Variable Interest Entities ("VIEs")

6 Months Ended

Jun. 30, 2023

Variable Interest Entity, Reporting Entity Involvement, Maximum Loss Exposure [Abstract]

Fixed Price Finished Lot Purchase Agreements (“LPAs”)

We generally do not engage in the land development business. Instead, we typically acquire finished building lots at market prices from various development entities under LPAs. The LPAs require deposits that may be forfeited if we fail to perform under the LPAs. The deposits required under the LPAs are in the form of cash or letters of credit in varying amounts, and typically range up to 10% of the aggregate purchase price of the finished lots.

The deposit placed by us pursuant to the LPA is deemed to be a variable interest in the respective development entities. Those development entities are deemed to be VIEs. Therefore, the development entities with which we enter into LPAs, including the joint venture limited liability corporations discussed below, are evaluated for possible consolidation by us. We have concluded that we are not the primary beneficiary of the development entities with which we enter into LPAs, and therefore, we do not consolidate any of these VIEs.

As of June 30, 2023, we controlled approximately 123,900 lots under LPAs with third parties through deposits in cash and letters of credit totaling approximately $553,300 and $8,200, respectively. Our sole legal obligation and economic loss for failure to perform under these LPAs is limited to the amount of the deposit pursuant to the liquidated damage provisions contained in the LPAs and, in very limited circumstances, specific performance obligations. For the three and six months ended June 30, 2023, we recorded a net reversal of approximately $6,900 and $10,000, respectively, related to previously impaired lot deposits based on current market conditions. For the three and six months ended June 30, 2022, we recorded a net reversal of approximately $400 and $6,300, respectively, related to previously impaired lot deposits. Our contract land deposit asset is shown net of a $46,401 and $57,060 impairment reserve at June 30, 2023 and December 31, 2022, respectively.

In addition, we have certain properties under contract with land owners that are expected to yield approximately 21,500 lots, which are not included in the number of total lots controlled. Some of these properties may require rezoning or other approvals to achieve the expected yield. These properties are controlled with deposits in cash and letters of credit totaling approximately $9,800 and $100, respectively, as of June 30, 2023, of which approximately $2,900 is refundable if certain contractual conditions are not met. We generally expect to assign the raw land contracts to a land developer and simultaneously enter into an LPA with the assignee if the project is determined to be feasible.

Our total risk of loss related to contract land deposits is limited to the amount of the deposits pursuant to the liquidated damages provision of the LPAs. As of June 30, 2023 and December 31, 2022, our total risk of loss was as follows:


	June 30, 2023		December 31, 2022
Contract land deposits	$	563,110	$	553,140
Loss reserve on contract land deposits	(46,401)		(57,060)
Contract land deposits, net	516,709		496,080
Contingent obligations in the form of letters of credit	8,307		6,896
Total risk of loss	$	525,016	$	502,976