When the borrower of a cluster home development in Norcross, GA defaulted, EpiCity stepped in to help the lender recover its investment.
Due to the dramatic market decline over the past few years, the borrower on a local cluster home development was unable to meet his obligations with the lender. As a result, the lender had no choice but to foreclose.
After foreclosure, it was immediately apparent that the financial institution was facing a significant challenge. Because many of the lots in the community were still empty, the sale prices had to be heavily discounted. The bank was looking at a net of about $5 to $10,000 per lot—a paltry sum given the total investment.
However, since some homes were already built and purchased, and some foundations were currently in, the property was considered “partially completed.” Most lenders don’t want to get involved in the business of new construction, but given the circumstances, this lender decided to engage EpiCity to help complete the development in order to ultimately achieve a higher return.
Adding to the complexity of the situation was the fact that ownership of the common areas in the community had not been properly handled and, after the foreclosure, ownership was transferred to the lender. This meant that the current homeowners in the community literally owned nothing more than the footprint of their home, and the lender now had a slew of additional work.
EpiCity got involved to help on a number of fronts. Working with the current owners, EpiCity leaders negotiated the process of transferring ownership of the common areas back into the hands of the community association. This required a great deal of legal paperwork and some carefully managed conversations to ensure the existing owners were kept well informed and satisfied.
Because these areas have such an enormous impact on the overall look and feel of any community, EpiCity still recommended that the lender invest in some common area improvements. Upgrades to the walking paths, landscaping and community courtyard would help give the property a cohesive, welcoming atmosphere. EpiCity managed these improvements along with new home construction within the community, maintaining the Charleston-style architecture of the existing homes.
With the common area improvements, these new homes, once completed, are expected to generate a net of nearly 7 times as much as the bank would have made on the empty lots.
EpiCity has brought in a local marketing company to leverage their resources and contacts to help sell the homes. Interest is already mounting as locals eagerly watch the construction activity.
Because of EpiCity’s involvement, the lender is likely to achieve a much higher return that previously anticipated.