Quarterly report pursuant to Section 13 or 15(d)

VARIABLE INTEREST ENTITIES AND CONSOLIDATED REAL ESTATE NOT OWNED

v3.21.2
VARIABLE INTEREST ENTITIES AND CONSOLIDATED REAL ESTATE NOT OWNED
 6 Months Ended
Jun. 30, 2021
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 OWNED
We 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 reduce our financial risk associated with land acquisitions and allow us to better leverage our balance sheet. 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 such assets and liabilities as Real estate not owned. As a result of our analyses, we determined that as of June 30, 2021 and December 31, 2020, 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, 2021 (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)
8,901  469,798  38,094 
Purchase contracts — non-refundable deposits, committed (1)
11,871  359,331  28,600 
Purchase and option contracts —refundable deposits, committed 2,650  89,326  886 
Total committed 23,422  918,455  67,580 
Purchase and option contracts — refundable deposits, uncommitted (2)
27,311  733,026  6,817 
Total lots under contract or option 50,733  $ 1,651,481  $ 74,397 
Total purchase and option contracts not recorded on balance sheet (3)
50,733  $ 1,651,481  $ 74,397  (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 our 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 our unaudited consolidated balance sheets in Deposits on real estate under option or contract as of June 30, 2021.
Generally, our options to purchase lots remain effective so long as we purchase a pre-established minimum number of lots each month or quarter, as determined by the 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 sales and home starts pace needed 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.