Local contractors cannot float the amount of work needed to fix all damage from fires
San Francisco, CA -- (SBWIRE) -- 10/03/2012 -- Building contractors in areas ravaged by the High Park and Waldo Canyon fires have no doubt they resources and expertise meet demand to rebuild homes; however, a lack of financing could prove a hurdle in their plans.
“I don’t think people need to worry about whether the Colorado Springs industry can handle those rebuilds,” said Joe Loidolt, president of Classic Homes in Colorado Springs. “We have capacity.”
Homebuilders who withstood the recent housing slump are not as secure financially as they were several years ago. Many of the banks they relied on to lend them construction funds are closed or less likely to issue loans.
According to Phil Benstein, director of the NoCo Rebuilding Network, most builders and subcontractors are unable to float the costs of projects or work with payments. The NCRN is a consortium of contractors and others who advise fire victims on rebuilding.
A number of mortgage lenders and insurers withhold a large share of funds as final payment when the new house is completed, he said.
“That absolutely doesn’t work for me,” said Lee Barker, a custom homebuilder who to lost his home in the High Park Fire. “The last four years have been brutal. I don’t have the pockets to carry that. It has to be a monthly draw.”
Some contractors, including Colorado Springs custom home builder Scott Hente, vice president of Robert Scott General Contractors, have credit lines from which they can draw.
“We are being able to structure a series of payments that the homeowner and the insurance company can live with,” he said. Subcontractors are not likely to wait long for their payment. “They won’t hang out for weeks or months,” he said.
There are estimates that roughly two-thirds of disaster victims are uninsured and forced to look for alternative forms of financing to rebuild their homes.
Bank lending in Colorado remains competitive and insurance money serves as proper collateral, said Don Childears, chief executive of the Colorado Bankers Association. “If the insurance money is only a matter of timing, then I think banks would be anxious to help once they understand the issue.”
Many Colorado builders said they are prepared to build quickly in rebuilding the 600 homes lost in the state’s recent burns. There are 616 active contractors in the state, which means there are nearly enough rebuild projects for each one.
Such sudden rebuilding would create a 26% hike in construction activity in the region, based on U.S. Census Bureau information.
Rebuilding has begun in some areas. Classic Homes is rebuilding one home in the Waldo Canyon burn zone, while Hente restored the damage to his own home soon after the fire.
“I thought everybody would be chomping at the bit, but few are,” he said. “Some tell me quite honestly they have to work through the trauma, the emotions.”
Benstein said estimates are that only 111 of the 259 homes destroyed in the High Park fire will be rebuilt.
Better access for builders to work in the Waldo Canyon fire area will likely result in more of the 346 homes destroyed there being rebuilt. Hente said nine permits have been pulled in three months.
The work is fairly involved once permits are pulled, said Hente. Working through the details of insurance settlements, creating blueprints and hiring contractors can cause the process to take longer than homeowners often expect. What is typically a two-year process may well take four or five years, say building experts.
Not all the homes were primary dwellings. “A lot of those properties lost in the mountains were cabins,” said Dotti Weber, executive officer of the Home Builders Association of Northern Colorado. “Waiting is an option for those people.”
The damage might not be at a stop just yet. A lingering drought, dry forest and greater concentration of people living in fire zones may mean more lost homes in the near future. “This isn’t over yet, not by a long shot,” Barker predicts.
ColoradoSpringsHomeSource.com (http://coloradospringshomesource.com/) of Colorado Springs, Colo. is the local expert buying, selling or renting your home. The firm offers a wide range of information for prospective buyers and sellers in addition to handling sales.
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