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construction at Chelsea Fairways subdivision, Chelsea, Michigan, Fall, 2012

The Builders are Back

How Chelsea Fairways found new life

by Josie Schneider

posted 1/22/2013

Amid falling leaves, hammers and cranes are back again at the Chelsea Fairways subdivision at E. Old US-12 and Freer Road.

It's been an unusual sight recently: after the real estate bubble burst in 2008, many Michigan building companies were crippled or went bankrupt, and their workers fled to other states or changed careers. The number of building permits issued in southeast Michigan, which peaked in 2004, had dropped 94 percent by 2009.

The home builders that survived had to dig deep and innovate. "In the last four years, there's been a lot of roundtable brainstorming," says Sean Lefere, Michigan division president for Norfolk Homes. "When your backs are against the wall, you solve the problems."

Chelsea Fairways had its share of problems. When the crash came, the original developer, Stoneleigh Development, ran out of buyers for its remaining lots--and the project ran out of money. "The roads were incomplete, the home owners association had years of back dues owed to them--[there were] lots of moving parts," says Lefere. "We had to come together with the city, the bank, the home owners association and come up with [a] resolution. There was some pain that went around."

Ninety-one homes were already occupied when the financial crisis hit, and the home owners had been dealing with deteriorating, unfinished roads for several years. Not only had the project been abandoned by Stoneleigh, but the City of Chelsea had allowed the bond that held the money to finish the roads to lapse.

"Yes, there was anger," says association president Matt Jordan, "disappointment and resentment with how the city handled it. For some unknown reason [the bond] didn't automatically renew, so when it expired, the city didn't take any action to pursue [Stoneleigh] for that money."

The city and the Chelsea Fairways residents ended up splitting the cost of having the roads finished, and the work was done this past spring. Norfolk stepped in to buy the thirty-two remaining undeveloped lots and complete the subdivision and

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also kicked in some money to replace the home owners' association dues not recouped from Stoneleigh. To cover the rest of the cost, Chelsea Fairways home owners will be assessed about $200 annually for the next ten years. And in a final move, the home owners' association lowered its annual dues by $200 a year, so that the net effect of the assessment is close to zero.

Even though the outcome is mostly positive, Leslie Lewis, a home owner in Chelsea Fairways, sums up many residents' mixed feelings about the resolution:

"I am happy that the streets are paved, although I feel that we should not have to pay the extra tax for these roads," says Lewis. "I feel the city of Chelsea dropped the ball with letting the bond lapse."

Meanwhile, Norfolk is busy building new homes on the remaining lots and finding new buyers. That landscape has changed, too.

In the past, Lefere says, buyers were happy to go ahead with construction on their new home before selling their old one--most just asked the builder to let them know when their new home was forty-five days away from completion, so they could put their existing home on the market. Now, uncertainty about how long a home will take to sell, and at what price, means that most don't even want to sign a purchase agreement until they close the sales of their existing homes. While their homes are being built, which typically takes four months, there's no place for the buyers to live.

Norfolk has come up with a clever solution: they rent their own unsold condominiums or homes to the displaced buyers. It's a win-win, because the buyers get a time-flexible rental, and Norfolk fills unsold properties and gains happy customers.

"Both builder and customer need each other," says Lefere. "We both bring something to the table."

The worst of the crash appears to be over: in the last year, new home construction is up 33 percent in Michigan. But Bob Filka, CEO of the Michigan Association of Home Builders, says caution is in order: "Michigan is poised for a slow but steady recovery. It's just going to be super slow."


    (end of article)

[Originally published in January, 2013.]


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