<SUBMISSION>
<ACCESSION-NUMBER>0000950147-01-501883
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>3
<PERIOD>20010930
<FILING-DATE>20011114
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>MERITAGE CORP
<CIK>0000833079
<ASSIGNED-SIC>1531
<IRS-NUMBER>860611231
<STATE-OF-INCORPORATION>MD
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>001-09977
<FILM-NUMBER>1789145
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>6613 N SCOTTSDALE RD
<STREET2>STE 200
<CITY>SCOTTSDALE
<STATE>AZ
<ZIP>85250
<PHONE>6029988700
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>6613 NORTH SCOTTSDALE ROAD
<STREET2>SUITE200
<CITY>SCOTTSDALE
<STATE>AZ
<ZIP>85250
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>EMERALD MORTGAGE INVESTMENTS CORP
<DATE-CHANGED>19900502
</FORMER-COMPANY>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>HOMEPLEX MORTGAGE INVESTMENTS CORP
<DATE-CHANGED>19920703
</FORMER-COMPANY>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>MONTEREY HOMES CORP
<DATE-CHANGED>19970113
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>e-7696.txt
<DESCRIPTION>QUARTERLY REPORT FOR QTR ENDING 9-30-2001
<TEXT>
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q


 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934


                          COMMISSION FILE NUMBER 1-9977


                              MERITAGE CORPORATION
             (Exact Name of Registrant as Specified in its Charter)


                MARYLAND                                          86-0611231
      (State of Other Jurisdiction                             (I.R.S. Employer
    of Incorporation or Organization)                        Identification No.)


  6613 NORTH SCOTTSDALE ROAD, SUITE 200
           SCOTTSDALE, ARIZONA                                      85250
(Address of Principal Executive Offices)                          (Zip Code)


                                 (480) 998-8700
              (Registrant's Telephone Number, Including Area Code)


INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE  PRECEDING 12 MONTHS (OR FOR SUCH  SHORTER  PERIOD THAT THE  REGISTRANT  WAS
REQUIRED  TO FILE  SUCH  REPORTS),  AND  (2) HAS  BEEN  SUBJECT  TO SUCH  FILING
REQUIREMENTS FOR THE PAST 90 DAYS: YES [X] NO [ ]

AS OF NOVEMBER 10, 2001,  5,412,006 SHARES OF MERITAGE  CORPORATION COMMON STOCK
WERE OUTSTANDING.

================================================================================
<PAGE>
                              MERITAGE CORPORATION
               FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2001

                                TABLE OF CONTENTS

                                                                        PAGE NO.
                                                                        --------

PART I. FINANCIAL INFORMATION

    ITEM 1. FINANCIAL STATEMENTS:

            Consolidated Balance Sheets as of September 30, 2001
            (unaudited) and December 31, 2000 .........................      3

            Consolidated Statements of Earnings for the Three and
            Nine Months ended September 30, 2001 and 2000
            (unaudited) ...............................................      4

            Consolidated Statements of Cash Flows for the Nine
            Months ended September 30, 2001 and 2000 (unaudited) ......      5

            Notes to Consolidated Financial Statements ................      6

    ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATIONS .......................     12

    ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
            MARKET RISK ...............................................     16

PART II. OTHER INFORMATION

    ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ..........................     17

SIGNATURES ............................................................    S-1

                                       2
<PAGE>
                          PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                      MERITAGE CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                  SEPTEMBER 30,   DECEMBER 31,
                                                                       2001          2000
                                                                    ---------      ---------
                                                                   (UNAUDITED)
<S>                                                                 <C>            <C>
ASSETS
  Cash and cash equivalents                                         $   1,456      $   4,397
  Real estate under development                                       346,277        211,307
  Deposits on real estate under option or contract                     40,635         24,251
  Receivables                                                           4,377          2,179
  Deferred tax asset                                                    1,961            543
  Goodwill                                                             29,355         17,675
  Property and equipment, net                                           8,949          4,717
  Other assets                                                          7,178          2,006
                                                                    ---------      ---------

                Total Assets                                        $ 440,188      $ 267,075
                                                                    =========      =========

LIABILITIES
  Accounts payable and accrued liabilities                          $  78,119      $  48,907
  Home sale deposits                                                   15,929         10,917
  Notes payable                                                       186,082         86,152
                                                                    ---------      ---------
                Total Liabilities                                     280,130        145,976
                                                                    ---------      ---------
STOCKHOLDERS' EQUITY
  Common stock, par value $0.01. Authorized 50,000,000
    shares; issued and outstanding 6,208,969 shares at
    September 30, 2001 and 5,922,822 shares at
    December 31, 2000                                                      62             59
  Additional paid-in capital                                          106,919        102,526
  Retained earnings                                                    64,300         29,530
  Treasury stock at cost; 818,963 shares at September 30, 2001
    and 811,963 at December 31, 2000                                  (11,223)       (11,016)
                                                                    ---------      ---------
                Total Stockholders' Equity                            160,058        121,099
                                                                    ---------      ---------

  Total Liabilities and Stockholders' Equity                        $ 440,188      $ 267,075
                                                                    =========      =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       3
<PAGE>
                      MERITAGE CORPORATION AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF EARNINGS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED            NINE MONTHS ENDED
                                                      SEPTEMBER 30,                 SEPTEMBER 30,
                                                ------------------------      ------------------------
                                                   2001           2000           2001          2000
                                                ---------      ---------      ---------      ---------
                                                        (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                             <C>            <C>            <C>            <C>
Home sales revenue                              $ 207,177      $ 134,464      $ 497,693      $ 346,919
Land sales revenue                                     --          1,412          1,598          4,115
                                                ---------      ---------      ---------      ---------
                                                  207,177        135,876        499,291        351,034
                                                ---------      ---------      ---------      ---------

Cost of home sales                               (161,468)      (105,629)      (390,876)      (277,111)
Cost of land sales                                     --         (1,264)        (1,474)        (3,648)
                                                ---------      ---------      ---------      ---------
                                                 (161,468)      (106,893)      (392,350)      (280,759)
                                                ---------      ---------      ---------      ---------

Home sales gross profit                            45,709         28,835        106,817         69,808
Land sales gross profit                                --            148            124            467
                                                ---------      ---------      ---------      ---------
                                                   45,709         28,983        106,941         70,275

Commissions and other sales costs                 (10,954)        (7,291)       (27,402)       (19,528)
General and administrative costs                  (11,433)        (5,364)       (24,251)       (14,213)
Interest expense                                       --             (1)            (1)            (6)
Other income, net                                     669            319          2,030          1,274
                                                ---------      ---------      ---------      ---------
Earnings before income taxes and
    extraordinary items                            23,991         16,646         57,317         37,802
Income taxes                                       (9,316)        (6,137)       (22,314)       (13,949)
                                                ---------      ---------      ---------      ---------
Earnings before extraordinary items                14,675         10,509         35,003         23,853
Extraordinary items, net of tax effects               212             --           (233)            --
                                                ---------      ---------      ---------      ---------

Net earnings                                    $  14,887      $  10,509      $  34,770      $  23,853
                                                =========      =========      =========      =========

Earnings per share:

Basic:
  Earnings before extraordinary items           $    2.73      $    2.06      $    6.64      $    4.57
  Extraordinary items, net of tax effects            0.04             --          (0.04)            --
                                                ---------      ---------      ---------      ---------
        Net earnings per share                  $    2.77      $    2.06      $    6.60      $    4.57
                                                =========      =========      =========      =========
Diluted:
  Earnings before extraordinary items           $    2.46      $    1.85      $    6.02      $    4.15
  Extraordinary items, net of tax effects            0.04             --          (0.04)            --
                                                ---------      ---------      ---------      ---------
      Net earnings per share                    $    2.50      $    1.85      $    5.98      $    4.15
                                                =========      =========      =========      =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       4
<PAGE>
                      MERITAGE CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                               NINE MONTHS ENDED
                                                                                 SEPTEMBER 30,
                                                                              2001           2000
                                                                            ---------      ---------
                                                                                 (IN THOUSANDS)
<S>                                                                         <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net earnings                                                              $  34,770      $  23,853
  Adjustments to reconcile net earnings to net
    cash used in operating activities:
    Depreciation and amortization                                               3,747          2,320
    (Increase) decrease in deferred tax asset before extraordinary item        (1,418)            28
    Stock option compensation expense                                              --             73
    Tax benefit from stock option exercise                                      2,376             --
  Change in assets and liabilities, net of effect of acquisition in 2001:
    Increase in real estate under development                                 (80,425)       (51,452)
    Increase in deposits on real estate under option or contract               (7,485)        (3,394)
    Increase in receivables and other assets                                   (8,316)          (350)
    Increase in accounts payable and accrued liabilities                       22,322          7,455
    Increase in home sale deposits                                              2,509          4,300
                                                                            ---------      ---------
    Net cash used in operating activities                                     (31,920)       (17,167)
                                                                            ---------      ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Cash paid for acquisition                                                   (65,759)        (5,158)
  Purchases of property and equipment                                          (5,115)        (2,206)
                                                                            ---------      ---------
    Net cash used in investing activities                                     (70,874)        (7,364)
                                                                            ---------      ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings                                                                  551,809        318,723
  Repayments of debt                                                         (453,769)      (298,093)
  Repurchase of stock                                                            (207)        (8,507)
  Proceeds from exercises of stock options                                      2,020            564
                                                                            ---------      ---------
    Net cash provided by financing activities                                  99,853         12,687
                                                                            ---------      ---------

Net decrease in cash and cash equivalents                                      (2,941)       (11,844)
Cash and cash equivalents at beginning of period                                4,397         13,422
                                                                            ---------      ---------
Cash and cash equivalents at end of period                                  $   1,456      $   1,578
                                                                            =========      =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
The acquisition of Hancock Communities resulted in the
 following changes in assets and liabilities:
  Real estate under development                                             $ (54,545)
  Deposits on real estate under option or contract                             (8,899)
  Receivables and other assets                                                   (543)
  Accounts payable and accrued liabilities                                      6,890
  Home sale deposits                                                            2,503
  Goodwill                                                                    (11,423)
  Property and equipment                                                       (1,632)
  Borrowings                                                                    1,890
                                                                            ---------
  Net cash paid for acquisition                                             $ (65,759)
                                                                            =========
</TABLE>

           See accompanying notes to consolidated financial statements.

                                       5
<PAGE>
                      MERITAGE CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

     We develop, construct and sell new high-quality, single-family homes in the
semi-custom  luxury,   move-up  and  entry-level  markets.  We  operate  in  the
Dallas/Fort  Worth,  Austin and Houston,  Texas markets as Legacy Homes,  in the
Phoenix/Scottsdale  and  Tucson,  Arizona  markets as  Monterey  Homes,  Hancock
Communities  and  Meritage  Homes,  and  in  the  East  San  Francisco  Bay  and
Sacramento, California markets as Meritage Homes.

     BASIS OF PRESENTATION.  The consolidated  financial  statements include the
accounts of Meritage Corporation and its subsidiaries. Intercompany balances and
transactions  have been  eliminated  in  consolidation  and certain prior period
amounts have been reclassified to be consistent with current financial statement
presentation.   In  the  opinion  of  management,   the  accompanying  unaudited
consolidated  financial  statements reflect all adjustments,  consisting only of
normal  recurring  adjustments,   necessary  to  fairly  present  our  financial
position,  results of operations and cash flows for the periods  presented.  The
results of operations for any interim period are not  necessarily  indicative of
results to be expected for a full fiscal year.

NOTE 2 - REAL ESTATE UNDER DEVELOPMENT AND CAPITALIZED INTEREST

The components of real estate under development are (in thousands):

                                         SEPTEMBER 30, 2001    DECEMBER 31, 2000
                                         ------------------    -----------------
Homes under contract, in production           $159,589              $ 92,881
Finished home sites                             84,014                60,630
Home sites under development                    55,999                27,636
Model homes and homes held for resale           43,626                26,937
Land held for development                        3,049                 3,223
                                              --------              --------
                                              $346,277              $211,307
                                              ========              ========

     We capitalize  certain  interest  costs  incurred  during  development  and
construction. Capitalized interest is allocated to real estate under development
and charged to cost of sales when the  property  is  delivered  to the buyer.  A
summary of interest capitalized and interest expensed follows (in thousands):

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED          NINE MONTHS ENDED
                                                    SEPTEMBER 30,               SEPTEMBER 30,
                                               ----------------------      ----------------------
                                                 2001          2000          2001          2000
                                               --------      --------      --------      --------
<S>                                            <C>           <C>           <C>           <C>
Beginning unamortized capitalized interest     $  7,248      $  4,911      $  5,426      $  3,971
Interest capitalized                              5,430         2,975        11,868         7,617
Amortized to cost of home and land sales         (3,576)       (2,203)       (8,192)       (5,905)
                                               --------      --------      --------      --------
Ending unamortized capitalized interest        $  9,102      $  5,683      $  9,102      $  5,683
                                               ========      ========      ========      ========

Interest incurred                              $  5,430      $  2,976      $ 11,869      $  7,623
Interest capitalized                             (5,430)       (2,975)      (11,868)       (7,617)
                                               --------      --------      --------      --------
Interest expensed                              $     --      $      1      $      1      $      6
                                               ========      ========      ========      ========
</TABLE>

                                       6
<PAGE>
                      MERITAGE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)

NOTE 3 - NOTES PAYABLE

Notes payable consists of:

<TABLE>
<CAPTION>
                                                                            SEPTEMBER 30,   DECEMBER 31,
                                                                                2001            2000
                                                                              --------        --------
                                                                                  (IN THOUSANDS)
<S>                                                                           <C>             <C>
$100 million bank revolving construction line of credit, interest
  payable monthly approximating prime (6.0% at September 30, 2001) or
  LIBOR (rates varying from 2.57% to 2.66% at September 30, 2001) plus
  2.0%, payable at the earlier of close of escrow, maturity date of
  individual homes and lots within the collateral pool or over a
  24-month period beginning June 1, 2003, secured by first deeds of
  trust on real estate                                                        $  9,880        $ 50,354

$75 million bank revolving construction line of credit, interest
  payable monthly approximating prime or LIBOR plus 2.0%, payable at the
  earlier of close of escrow, maturity date of individual homes and lots
  within the line or May 31, 2002, secured by first deeds of trust on
  real estate                                                                   14,998          17,269

Acquisition and development seller carry back financing, interest
  payable monthly at fixed rates of 9% and 10% per annum; payable at the
  maturity date of the individual projects, secured by first deeds of
  trust on land                                                                  6,204           3,516

Senior unsecured notes, maturing June 1, 2011, annual interest of 9.75%
  payable semi-annually                                                        155,000              --

Senior unsecured notes, paid in full May 30, 2001                                   --          15,000

Other                                                                               --              13
                                                                              --------        --------

     Total                                                                    $186,082        $ 86,152
                                                                              ========        ========
</TABLE>

                                       7
<PAGE>
                      MERITAGE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)

NOTE 4 - EARNINGS PER SHARE

Basic and diluted earnings per share were calculated as follows (in thousands,
except per share amounts):

<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED        NINE MONTHS ENDED
                                                                SEPTEMBER 30,            SEPTEMBER 30,
                                                           ---------------------     ----------------------
                                                             2001         2000         2001          2000
                                                           --------     --------     --------      --------
<S>                                                        <C>          <C>          <C>           <C>
BASIC:
Earnings before extraordinary items                        $ 14,675     $ 10,509     $ 35,003      $ 23,853
Extraordinary items, net of tax effects                         212           --         (233)           --
                                                           --------     --------     --------      --------
Net earnings                                               $ 14,887     $ 10,509     $ 34,770      $ 23,853
                                                           ========     ========     ========      ========

Weighted average number of shares outstanding                 5,367        5,097        5,264         5,224
                                                           --------     --------     --------      --------
Basic earnings per share before extraordinary items        $   2.73     $   2.06     $   6.64      $   4.57
Extraordinary items                                             .04           --         (.04)           --
                                                           --------     --------     --------      --------
Basic earnings per share                                   $   2.77     $   2.06     $   6.60      $   4.57
                                                           ========     ========     ========      ========

DILUTED:
Earnings before extraordinary items                        $ 14,675     $ 10,509     $ 35,003      $ 23,853
Extraordinary items, net of tax effects                         212           --         (233)           --
                                                           --------     --------     --------      --------
Net earnings                                               $ 14,887     $ 10,509     $ 34,770      $ 23,853
                                                           ========     ========     ========      ========

Weighted average number of shares outstanding                 5,367        5,097        5,264         5,224
Effect of dilutive securities:
   Contingent shares and warrants                                --           --           --            25
   Options to acquire common stock                              596          582          546           496
                                                           --------     --------     --------      --------
Diluted weighted common shares outstanding                    5,963        5,679        5,810         5,745
                                                           --------     --------     --------      --------

Diluted earnings per share before extraordinary items      $   2.46     $   1.85     $   6.02      $   4.15
Extraordinary items                                            0.04           --        (0.04)           --
                                                           --------     --------     --------      --------
Diluted earnings per share                                 $   2.50     $   1.85     $   5.98      $   4.15
                                                           ========     ========     ========      ========

Antidilutive stock options not included in diluted EPS           --          102           --           265
                                                           ========     ========     ========      ========
</TABLE>

NOTE 5 - EXTRAORDINARY ITEMS

     During the quarter ended September 30, 2001 we recognized an  extraordinary
gain of  $212,000,  net of  related  income tax  effect of  $136,000.  This gain
resulted  from the  purchase and  retirement  of $10 million in principal of our
9.75% senior notes due June 1, 2011, which we bought back at 93.25.

     The nine months ended September 30, 2001, includes as an extraordinary item
a $446,000 loss,  net of a $285,000 tax benefit, due to the early extinguishment
of $15 million of senior unsecured debt in May 2001.

                                       8
<PAGE>
                      MERITAGE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)

NOTE 6 - INCOME TAXES

     Total income tax expense for the three and nine months ended  September 30,
2001 was allocated as follows (in thousands):

                                        THREE MONTHS ENDED    NINE MONTHS ENDED
                                        SEPTEMBER 30, 2001    SEPTEMBER 30, 2001
                                        ------------------    ------------------
Income from continuing operations             $ 9,316              $ 22,314
Extraordinary items                               136                  (149)
                                              -------              --------
                                              $ 9,452              $ 22,165
                                              =======              ========

Income tax expense attributable to income from continuing operations consists of
(in thousands):

                        THREE MONTHS ENDED           NINE MONTHS ENDED
                           SEPTEMBER 30,               SEPTEMBER 30,
                      ----------------------      ----------------------
                        2001          2000          2001          2000
                      --------      --------      --------      --------
     Current:
          Federal     $  8,743      $  5,263      $ 20,162      $ 12,202
          State          1,933           710         3,571         1,719
                      --------      --------      --------      --------
                        10,676         5,973        23,733        13,921
                      --------      --------      --------      --------
     Deferred:
          Federal       (1,178)          147        (1,212)           25
          State           (182)           17          (207)            3
                      --------      --------      --------      --------
                        (1,360)          164        (1,419)           28
                      --------      --------      --------      --------

          Total       $  9,316      $  6,137      $ 22,314      $ 13,949
                      ========      ========      ========      ========

NOTE 7 - SEGMENT INFORMATION

     We classify our operations into three primary geographic  segments:  Texas,
Arizona and  California.  These segments  generate  revenue  through the sale of
homes to external customers. We are not dependent on any one major customer.

     Operational   information  relating  to  the  different  business  segments
follows.  Certain  information  has not  been  included  by  segment  due to the
immateriality  of the amount to the  segment or in total.  We  evaluate  segment
performance based on several factors,  of which the primary financial measure is
earnings  before  interest  and taxes  (EBIT).  The  accounting  policies of the
business segments are the same as those described in Notes 1 and 2. There are no
significant transactions between segments.

                                       9
<PAGE>
                      MERITAGE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)

NOTE 7 - SEGMENT INFORMATION (CONT.)

<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED            NINE MONTHS ENDED
                                                SEPTEMBER 30,                SEPTEMBER 30,
                                          ------------------------      ------------------------
                                             2001           2000           2001          2000
                                          ---------      ---------      ---------      ---------
                                                              (IN THOUSANDS)
<S>                                       <C>            <C>            <C>            <C>
HOME SALES REVENUE:
   Texas                                  $  62,306      $  58,932      $ 185,264      $ 160,643
   Arizona                                  100,794         45,168        201,154         99,367
   California                                44,077         30,364        111,275         86,909
                                          ---------      ---------      ---------      ---------
          Total                           $ 207,177      $ 134,464      $ 497,693      $ 346,919
                                          =========      =========      =========      =========

EBIT:
   Texas                                  $  10,892      $  10,449      $  31,954      $  26,228
   Arizona                                   10,063          4,862         19,487          8,619
   California                                 8,098          5,033         17,392         12,975
   Corporate and other                       (1,486)        (1,493)        (3,323)        (4,109)
                                          ---------      ---------      ---------      ---------
          Total                           $  27,567      $  18,851      $  65,510      $  43,713
                                          =========      =========      =========      =========

AMORTIZATION OF CAPITALIZED INTEREST:
   Texas                                  $     625      $     585      $   1,772      $   1,876
   Arizona                                    2,001          1,213          4,417          2,724
   California                                   950            405          2,003          1,305
                                          ---------      ---------      ---------      ---------
          Total                           $   3,576      $   2,203      $   8,192      $   5,905
                                          =========      =========      =========      =========

                                                                            AT             AT
                                                                       SEPTEMBER 30,  DECEMBER 31,
                                                                           2001           2000
                                                                         --------       --------
                                                                             (IN THOUSANDS)
ASSETS:
   Texas                                                                 $140,077       $108,238
   Arizona                                                                217,497        102,746
   California                                                              80,722         53,723
   Corporate                                                                1,892          2,368
                                                                         --------       --------
          Total                                                          $440,188       $267,075
                                                                         ========       ========
</TABLE>

NOTE 8 - HANCOCK ACQUISITION

     On May 30, 2001,  we acquired  substantially  all of the  homebuilding  and
related   assets  of  HC  Builders,   Inc.  and  Hancock   Communities,   L.L.C.
(collectively "Hancock"). The purchase price was $65.8 million in cash, plus the
assumption  of  trade  payables,   accrued   liabilities  and  customer  deposit
liabilities totaling $9.4 million and a note totaling $1.9 million. In addition,
we granted to Greg  Hancock,  the founder of Hancock  Communities,  an earn-out,
payable over three years,  equal to 20% of Hancock's  pre-tax net income after a
10.5%  charge on capital.  Hancock  designs,  builds and markets a wide range of
high-quality  homes in the  Phoenix,  Arizona  area with a focus on serving  the
entry-level  and  move-up   single-family   housing  markets  and  is  currently
developing  affordable  age-restricted  adult communities.  During 2000, Hancock
closed 1,143 homes at an average  selling price of $160,700,  resulting in total
revenues of $183.7 million and EBITDA of $16.9 million.

                                       10
<PAGE>
                      MERITAGE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)

     This acquisition was accounted for using the purchase method of accounting.
Accordingly, the Company recorded goodwill of approximately $11.4 million, which
represents  the  excess of the  purchase  price  over the fair  value of the net
tangible and identifiable  intangible  assets acquired and liabilities  assumed.
Such amount is being amortized over a period of 20 years.

     The  following  unaudited pro forma  financial  data for the three and nine
months ended September 30, 2001 and 2000 has been prepared as if the acquisition
of the assets and liabilities of Hancock on May 30, 2001 had occurred on January
1, 2000.  Unaudited  pro forma  financial  data is presented  for  informational
purposes only and is based on historical  information.  This information may not
be  indicative of the actual  amounts of the Company had the events  occurred on
the date  listed  above,  nor does it purport to  represent  future  periods (in
thousands except per share data):

<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED        NINE MONTHS ENDED
                                               SEPTEMBER 30,             SEPTEMBER 30,
                                           ---------------------     ---------------------
                                             2001         2000         2001         2000
                                           --------     --------     --------     --------
<S>                                        <C>          <C>          <C>          <C>
Revenue                                    $207,177     $194,294     $552,001     $486,925
Earnings before extraordinary items          14,675       12,671       40,728       28,311
Net earnings                                 14,887       12,671       40,940       27,865
Diluted EPS before extraordinary items         2.46         2.23         7.01         4.93
Diluted EPS after extraordinary items          2.50         2.23         7.05         4.85
</TABLE>

NOTE 9 - NEW ACCOUNTING PRONOUNCEMENTS

     On October 3, 2001, the Financial  Accounting Standards Board (FASB) issued
FASB Statement No. 144,  ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED
ASSETS, which addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. While Statement No. 144 supersedes FASB Statement
No. 121,  ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED  ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF, it retains many of the fundamental  provisions of that
Statement.

     Statement No. 144 also  supersedes the accounting and reporting  provisions
of APB  Opinion  No. 30,  REPORTING  THE  RESULTS OF  OPERATIONS--REPORTING  THE
EFFECTS OF DISPOSAL OF A SEGMENT OF A BUSINESS,  AND EXTRAORDINARY,  UNUSUAL AND
INFREQUENTLY OCCURRING EVENTS AND TRANSACTIONS, for the disposal of a segment of
a  business.  However,  it retains the  requirement  in Opinion No. 30 to report
separately  discontinued operations and extends that reporting to a COMPONENT OF
AN ENTITY  that  either  has been  disposed  of (by sale,  abandonment,  or in a
distribution  to owners) or is classified  as held for sale.  By broadening  the
presentation of discontinued  operations to include more disposal  transactions,
the FASB has enhanced  managements'  ability to provide  information  that helps
financial statement users to assess the effects of a disposal transaction on the
ongoing operations of an entity. Statement No. 144 is effective for fiscal years
beginning after December 15, 2001. At the current time, management believes that
the  adoption  of this  statement  on  January  1, 2002 will not have a material
impact on our financial position.

                                       11
<PAGE>
                      MERITAGE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)

     In July 2001, the FASB issued Statement No. 141, BUSINESS COMBINATIONS, and
Statement No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS.  Statement 141 requires
that the purchase  method of  accounting  be used for all business  combinations
initiated  after  June  30,  2001  as  well  as  all  purchase  method  business
combinations  completed  after  June 30,  2001.  Statement  141  also  specifies
criteria  that  intangible   assets  acquired  in  a  purchase  method  business
combination  must  meet to be  recognized  and  reported  apart  from  goodwill.
Statement 142 will require that goodwill and intangible  assets with  indefinite
useful lives no longer be amortized,  but instead tested for impairment at least
annually in accordance with the provisions of Statement 142.  Statement 142 will
also require that intangible assets with definite useful lives be amortized over
their respective  estimated useful lives to their estimated residual values, and
reviewed for impairment in accordance with Statement No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF.

     The  Company  is  required  to  adopt  the   provisions  of  Statement  141
immediately, except with regard to business combinations initiated prior to July
1, 2001, and Statement 142 effective January 1, 2002. Furthermore,  any goodwill
and any intangible  assets determined to have an indefinite useful life that are
acquired in a purchase business  combination  completed after June 30, 2001 will
not  be  amortized,  but  will  continue  to be  evaluated  for  impairment,  in
accordance  with  the  appropriate   pre-Statement  142  accounting  literature.
Goodwill  and  intangible  assets  acquired in business  combinations  completed
before  July 1,  2001 will  continue  to be  amortized  until  the  adoption  of
Statement 142.

     Statement  141 will  require,  upon  adoption of  Statement  142,  that the
Company evaluate its existing  intangible assets and goodwill that were acquired
in  a  prior  purchase   business   combination,   and  to  make  any  necessary
reclassifications in order to conform with the new criteria in Statement 141 for
recognition  apart from  goodwill.  Upon adoption of Statement  142, the Company
will be  required  to  reassess  the  useful  lives and  residual  values of all
intangible  assets  acquired in  purchase  business  combinations,  and make any
necessary amortization period adjustments by the end of the first interim period
after adoption.  In addition, to the extent an intangible asset is identified as
having an  indefinite  useful  life,  the  Company  will be required to test the
intangible  asset for impairment in accordance  with the provisions of Statement
142 within the first interim period.  Any impairment loss will be measured as of
the date of adoption  and  recognized  as the  cumulative  effect of a change in
accounting principle in the first interim period.

     As of  September  30,  2001,  the Company had  unamortized  goodwill in the
amount of approximately  $29.4 million,  which will be subject to the transition
provisions  of  Statement  142.  Amortization  expense  related to goodwill  was
$1,004,000 and  $1,067,000 for the nine months ended  September 30, 2001 and for
the year ended December 31, 2000,  respectively.  The Company has not determined
the  impact of the  immediate  adoption  of  Statement  141 or the  adoption  of
Statement 142 on January 1, 2002.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

     This Quarterly Report on Form 10-Q contains forward-looking statements. The
words "believe,"  "expect,"  "anticipate," and "project" and similar expressions
identify  forward-looking  statements,  which  speak  only  as of the  date  the
statement was made.  Such  forward-looking  statements are within the meaning of
that term in Section 27A of the Securities Act of 1933, as amended,  and Section
21E of the Securities Exchange Act of 1934. Such statements include the expected
benefits of the Hancock  acquisition,  including  future  closings and Hancock's
contribution  to our revenue and  earnings,  projections  of revenue,  income or
loss, capital  expenditures,  backlog,  plans for future  operations,  financing
needs or plans and  liquidity,  and plans  relating to our  housing  products or
services, as well as assumptions relating to the foregoing. Our past performance
or past  or  present  economic  conditions  in our  housing  markets  may not be
indicative of future performance and conditions.

                                       12
<PAGE>
     Actual   results   may   differ   materially   from  those   expressed   in
forward-looking  statements.  Risks  identified in Exhibit 99 to this  Quarterly
Report on Form  10-Q and in our  Annual  Report on Form 10-K for the year  ended
December 31, 2000,  including  under the  captions  "Business",  "Market for the
Registrant's Common Stock and Related Stockholder  Matters", in the Notes to the
Consolidated  Financial Statements and in "Management's  Discussion and Analysis
of Financial  Condition and Results of  Operations,  Factors That May Affect Our
Future Results and Financial  Condition," and "Special Note of Caution Regarding
Forward-Looking   Statements"   describe  factors,   among  others,  that  could
contribute  to or cause such  differences.  These  factors  may also  affect our
business generally. Additional factors that could cause actual results to differ
materially  from those  expressed in such  forward-looking  statements  and that
could affect our business  generally,  are  described in our Form S-4 filed with
the SEC on July 18, 2001. As a result of these factors,  the Company's stock and
bond prices may fluctuate dramatically.

     RESULTS OF OPERATIONS

     The following  discussion and analysis provides  information  regarding our
results of operations  for the three and nine month periods ended  September 30,
2001 and  2000.  All  material  balances  and  transactions  between  us and our
subsidiaries have been eliminated in consolidation. In management's opinion, the
data reflects all adjustments,  consisting of only normal recurring adjustments,
necessary to fairly present our financial position and results of operations for
the  periods  presented  in  accordance  with  accounting  principles  generally
accepted in the United  States of America.  The  results of  operations  for any
interim  period are not  necessarily  indicative of results  expected for a full
fiscal year.

     HOME SALES REVENUE, SALES CONTRACTS AND NET SALES BACKLOG

     The data provided  below shows  operating and financial  data regarding our
homebuilding activities (dollars in thousands).

<TABLE>
<CAPTION>
                           THREE MONTHS ENDED                         NINE MONTHS ENDED
                              SEPTEMBER 30,         PERCENTAGE          SEPTEMBER 30,         PERCENTAGE
                        ------------------------     INCREASE      -----------------------     INCREASE
HOME SALES REVENUE         2001           2000      (DECREASE)       2001         2000        (DECREASE)
                        ---------      ---------    ----------     ---------    ---------     ----------
<S>                     <C>            <C>             <C>         <C>          <C>               <C>
TOTAL
Dollars                 $ 207,177      $ 134,464       54%         $ 497,693    $ 346,919         43%
Homes closed                  938            588       60%             2,227        1,553         43%
Average sales price     $   220.9      $   228.7       (3)%        $   223.5    $   223.4          *

TEXAS
Dollars                 $  62,306      $  58,932        6%         $ 185,263    $ 160,643         15%
Homes closed                  357            334        7%             1,077          939         15%
Average sales price     $   174.5      $   176.4       (1)%        $   172.0    $   171.1          *

ARIZONA
Dollars                 $ 100,794      $  45,168      123%         $ 201,155    $  99,367         102%
Homes closed                  469            165      184%               863          361         139%
Average sales price     $   214.9      $   273.7      (22)%        $   233.1    $   275.3        (15)%

CALIFORNIA
Dollars                 $  44,077      $  30,364       45%         $ 111,275    $  86,909         28%
Homes closed                  112             89       26%               287          253         13%
Average sales price     $   393.5      $   341.2       15%         $   387.7    $   343.5         13%
</TABLE>

----------
* Less than one percent

                                       13
<PAGE>
<TABLE>
<CAPTION>
                           THREE MONTHS ENDED                         NINE MONTHS ENDED
                              SEPTEMBER 30,         PERCENTAGE          SEPTEMBER 30,         PERCENTAGE
                        ------------------------     INCREASE      -----------------------     INCREASE
SALES CONTRACTS            2001           2000      (DECREASE)       2001         2000        (DECREASE)
                        ---------      ---------    ----------     ---------    ---------     ----------
<S>                     <C>            <C>             <C>         <C>          <C>             <C>
TOTAL
Dollars                 $ 161,486      $173,930        (7)%        $ 513,237     $ 470,601         9%
Homes ordered                 723           731        (1)%            2,220         1,950        14%
Average sales price     $   223.4      $  237.9        (6)%        $   231.2     $   241.3        (4)%

TEXAS
Dollars                 $  50,409      $ 71,684       (30)%        $ 193,241     $ 190,166         2%
Homes ordered                 297           422       (30)%            1,156         1,094         6%
Average sales price     $   169.7      $  169.9         *          $   167.2     $   173.8        (4)%

ARIZONA
Dollars                 $  84,197      $ 59,912        41%         $ 220,025     $ 148,771        48%
Homes ordered                 359           194        85%               814           474        72%
Average sales price     $   234.5      $  308.8       (24)%        $   270.3     $   313.9       (14)%

CALIFORNIA
Dollars                 $  26,880      $ 42,334       (37)%        $  99,971     $ 131,664       (24)%
Homes ordered                  67           115       (42)%              250           382       (35)%
Average sales price     $   401.2      $  368.1         9%         $   399.9     $   344.7        16%
</TABLE>

----------
*    Less than one percent

                                         AT SEPTEMBER 30,             PERCENTAGE
                                    -------------------------          INCREASE
NET SALES BACKLOG                     2001             2000           (DECREASE)
                                      ----             ----           ----------
TOTAL
   Dollars                          $432,968         $344,566             26%
   Homes in backlog                    1,849            1,390             33%
   Average sales price              $  234.2         $  247.9             (6)%

TEXAS
   Dollars                          $127,542         $123,505              3%
   Homes in backlog                      774              721              7%
   Average sales price              $  164.8         $  171.3             (4)%

ARIZONA
   Dollars                          $241,604         $143,722             68%
   Homes in backlog                      905              437            107%
   Average sales price              $  267.0         $  328.9            (19)%

CALIFORNIA
   Dollars                          $ 63,822         $ 77,339            (18)%
   Homes in backlog                      170              232            (27)%
   Average sales price              $  375.4         $  333.4             13%

     HOME SALES REVENUE. The increases in total home sales revenue and number of
homes closed in the third  quarter and first nine months of 2001 compared to the
same periods of 2000 resulted  mainly from strong markets at the time the orders
for these closings were taken in all of our divisions,  continued  growth in our
mid-priced communities in Arizona and the addition of Hancock Communities to our
operations in Phoenix,  Arizona,  which was acquired on May 30, 2001. During the
three and nine months ended  September 30, 2000,  313 and 383 Hancock homes were
closed, respectively.

                                       14
<PAGE>
     SALES  CONTRACTS.  Sales  contracts for any period  represent the aggregate
sales price of all homes ordered by customers,  net of cancellations.  We do not
include sales contingent upon the sale of a customer's  existing home as a sales
contract until the  contingency is removed.  Sales contracts for the nine months
ended  September  30, 2001 are up from the previous  year,  due to 304 contracts
from the Hancock  acquisition  and the  strength  of our markets  earlier in the
year.  Total sales contracts  decreased in the third quarter of 2001 compared to
the same period of 2000 due mainly,  we believe,  to a  combination  of factors,
including a difficult  comparison to the prior year's very strong sales results,
slowing in our high-end  Monterey  Scottsdale  product and in our move-up Austin
product,  compounded  by the events of September  11. These  factors were mostly
offset by the inclusion of 234 Hancock  sales  contracts in the third quarter of
2001. Historically, we have experienced a cancellation rate approximating 23% of
gross  sales,  which we believe  is  consistent  with  industry  norms.  For the
quarter,  cancellation  rates  increased  to 31% which we believe  was caused by
September 11.

     NET SALES BACKLOG.  Backlog  represents  net sales  contracts that have not
closed.  Total  dollar  backlog at  September  30, 2001  increased  26% over the
September  30, 2000 amount due to an increase in the number of homes in backlog.
The number of homes in backlog at September 30, 2001 increased 33% over the same
date in the  prior  year.  These  increases  resulted  mainly  from our  Hancock
acquisition.

     OTHER OPERATING INFORMATION

<TABLE>
<CAPTION>
                                              THREE MONTHS ENDED                    NINE MONTHS ENDED
                                                 SEPTEMBER 30,                        SEPTEMBER 30,
                                      -----------------------------------    ----------------------------------
                                                               PERCENTAGE                           PERCENTAGE
                                                                INCREASE                              INCREASE
                                        2001         2000      (DECREASE)      2001        2000      (DECREASE)
                                        ----         ----      ----------      ----        ----      ----------
<S>                                   <C>          <C>            <C>        <C>          <C>           <C>
HOME SALES GROSS PROFIT
Dollars                               $45,709      $28,835        58.5%      $106,817     $69,808       53.0%
Percentage of home sales revenues        22.1%        21.4%          *           21.5%       20.1%       1.4%

COMMISSIONS AND OTHER SALES COSTS
Dollars                               $10,954      $ 7,291        50.2%      $ 27,402     $19,528       40.3%
Percent of home sales revenue             5.3%         5.4%          *            5.5%        5.6%         *

GENERAL AND ADMINISTRATIVE COSTS
Dollars                               $11,433      $ 5,364       113.1%      $ 24,251     $14,213       70.6%
Percent of total revenue                  5.5%         3.9%        1.6            4.9%        4.0%         *

INCOME TAXES
Dollars                               $ 9,316      $ 6,137        51.8%      $ 22,314     $13,949       60.0%
Percent of income before taxes
  and extraordinary items                38.8%        36.9%        1.9%          38.9%       36.9%       2.0%
</TABLE>

* Less than one percent

     HOME SALES GROSS  PROFIT.  Gross profit equals home sales  revenue,  net of
housing cost of sales,  which  include  developed lot costs,  home  construction
costs, amortization of common community costs (such as the cost of model complex
and  architectural,  legal and zoning  costs),  interest,  sales tax,  warranty,
construction  overhead and closing costs.  The dollar  increases in gross profit
for the three and nine months ended  September 30, 2001 are  attributable to the
greater  number of home  closings  and due to the strong  housing  markets  that
existed at the time these homes were sold.  We were also able to benefit  from a
reasonably favorable environment for controlling construction costs.

     COMMISSIONS AND OTHER SALES COSTS.  Commissions and other sales costs, such
as advertising and sales office expenses,  were approximately  $11.0 million, or
5.3% of home sales  revenue,  in the three months ended  September  30, 2001, as
compared to approximately  $7.3 million,  or 5.4% of home sales revenue,  in the
third quarter of 2000. For the first nine months of 2001,  commissions and other
sales  costs were  approximately  $27.4  million or 5.5% of home sales  revenue,
compared with $19.5 million, or 5.6% of home sales revenue,  for the nine months
of 2000.

                                       15
<PAGE>
     GENERAL AND ADMINISTRATIVE  COSTS.  General and  administrative  costs were
approximately  $11.4 million,  or 5.5% of total revenue, in the third quarter of
2001, as compared to approximately  $5.4 million,  or 3.9% of total revenue,  in
2000. General and administrative costs were approximately $24.3 million, or 4.9%
of total revenue, in the first nine months of 2001, as compared to approximately
$14.2 million,  or 4.0% of total revenue,  for the same period of 2000.  General
and  administrative  costs in 2001 were higher as a  percentage  of revenue,  in
comparison to the prior year due to a general  overall  increase in these costs,
and due to the strong  closing  performance of our Northern  California  region,
which resulted in a  larger-than-typical  earn-out  payment per the terms of the
purchase contract when we acquired the division. The earn-out,  which terminates
in June 2002, is calculated  based on 20 percent of the pre-tax  earnings of the
Northern California region after reduction for a capital charge.

     INCOME TAXES. The increases in income taxes for the quarter and nine months
ended  September  30,  2001 from the prior year  resulted  from an  increase  in
pre-tax income, along with a slightly higher effective tax rate.

     LIQUIDITY AND CAPITAL RESOURCES

     Our principal uses of working capital are land  purchases,  lot development
and home construction. We use a combination of borrowings and funds generated by
operations to meet our working capital requirements.

     At September 30, 2001, we had  short-term  secured  revolving  construction
loan and  acquisition  and development  facilities  totaling $185.0 million,  of
which approximately $24.9 million was outstanding.  An additional $123.7 million
of unborrowed  funds  supported by approved  collateral were available under our
credit  facilities at that date,  subject to  compliance  with the financial and
other covenants in our loan agreements.  This additional borrowing is limited to
approximately $69 million under such loan covenants.

     In September 2001, we purchased and retired $10 million in principal amount
of our 9.75% senior notes due June 1, 2011. The purchases were made at 93.25% of
par and resulted in an extraordinary gain of $212,000, net of related income tax
effect of $136,000.

     The 9.75%  senior  unsecured  notes  require us to comply  with a number of
covenants including:

     1)   Limitations on additional indebtedness,
     2)   Limitations  on  the  payment  of  dividends,   redemption  of  equity
          interests and certain investments,
     3)   Maintenance of a minimum level of consolidated tangible net worth,
     4)   Limitations on liens securing certain obligations, and
     5)   Limitations  on the sale of assets,  mergers  and  consolidations  and
          transactions with affiliates.

     We believe that our current borrowing  capacity,  cash on hand at September
30, 2001 and  anticipated  cash flows from  operations  are  sufficient  to meet
liquidity needs for the foreseeable future. There is no assurance, however, that
future  amounts  available  from our sources of liquidity  will be sufficient to
meet future capital needs.  The amount and types of  indebtedness  that we incur
may be limited by the terms of the  indenture  governing our senior notes and by
the terms of our other credit agreements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We do not enter into derivative financial instruments for trading purposes,
although we do have other financial instruments in the form of notes payable and
senior debt. Our lines of credit and credit  facilities are at variable interest
rates and are subject to market risk in the form of interest rate  fluctuations.
The interest rate on our senior debt is at a fixed rate.

                                       16
<PAGE>
                           PART II - OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (A)  EXHIBITS

<TABLE>
<CAPTION>
     EXHIBIT                                                                        PAGE OR
     NUMBER                             DESCRIPTION                             METHOD OF FILING
     ------                             -----------                             ----------------
<S>            <C>                                                              <C>
      10.1     Employment Agreement between the Company and Larry W. Seay,
               dated October 1, 2001                                             Filed herewith

      99       Private Securities Litigation Reform Act of 1995 Safe Harbor
               Compliance Statement for Forward-Looking Statements               Filed herewith
</TABLE>

     (B)  REPORTS ON FORM 8-K

     None.

                                       17
<PAGE>
                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934,  the registrant has duly cause this report on Form 10-Q to
be signed on its behalf by the undersigned, thereunto duly authorized, this 14th
day of November 2001.


                                         MERITAGE CORPORATION,
                                         a Maryland Corporation

                                         BY /s/ LARRY W. SEAY
                                            ------------------------------------
                                            Larry W. Seay
                                            Chief Financial Officer and
                                            Vice President-Finance
                                            (Principal Financial Officer and
                                            Duly Authorized Officer)

                                       S-1

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>ex10-1.txt
<DESCRIPTION>LARRY W. SEAY EMPLOYMENT AGREEMENT
<TEXT>
                                                                    Exhibit 10.1

                              EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT (the "Agreement") is made as of this 1st day of
October, 2001 by and between MERITAGE CORORATION, a Maryland corporation (the
"Company") and Larry W. Seay, an individual ("Executive"). If Executive is
presently or subsequently becomes employed by a subsidiary of Company, the term
"Company" shall be deemed to refer collectively to Meritage Corporation and the
subsidiary or subsidiaries which employs Executive.

                                    RECITALS

     A. COMPANY BUSINESS. The Company's principal business is homebuilding.

     B. EXECUTIVE EXPERIENCE. Since April 1, 1996, Executive has served as Vice
President - Finance, Chief Financial Officer ("CFO"), Treasurer and Secretary of
the Company.

     C. AGREEMENT PURPOSE. The Company desires to employ Executive, and
Executive desires to be employed by Company, on the terms and condition set
forth herein.

     NOW THEREFORE, in consideration of the mutual covenants, agreements,
representations, and warranties contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:

     1. DEFINITIONS. As used herein:

          (a) "CAUSE" shall include the following:

               i) Employee's wrongful misappropriation of any money or other
     assets or properties of the Company;

               ii) Executive is convicted of committing a felony, or engages in
     conduct involving fraud, moral turpitude, dishonesty, gross misconduct,
     embezzlement, theft, or similar matters that are detrimental to Company;

               iii) Employee's willful disregard of his primary duties to the
     Company or policies of the Company.

          (b) "CHANGE OF CONTROL". A Change of Control of the Company shall
     mean: (a) the purchase or other acquisition by any person, entity, or group
     of persons, within the meaning of section 13 (d) or 14 (d) of the
     Securities Exchange Act of 1934 as amended (the "Act") of beneficial
     ownership (within the meaning of Rule 13d-3 promulgated under the Act) of
     more than 50% of either the outstanding share of common stock of the
     Company or the combined voting power of the Company's then outstanding
     voting securities entitled to vote generally; (b) the approval by the
     stockholders of the Company of a reorganization, merger, or consolidation,

                                       -1-
<PAGE>
     in each case with respect to which persons who were stockholders of the
     Company immediately prior to such reorganization, merger, or consolidation
     do not, immediately thereafter, own more than 50% of the combined voting
     power entitled to vote generally in the election of directors of the
     reorganized, merged, or consolidated company's then outstanding securities;
     or (c) a liquidation or dissolution of the Company or the sale of all or
     substantially all of the Company's assets.

          (c) "COMPANY CONFIDENTIAL INFORMATION" shall mean confidential,
     proprietary information or trade secrets of Company and its subsidiaries,
     including, without limitation, the following: (1) customer and vendor lists
     and customer and vendor information as complied by Company and its
     subsidiaries, including pricing, sale and contract terms and conditions,
     contract expirations, and other compiled customer and vendor information;
     Company's and its subsidiaries' internal practices and procedures; (3)
     Company's and its subsidiaries' financial condition and financial results
     of operation; (4) information relating to Company's and its subsidiaries'
     real estate holding or commitments, lot positions, strategic planning,
     sales, financing, insurance, purchasing, marketing, promotion,
     distribution, and selling activities, whether now existing, or acquired,
     developed, or made available anytime in the future to or by Company or its
     subsidiaries; (5) all information which Executive has a reasonable basis to
     consider confidential or which is treated by Company or its subsidiaries as
     confidential; and (6) any and all information having independent economic
     value to Company or its subsidiaries that is not generally known to, and
     not readily ascertainable by proper means by, persons who can obtain
     economic value from its disclosure or use. Executive acknowledges that such
     information is Company Confidential Information whether disclosed to or
     learned by Executive or originated by Executive during his employment by
     Company or any of its subsidiaries. In the event that information is not
     clearly and obviously publicly available, all information about Company or
     its subsidiaries shall be presumed to be confidential. In the event of a
     dispute or litigation, Executive will have the burden of proof by clear and
     convincing evidence that such information is not confidential.

          (d) "DEMOTION EVENT" shall include a demotion or relocation of
     Executive, a material chance in Executive's duties without Executive's
     consent, a reduction from the previous year in Executive's base salary
     without Executive's consent, or any action taken by the Company
     specifically to limit Executive's ability to earn a bonus comparable to his
     prior year's bonus. Notwithstanding the foregoing, the assignment of
     certain controller and treasury duties to a corporate controller who shall
     report to Executive shall not be considered a Demotion Event.

          (e) "TERMINATION" shall mean termination of Executive's employment
     with Company pursuant to Sections 17 through 21 hereof.

     2. TERM OF AGREEMENT. This Agreement will commence as of October 1, 2001,
and shall terminate on December 31, 2003, unless earlier terminated in
accordance with, and subject to, the other provision hereof (the "Term"). This
Agreement will automatically renew for successive one-year terms unless one of
the parties hereto gives notice of non-renewal at least ninety (90) days before
the scheduled renewal date.

                                       -2-
<PAGE>
     3. POSITION WITH COMPANY. During the Term, Executive shall serve as Vice
President - Finance, CFO, Treasurer and Secretary of Company, shall devote his
full time and efforts to the affairs of Company, and shall faithfully and
diligently perform all duties commensurate with such position, including,
without limitation, those duties reasonably requested by Company's Board of
Directors. Without limitation of the foregoing, Executive shall: (i) manage
financing and capital arrangements; (ii) supervise controller function; (iii)
supervise treasury function; (iv) supervise public reporting and stockholder
relations; (v) supervise information and data processing systems, and (vi)
support merger and acquisition efforts. Executive shall be subject to and comply
with all of Company's policies and procedures.

     4. SALARY. Executive shall be entitled to receive a minimum base salary
from Company in the amount of $200,000 annually, payable in equal installments
in accordance with Company's general salary payment policies in effect during
the Term hereof (the "Minimum Base Salary"). The Minimum Base Salary may be
increased at such times and in such amounts as Company's Board of Directors
shall determine in its sole discretion.

     5. BONUS AND STOCK OPTION. The Board of Directors may, from time to time,
at its discretion, pay performance bonuses to Executive, which shall based on a
target ranging from 75 percent to 100 percent of base salary. Any such
performance bonus may be paid in cash or Company stock, in the discretion of the
Board of Directors. In addition, the Board of Directors may, form time to time,
at its discretion, grant Executive options under the Company's stock option
plan.

     6. VACATION AND SICK LEAVE. Executive shall be entitled to take reasonable
vacation, holiday and sick leave, subject to the Company's reasonable limits and
policies.

     7. BENEFIT PLANS. Executive shall be eligible to participate in all benefit
plans made available to Company employees from time to time. Nothing herein
shall restrict Company's ability to terminate or modify any benefit plan or
arrangement.

     8. EXPENSES. Company shall pay for or reimburse Executive for all ordinary
and necessary business expenses incurred or paid by Executive in furtherance of
Company's business, subject to and in accordance with Company's policies and
procedures of general application. The Company shall provide Executive a car
allowance of $500 per month.

     9. STAFF MANUAL. All other terms of Executives employment shall be governed
by the Company employee manual (the "Employee Manual"). The Company reserves the
right to amend the Employee Manual, from time to time, and Executive shall be
subject to changes made so long as such changes are applied to all Company
employees.

     10. COVENANTS OF EXECUTIVE. (a) Executive hereby covenants and agrees that,
during the term of this Agreement, Executive will not engage, directly or
indirectly, either as principal, partner, joint venturer, consultant or

                                       -3-
<PAGE>
independent contractor, agent, or proprietor or in any other manner participate
in the ownership, management, operation, or control of any person, firm,
partnership, limited liability company, corporation, or other entity which
engages in the business or providing any products or services, including,
without limitation, home building products or services, which are competitive
with those products or services offered or sold by Company or its subsidiaries
within any jurisdiction in which Company or its subsidiaries does or proposes to
do business. The covenants set forth in this paragraph 10(a) shall expire upon
cessation of Executive's employment for any reason.

          (b) Executive hereby covenants and agrees that, during the term of the
Agreement, and for a period of one year after the last date on which the
Executive is employed by the Company, Executive will not:

               (i) Directly or indirectly solicit for employment (whether as an
     employee, consultant, independent contractor, or otherwise) any person who
     is any employee, independent contractor or the like of Company or any of
     its subsidiaries, unless Company gives its written consent to such
     employment or offer of employment.

               (ii) Call on or directly or indirectly solicit or divert or take
     away from Company or any of its subsidiaries (including, without
     limitation, by divulging to any competitor or potential competitor or
     company or its subsidiaries) any person, firm, corporation, or other entity
     who was a customer of prospective customer of the Company during
     Executive's term of Employment.

     11. CONFIDENTIALITY AND NONDISCLOSURE. It is understood that in the course
of Executive's employment with Company, Executive will become acquainted with
Company Confidential Information. Executive recognizes that Company Confidential
Information has been developed or acquired at great expense, is proprietary to
Company or its subsidiaries, and is an shall remain the exclusive property of
Company. Accordingly, Executive hereby covenants and agrees that he will not,
without the express written consent of Company, during Executive's employment
with Company or its subsidiaries and thereafter or until such time as Company
Confidential Information becomes generally known, or readily ascertainable by
proper means, by persons unrelated to Company or its subsidiaries, disclose to
others, copy, make any use of, or remove from Company's or its subsidiaries'
premises any Company Confidential Information, except as Executive's duties for
Company or its subsidiaries may specifically require. In the event of dispute or
litigation, Executive shall have the burden of proof by clear and convincing
evidence that the Company Confidential Information has become generally known,
or readily ascertainable by proper means, by persons unrelated to Company or its
subsidiaries.

     12. ACKNOWLEDGMENT; RELIEF FOR VIOLATION. Executive hereby agrees that the
period of time provided for in Sections 10 and 11 and the territorial
restrictions and other provisions and restrictions set forth therein are
reasonable and necessary to protect Company, its subsidiaries and its and their
successors and assigns in the use and employment of the good will of the
business conducted by Company and its subsidiaries. Executive further agrees
that damages cannot compensate Company in the event of a violation of Section 10
or 11, and than, if such violation should occur, injunctive relief shall be

                                       -4-
<PAGE>
essential for the protection of Company, its subsidiaries, and its and their
successors and assigns. Accordingly, Executive hereby covenants and agrees that,
in the event any of the provisions of Sections 10 and 11 shall be violated or
breached, Company shall be entitled to obtain injunctive relief against
Executive, without bond but upon due notice, in addition to such further or
other relief as may appertain at equity or law. Obtainment of such an injunction
by Company shall not be considered an election of remedies or a waiver of any
right to assert any other remedies which Company has at law or in equity. No
waiver of any breach or violation hereof shall be implied from forbearance or
failure by Company to take action thereon. Executive hereby agrees that he has
such skills and abilities that the provisions of Sections 10 and 11 will not
prevent him from earning a living. Each party agrees to pay its own costs and
expenses in enforcing any provision of this Agreement.

     13. EXTENSION DURING BREACH. Executive agrees that the time period
described in Sections 10 and 11 shall be extended for a period equal to the
duration of any breach of such provisions by Executive.

     14. NO CONFLICTS OF INTEREST.

          (a) During the period of Executive's employment with Company,
Executive will not independently engage in the same or a similar line of
business as Company or its subsidiaries, or, directly or indirectly, serve,
advise, or be employed by any individual, firm, partnership, association,
corporation, or other entity engaged in the same or similar line or lines of
business.

          (b) Executive is not a promoter, director, employee, or officer of, or
consultant or independent contractor to, a business organized for profit, nor
will Executive become a promoter, director, employee, or officer of, or
consultant to, such a business while employed by Company or its subsidiaries
without first obtaining the prior written approval of Company. Executive
disclaims any such relationship or position with any such business. Should
Executive become a promoter, director, employee, or officer of, or a consultant
to, a business organized for profit upon obtaining such prior written approval,
Executive understands that Executive has a continuing obligation to advise
Company at such time of any activity of Company, or such other business that
presents Executive with a conflict of interest as an employee of Company.

          (c) Should any matter of dealing in which Executive is involved, or
hereafter becomes involved, on his own behalf or as an employee of Company,
appear to present a possible conflict of interest under any Company policy then
in effect, Executive will promptly disclose the facts to Company's Board of
Directors so that a determination can be made as to whether a conflict of
interest does exist. Executive will take whatever action is requested of
Executive by Company or its Board of Directors to resolve any conflict which it
finds to exist, including severing the relationship which creates the conflict.

          (d) Notwithstanding anything herein to the contrary, Executive may
make investments in commercial properties or land development ventures provided
they are not competitive with the business of the Company, and may own less than
1% of stock in publicly traded homebuilders.

                                       -5-
<PAGE>
     15. RETURN OF COMPANY MATERIAL AND COMPANY CONFIDENTIAL INFORMATION. Upon
Termination, Executive shall promptly deliver to Company the originals and all
copies of any and all materials, documents, notes, manuals, or lists containing
or embodying Company Confidential Information or relating directly or indirectly
to the business of Company in the possession or control of Executive.

     16. NO AGREEMENT WITH OTHERS. Executive represents, warrants, and agrees
that Executive is not a party to any agreement with any other person or business
entity, including former employers, that in any way affects Executive's
employment by Company or relates to the same subject matter of this Agreement or
conflicts with his obligations under this Agreement, or restricts Executive's
services to Company.

     17. TERMINATION FOR CAUSE. The Company may terminate this Agreement for
Cause by giving written notice of Termination and, with respect to a purported
violation of Section 1 (a)(i), (ii) or (iii) of this Agreement that is curable
in such time period, shall afford Executive an opportunity to cure or disprove
the purported violation for the thirty-day period following such notice. Upon
Termination of Executive for Cause, Executive shall be entitled to receive only
the Minimum Base Salary, the amount of any unpaid performance bonus earned in
any complete fiscal year of the Company preceding the date of termination, and
any benefits as are due Executive through the effective date of such
Termination. No prorated bonus shall be paid to Executive upon a Termination for
Cause.

     18. TERMINATION BY COMPANY WITHOUT CAUSE. If Executive is terminated
without Cause, Executive shall be entitled to receive an amount equal to 75% of
Executive's base salary and 75% of Executive's average bonus for the previous
three fiscal years and the vesting of Executive's stock options shall be
accelerated, as if Executive had held them through the end of the following
fiscal year. Executive may terminate his employment upon the occurrence of a
Demotion Event and such termination shall be deemed a Termination without Cause.
Any amounts due to Executive under this paragraph shall be paid to Executive in
six (6) equal monthly payments or in a lump sum (to be paid within twenty (20)
days after Termination), at the Executive's discretion, following Termination.
If the Executive elects to take the payments due under this paragraph over a six
month period, he shall be entitled, to the extent permitted by law and the
plans, to continued participation in the Company's benefit plans for such
period. If the Executive elects to take a lump sum payment, his participation in
the Company's benefit plans shall terminate upon receipt of the lump sum
payment.

     19. TERMINATION UPON CHANGE OF CONTROL. If, within twelve (12) months
following a Change of Control of the Company, Executive voluntarily terminates
his employment as a result of a Demotion Event, Executive shall be entitled to
receive an amount equal to 100% of Executive's base salary and 100% of
Executive's average bonus for the previous three fiscal years and all of
Executive's stock options shall vest in full and be immediately exercisable. Any
amount due to Executive under this paragraph shall be paid to Executive in
twelve (12) equal monthly payments or in a lump sum (to be paid within twenty

                                       -6-
<PAGE>
(20) days after Termination), at the Executive's discretion, following
Termination. If the Executive elects to take the payments due under this
paragraph over a twelve month period, he shall be entitled, to the extent
permitted by law and the plans, to continued participation in the Company's
benefit plans for such period. If the Executive elects to take a lump sum
payment, his participation in the Company's benefit plans shall terminate upon
receipt of the lump sum payment.

     20. TERMINATION UPON DEATH OF EXECUTIVE. If during the term of this
Agreement Executive dies, then this Agreement shall terminate and Company shall
pay to the estate of Executive only the Minimum Base Salary, the amount of any
unpaid bonus earned in any complete fiscal year of the Company preceding the
date of Termination, the prorated portion of any objectively determined current
year bonus, and any benefits (including any life insurance benefits provided to
Executive's estate under Company's standard policies as in effect) as are due
through the date of his death. In addition, the vesting of Executive's stock
options shall be accelerated, as if the executive has served through the end of
the fiscal year of his Termination.

     21. TERMINATION UPON DISABILITY OF EXECUTIVE. If during the term of the
Agreement Executive is unable to perform the services required of Executive
pursuant to this Agreement for a continuous period of ninety (90) days due to
disability or incapacity by reason of any physical or mental illness (as
reasonable determined by Company by its Board of Directors), then Company shall
have the right to terminate this Agreement at the end of such ninety-day period
by giving written notice to Executive. Executive shall be entitled to receive
only such Minimum Base Salary, the amount of any unpaid bonus earned in any
complete fiscal year of the Company preceding the date of termination, the
prorated portion of any objectively determined current year bonus, and any
benefits as are due Executive through the effective date of such Termination. In
addition, the vesting of Executive's stock options shall be accelerated, as if
the Executive had served through the end of the fiscal year of his Termination.

     22. INDEMNITY. The Company shall indemnify Executive to the fullest extent
permitted by the Company's Bylaws. Such indemnification shall survive the
termination of this Agreement.

     23. ARBITRATION. Any dispute, controversy, or claim, whether contractual or
non-contractual, between the parties hereto arising directly or indirectly out
of or connected with this Agreement, relating to the breach or alleged breach of
any representation, warranty, agreement, or covenant under this Agreement,
unless mutually settled by the parties hereto, shall be resolved by binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (the "AAA"). Any arbitration shall be conducted by
arbitrators approved by the AAA and mutually acceptable to Company and
Executive. All such disputes, controversies, or claims shall be conducted by a
single arbitrator, unless the dispute involves more than $50,000 in the
aggregate in which case the arbitration shall be conducted by a panel of three
arbitrators. If the parties hereto are unable to agree on the arbitrator(s),
then the AAA shall select the arbitrator(s). The resolution of the dispute by
the arbitrator(s) shall be final, binding, nonappealable, and fully enforceable
by a court of competent jurisdiction under the Federal Arbitration Act. The
arbitrator(s) shall award compensatory damages to the prevailing party. The

                                       -7-
<PAGE>
arbitrator(s) shall have no authority to award consequential or punitive or
statutory damages, and the parties hereby waive any claim to those damages to
the fullest extent allowed by law. The arbitration award shall be in writing and
shall include a statement of the reasons for the award. The arbitration shall be
held in Phoenix, Arizona. The arbitrator(s) shall award reasonable attorney's
fees and costs to the prevailing party.

     24. SEVERABILITY; REFORMATION. In the event any court or arbiter determines
that any of the restrictive covenants in this Agreement, or any part thereof, is
or are invalid or unenforceable, the reminder of the restrictive covenants shall
not thereby be affected and shall be given full effect, without regard to
invalid portions. If any of the provisions of this Agreement should ever be
deemed to exceed the temporal, geographic, or occupational limitations permitted
by applicable laws, those provisions shall be and are hereby reformed to the
maximum temporal, geographic, or occupational limitations permitted by law. In
the event any court or arbiter refuses to reform this Agreement as provided
above, the parties hereto agree to modify the provisions held to be
unenforceable to preserve each party's anticipated benefits thereunder.

     25. NOTICES. All notices and other communication hereunder shall be in
writing and shall be sufficiently given if made by hand delivery, by telecopier,
or by registered or certified mail (postage prepaid and return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by it by like notice):

          If to Company:      Meritage Corporation
                              6613 N. Scottsdale Road
                              Suite 200
                              Scottsdale, Arizona 85250
                              Phone: (602) 998-8700
                              Fax: (602) 998-9162
                              Attn: Co-Chairman and Co-CEO

          With a copy to:     Snell & Wilmer L.L.P.
                              One Arizona Center
                              Phoenix, Arizona 85004-0001
                              Phone: (602) 382-6252
                              Fax: (602) 382-6070
                              Attn: Steven D. Pidgeon, Esq.

          If to Executive:    Larry W. Seay
                              802 W. El Caminito Drive
                              Phoenix, Arizona 85021

     All such notices and other communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; three business days
after being deposited in the mail, postage prepaid, if delivered by mail: and
when receipt is acknowledged, if telecopied.

                                       -8-
<PAGE>
     26. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each counterpart shall constitute an original instrument, but
all such separate counterparts shall constitute one and the same Agreement.

     27. GOVERNING LAW. The validity, construction, and enforceability of this
Agreement shall be governed in all respects by the laws of the State of Arizona,
without regard to its conflict of laws rules.

     28. ASSIGNMENT. This Agreement shall not be assigned by operation of law or
otherwise, except that Company may assign all or any portion of its rights under
this Agreement to any Company entity, but no such assignment shall relieve
Company of its obligations hereunder, and except that this Agreement may be
assigned to any corporation or entity with or into which Company may be merged
or consolidated or to which Company transfers all or substantially all of its
assets, and such corporation or entity assumes this Agreement and all
obligations and undertakings of Company hereunder.

     29. FURTHER ASSURANCES. At any time on or after the date hereof, the
parties hereto shall each perform such acts, execute and deliver such
instruments, assignments, endorsements and other documents and do all such other
things consistent with the terms of this Agreement as may be reasonably
necessary to accomplish the transaction contemplated in this Agreement or
otherwise carryout the purpose of this Agreement.

     30. GENDER, NUMBER AND HEADINGS. The masculine, feminine, or neuter
pronouns used herein shall be interpreted without regard to gender, and the use
of the singular or plural shall be deemed to include the other whenever the
context so requires.

     31. WAIVER OF PROVISION. The terms, covenants, representations, warranties,
and conditions of this Agreement may be waived only by a written instrument
executed by the party waiving compliance. The failure of any party at any time
to require performance of any provisions hereof shall, in no manner, affect the
right at a later date to enforce the same. No waiver by any party of any
condition, or breach of any provision, term, covenant, representation, or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or of the breach of any other provision,
term, covenant, representation, or warranty of this Agreement.

     32. ATTORNEYS' FEES AND COSTS. If any legal action or any arbitration or
other proceeding is brought for the enforcement of this Agreement, or because of
an alleged dispute, breach, default, or misrepresentation in connection with any
of the provisions of this Agreement, the successful or prevailing party or
parties shall be entitled to recover reasonable attorneys' fees, accounting
fees, and other costs incurred in that action or proceeding, in addition to any
other relief to which it or they may be entitled.

                                       -9-
<PAGE>
     33. SECTION AND PARAGRAPH HEADINGS. The Article and Section headings in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.

     34. AMENDMENT. This Agreement may be amended only by an instrument in
writing executed by all parties hereto.

     35. EXPENSES. Except as otherwise provided herein, each party shall bear
its own expenses incident to this Agreement and the transactions contemplated
hereby, including without limitation, all fees of counsel, consultants, and
accountants.

     36. ENTIRE AGREEMENT. This Agreement constitutes and embodies the full and
complete understanding and agreement of the parties hereto with respect to the
subject matter hereof, and supersedes all prior understandings or agreements,
whether oral or in writing.

     37. WITHHOLDING. Executive acknowledges and agrees that payments made to
Executive by Company pursuant to the terms of this Agreement may be subject to
tax withholding and that Company may withhold against payments due Executive any
such amounts as well as any other amounts payable by Executive to Company.

     38. RELEASE. Receipt by Executive of any of the severance benefits noted in
paragraphs 18, 19, 20 and 21 hereof following termination of Executive's
employment hereunder shall be subject to Executive's compliance with any
reasonable and lawful policies or procedures of Company relating to employee
severance including the execution and delivery by Executive of a release
reasonably satisfactory to Company and Executive of any and all claims that
Executive may have against Company or any related person, except for the
continuing obligations provided herein, and an agreement that Executive shall
not disparage Company or any of its directors, officers, employees or agents.
Concurrent with the termination of Executive's employment hereunder pursuant to
paragraphs 18, 19, 20 or 21 hereof, and receipt of a release reasonably
satisfactory to the Company and Executive, the Company shall execute and deliver
to Executive a release, reasonably satisfactory to Company and Executive, of any
and all claims that Company may have against Executive, except for any claims
arising out of Executive's fraudulent or criminal conduct, and an agreement the
Company shall not disparage Executive.

                                      -10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement or
caused this Agreement to be duly executed on their respective behalf, by their
respective officers thereunto duly authorized, all as of the day and year first
above written.

MERITAGE CORPORATION, a
Maryland corporation


By:                                     By:
    --------------------------------        ------------------------------------
    Name: Steven J. Hilton                  Name: John R. Landon
    Its: Co-Chairman and Co-CEO             Its: Co-Chairman and Co-CEO


---------------------------------
Larry W. Seay

                                      -11-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>4
<FILENAME>ex99.txt
<DESCRIPTION>COMPLIANCE STATEMENT
<TEXT>
                                                                      Exhibit 99

                PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
         SAFE HARBOR COMPLIANCE STATEMENT FOR FORWARD-LOOKING STATEMENTS

     In  passing  the  Private  Securities  Litigation  Reform  Act of 1995 (the
"PSLRA"),   Congress  encouraged  public  companies  to  make   "forward-looking
statements" by creating a safe-harbor to protect  companies from  securities law
liability in connection with  forward-looking  statements.  Meritage  intends to
qualify  both its written and oral  forward-looking  statements  for  protection
under the PSLRA.

     The words  "believe,"  "expect,"  "anticipate,"  and  "project" and similar
expressions identify forward-looking statements, which speak only as of the date
the statement was made. Such  forward-looking  statements are within the meaning
of that term in Section  27A of the  Securities  Act of 1993,  as  amended,  and
Section 21E of the Securities Exchange Act of 1934.  Forward-looking  statements
in this Form 10-Q include  statements  concerning the demand for and the pricing
of our homes,  the expectation of continued  positive  operating  results in the
remainder of 2001 and beyond, the expected benefits of the Hancock  acquisition,
including future home closings and Hancock's future contribution to our revenues
and earnings, and our ability to continue positive operating results in light of
current economic  conditions and the events of September 11. Such statements are
subject to significant risks and uncertainties.

     Important  factors  currently  known to management  that could cause actual
results to differ materially from those in forward-looking  statements, and that
could negatively affect the Company's business,  stock and bond prices, include,
but are not  limited  to,  the  following:  (i)  changes in  national  and local
economic  financial  results and other  conditions,  such as employment  levels,
availability of mortgage financing,  interest rates,  consumer  confidence,  and
housing demand; (ii) risks inherent in homebuilding activities, including delays
in  construction  schedules,  cost overruns,  changes in government  regulation,
increases in real estate taxes and other local fees;  (iii)  changes in costs or
availability of land,  materials,  and labor;  (iv)  fluctuations in real estate
values;  (v) the timing of home closings and land sales; (vi) Meritage's ability
to continue to acquire  additional land or options to acquire additional land on
acceptable  terms;  (vii) a  relative  lack  of  geographic  diversification  of
Meritage's operations,  especially when real estate analysts are predicting that
new  home  sales in  certain  markets  may slow  during  or after  2001;  (viii)
Meritage's  inability  to  obtain  sufficient  capital  on terms  acceptable  to
Meritage to fund its planned  capital and other  expenditures;  (ix)  changes in
local, state and federal rules and regulations governing real estate development
and homebuilding activities and environmental matters,  including "no growth" or
"slow growth"  initiatives,  building permit allocation  ordinances and building
moratoriums; (x) expansion by Meritage into new geographic or product markets in
which  Meritage has little or no  operating  experience;  (xi) the  inability of
Meritage  to identify  acquisition  candidates  that will  result in  successful
combinations;  (xii) the  failure  of  Meritage  to make  acquisitions  on terms
acceptable to Meritage, or to successfully  integrate acquired operations,  into
Meritage; and (xiii) the loss of key employees of the Company,  including Steven
J. Hilton and John R. Landon; (xiv) Meritage's significant level of indebtedness
and the diversion of cash flow to make debt payments;  (xv)  restrictions on our
business  activities imposed by the agreements  governing our indebtedness;  and
(xvi) our inability to repay our indebtedness.

     With respect to our acquisition of Hancock,  these  uncertainties  include:
(1) the risk that the Hancock  business will not be integrated with our existing
business  successfully;  (2) that the market and financial synergies will not be
achieved in the time frame anticipated, or at all; (3) that the acquisition will
not be  accretive  to earnings  due to  unexpected  expenses,  contingencies  or
liabilities  or due to the financial  performance of the Hancock  business;  (4)
that the combined  companies will lose key employees,  management,  suppliers or
subcontractors;  (5) increased competition;  (6) and our ability to successfully
manage new housing  lines that were  previously  managed by Hancock or new lines
planned for the future.

     Forward-looking  statements  express  expectations  of future  events.  All
forward-looking statements are inherently uncertain as they are based on various
expectations  and assumptions  concerning  future events and they are subject to
numerous  known and unknown  risks and  uncertainties  which could cause  actual
events or  results  to differ  materially  from  those  projected.  Due to these
inherent  uncertainties,  the  investment  community is urged not to place undue
reliance on  forward-looking  statements.  In addition,  Meritage  undertakes no
obligations to update or revise  forward-looking  statements to reflect  changed
assumptions, the occurrence of anticipated events or changes to projections over
time.  As a result of these  and other  factors,  the  Company's  stock and bond
prices may fluctuate dramatically.


</TEXT>
</DOCUMENT>
</SUBMISSION>
