No builder ever plans to go bankrupt—not Neumann Homes, not Levitt and Sons, and not Ted Schave, a Minnesota builder who moved to Cape Coral, Fla., in 2001 at the encouragement of investors because the home building business in Southwest Florida was white hot.

For four years, things went well, Schave says. His company, Fisherman Homes, built as many as 20 houses a year in the $150,000 to $350,000 range. Then, in the fall of 2005, the first rumblings of the downturn were felt. The market was overheated with unsustainable price run-ups; subcontractors were tied up with rebuilding after the devastation left by Hurricane Charley a year earlier; and the city inspectors were overburdened. He had a part in the problem, too, taking on more work than he could manage.

“You think that if you can build three houses at one time, you can build five,” he says. “And if you can do five, you can do eight.”

His houses fell behind schedule, which meant he couldn’t get his next draws from the lenders. By the end of the year, the rumblings had begun to build into a full-scale implosion from which Schave could not escape.

“We were overextended, and we had more homes going than we should have for the cash we had,” Schave says. “When we couldn’t get draws from the banks, it got worse and worse and worse. … People think there’s some grand scheme. I think it was just the perfect storm. You put a bunch of things ­together, and it started to collapse.”

As the housing market contracted, Schave’s ­experience was far from unique. For every volume builder that sparks headlines when filing for ­bankruptcy, there are dozens of small builders like Fisherman Homes quietly closing their doors.

Schave, who is 67 and living now on social security, thinks about all of them. “I feel bad for the people still there,” he says. “If someone has a life and assets and is trying to get their life together, there’s a lot of leverage. I only have [the] blood left in my body. After that, there’s nothing left. There isn’t much pressure anyone can put on me.”

Except, of course, the pressure he has put on himself.

“I let Fisherman Homes down,” he says. “I let my family down.”

Builder’s special report examines the aftershocks of builder bankruptcy—the impact on subcontractors and suppliers, the builders’ home buyers, and the builders left holding the bag in battered markets.

Other stories in Field Report 2008:

  • Lien On Me: Contractors left unpaid by a bankrupt Neumann Homes think twice about extending credit to other builders.

  • The Damage Hits Home: A builder’s bankruptcy can be devastating to home buyers.

  • Blast Survivors: Builders in Ft. Myers/Cape Coral, Fla., struggle to hang on.

Learn more about markets featured in this article: Chicago, IL, Memphis, TN, Cape Coral, FL.