From Bloomberg:
Kara Homes in Bankruptcy After Mortgage Payment Offer
Kara Homes Inc., the New Jersey builder known for so-called McMansions, filed for bankruptcy after $250,000 discounts failed to lure buyers.
The closely held East Brunswick, New Jersey-based company sought Chapter 11 protection in U.S. Bankruptcy Court Oct. 5, saying it owes $296.84 million to lumber, concrete, electrical, plumbing and woodwork companies while holding $350.18 million in assets, primarily unsold houses and land. One property for sale is the 6,319-square-foot, five-bedroom “Buckingham” model with a three-car garage, listed for $1.5 million in Freehold, New Jersey.
U.S. housing demand is flagging after five record years, swelling the inventory of unsold homes. Almost half the people who sign contracts with builders are canceling before the house is finished, forcing companies to sacrifice profit margins by offering freebies to attract new buyers, according to James Hughes of Rutgers University, in the same town as Kara’s headquarters.
“There could be many similar filings in markets glutted with single family homes,” said Gerard Cassidy, managing director of bank equity research for RBC Capital Markets in Portland, Maine. “Kara is already at the table. We expect more people to come to dinner, the question is, how many more?”
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Kara began advertising in 2005 that it would pay the first year of mortgage bills for buyers — what it called its “On the House” program, and said in January it would continue the offer this year. In August, Kara began advertising discounts of $20,000 to $246,000 for so-called “spec,” or speculative houses built without a buyer under contract, calling it its “Home Spec- tacular” program.
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Kara is selling homes in 29 developments in New Jersey towns such as Edison, Monroe, Lakewood and Manalapan, and lists four communities as “coming soon,” including Heather Glen in Stafford, New Jersey, according to its Web site. Homes listed for sale are priced between $324,227 and $1.5 million.
“Kara Homes Inc., the New Jersey builder known for so-called McMansions, filed for bankruptcy after $250,000 discounts failed to lure buyers.”
250k discounts failed????
A temporaty adjustment/pullback??? A slight retracement??? A much needed pause??? Buyers waiting on the sidelines???
How about a good old fashioned bust!!!
It’s a shame. I feel bad for the small contractors who were doing work for this company. My dad is in the business, and he said he’ll never work for any of the big developers because they’ll screw you over when it comes to payments. That’s exactly what Kara’s doing to all the small contractors it was using.
-Richie
I really hope the gov’t doesn’t bail these companies out. They really need to be responsible for their own actions and greed. C’mon Kara, sell those homes at discounts, please don’t run home crying to daddy.
Anyone have any information on Excelsior at Franklin Lakes? It was a Kara adult community (never built) but the sign still is on Colonial Road in Franklin Lakes…
Update: According to the borough of Franklin Lakes, Kara homes never submitted anything to the borough to get the development started. Looks like they just own the property and aren’t doing anything with it
Kara Homes quite simply ripped a lot of people off. Not paying subs was standard procedure at kara. So was lying to buyers. Karagjozi belongs in jail, if he slides thru this there is no justice.