VARIABLE INTEREST ENTITIES AND CONSOLIDATED REAL ESTATE NOT OWNED

6 Months Ended

Jun. 30, 2023

Variable Interest Entities and Consolidated Real Estate Not Owned [Abstract]

VARIABLE INTEREST ENTITIES AND CONSOLIDATED REAL ESTATE NOT OWNED

VARIABLE INTEREST ENTITIES AND CONSOLIDATED REAL ESTATE NOT OWNEDWe enter into purchase and option agreements for land or lots as part of the normal course of business. These purchase and option agreements enable us to acquire properties at one or multiple future dates at pre-determined prices. We believe these acquisition structures allow us to better leverage our balance sheet and reduce our financial risk associated with land acquisitions. In accordance with ASC 810, Consolidation, we evaluate all purchase and option agreements for land to determine whether they are a variable interest entity ("VIE"), and if so, whether we are the primary beneficiary. Although we do not have legal title to the underlying land, if we are the primary beneficiary we are required to consolidate the VIE in our financial statements and reflect its assets and liabilities as Real estate not owned and Liabilities related to real estate not owned, respectively. As a result of our analyses, we determined that as of June 30, 2023 and December 31, 2022, we were not the primary beneficiary of any VIEs from which we have acquired rights to land or lots under option contracts.

The table below presents a summary of our lots under option at June 30, 2023 (dollars in thousands):


	Projected Number of Lots	Purchase Price		Option/ Earnest Money Deposits–Cash
Purchase and option contracts recorded on balance sheet as Real estate not owned	—	$	—	$	—
Option contracts — non-refundable deposits, committed (1)	6,890	400,805		37,672
Purchase contracts — non-refundable deposits, committed (1)	5,408	154,591		19,930
Purchase and option contracts —refundable deposits, committed	2,109	158,893		2,035
Total committed	14,407	714,289		59,637
Purchase and option contracts — refundable deposits, uncommitted (2)	21,171	779,805		11,347
Total lots under contract or option	35,578	$	1,494,094	$	70,984
Total purchase and option contracts not recorded on balance sheet (3)	35,578	$	1,494,094	$	70,984	(4)

(1)Deposits are non-refundable except if certain contractual conditions are not performed by the selling party.

(2)Deposits are refundable at our sole discretion. We have not completed our acquisition evaluation process and we have not internally committed to purchase these lots.

(3)Except for our specific performance contracts recorded on the accompanying unaudited consolidated balance sheets as Real estate not owned (if any), none of our purchase or option contracts require us to purchase lots.

(4)Amount is reflected on the accompanying unaudited consolidated balance sheets in Deposits on real estate under option or contract as of June 30, 2023.

Generally, our options to purchase lots remain effective so long as we purchase a pre-established minimum number of lots on a pre-determined schedule in accordance with each respective agreement. Although the pre-established number is typically structured to approximate our expected rate of home construction starts, during a weakened homebuilding market, we may purchase lots at an absorption level that exceeds our expected orders and home starts pace to meet the pre-established minimum number of lots or restructure our original contract to terms that more accurately reflect our revised orders pace expectations. During a strong homebuilding market, we may accelerate our pre-established minimum purchases if allowed by the contract.