Construction work has slowed over the past year in Virginia’s Montgomery County, but the last few months have been quieter than anyone could remember. Even the old-timers in the home building business here thought that the surrounding area had really hit rock bottom. As a result of the industry’s economic woes, about 35 percent of the builders and supporting construction trades in the area have vanished. And that number only reflects the “hands-on” trades. Also gone are mortgage and title companies, real estate brokers, appliance stores, and interior decorators. In all, the situation is pretty devastating.
But not all builders were swept out with the ebbing financial tide. The tried and true companies are still in business; they’re just not as busy as they may have been over the last several years. One such local company was J&B Custom Homes. The owners, Jim and Bob Levinson, had grown up in the business, working for their father, a commercial contractor. The boys loved building, and even more, they loved working with their father. When the older of the brothers, Jim, turned 28, he decided to approach his dad and brother about diversifying and opening up a custom home division. Bob was all for it. Dad was getting ready to retire and wanted to turn his business over to the boys.
Even with the economy stumbling and fumbling, J&B was financially stable and had its fair share of work. It was keeping its subcontractors and suppliers busy enough and had a portfolio of nine homes under contract and construction.
One was the Dingle project, a 4,560-square-foot residence with a three-car garage and a considerable amount of detail. With lots of Georgian trim blended with contemporary appliances, fixtures, and amenities, the project carried a $2.37 million fixed contract. In addition to the main house, there was an outbuilding with a workshop and an attached, one-bedroom guesthouse. The project had been moving along swiftly and was approximately 80 percent complete.
And then came that phone call.
Jim had just walked into the office after a relaxing business lunch with another client when Susan, the office manager, barked at him, “Jim, how come you didn’t answer my calls to your cell? I’ve been calling since about two minutes after you left here for lunch.” “Whoa there, Susan, whatever the problem is, we’ll take care of it,” Jim reassured her. “Now, what’s up?”
“Bill Dillingham called several times this morning looking for you. He says there’s a problem with the latest Dingle draw payment request.” “Problem?” Jim asked. “Like what?” He looked puzzled. “The bank has frozen all bank draws due to a margin and cash call issue with the entire bank, not just the local branch,” Susan answered. “Bill reluctantly told me, after the third phone call looking for you, that the bank won’t be issuing our $467,000 payment request because the bank just reappraised the Dingle project at 50 percent of the contract. Bill’s bank won’t fund the draw, because their position is that they have already overfunded the loan. He also added that the loan was being called against the Dingles because they’re three months behind in their construction loan payments.”
There’s no easy ending to this story. Things have changed. Having a contract and a funded loan doesn’t guarantee the project you’re building will be continually funded without interruption, due to the banking credit woes of 2008.—Dennis A. Dixon is an author, contractor, and speaker with 23 years of experience in the building industry. He can be reached at dixven@aol.com.
