankruptcy. Explain what you would do in this situation and how you came to your conclusions. If you decide for bankruptcy, how would you go about this?
Minimum 300 words
ISBN # 9780132671033
Financial Management Core Concepts by Raymond Brooks
Explanation / Answer
Economic downfall is something which cannot be prevented but the alarms go off at a much time before the actual recession. So, I think that the person or specifically the builder who was struck hard by this situation was not a farsighted man or else he should have taken alternate mode of income also along with his construction works. Nevertheless now he is in a very typical situation, in my opinion there are two passages that can be chosen. But we should also look for the merit and demerit of both the situations that he would be choosing.
The first thing is that he could declare himself bankrupt. But if he does so he won
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