Company: LGIH
Filing Date: 2025-04-30
Form Type: 10-Q
Source: 0001580670-25-000043
Chunk: 44

Company: LGI Homes, Inc.
Filing Date: 2025-04-30
Form: 10-Q
Item: Part I, Item 1
Chunk 44
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 purchase contract. Typically, our retail homebuyers provide documentation regarding their ability to obtain mortgage financing within 14 days after the purchase contract is signed. If we determine that the homebuyer is not qualified to obtain mortgage financing or is not otherwise financially able to purchase the home, we will terminate the purchase contract. If a purchase contract has not been cancelled or terminated within 14 days after the purchase contract has been signed, then the homebuyer has met the preliminary criteria to obtain mortgage financing. Only purchase contracts that are signed by homebuyers who have met the preliminary criteria to obtain mortgage financing are included in new (gross) orders.

Our “backlog” consists of homes that are under a purchase contract that has been signed by homebuyers who have met the preliminary criteria to obtain mortgage financing but have not yet closed and wholesale contracts with varying terms. Since our business model is generally based on building move-in ready homes before a purchase contract is signed, the majority of our homes in backlog are currently under construction or complete. Ending backlog represents the number of homes in backlog from the previous period plus the number of net orders (new orders for homes less cancellations) generated during the current period minus the number of homes closed during the current period. Our backlog at any given time will be affected by cancellations, the number of our active communities and the timing of home closings. Homes in backlog are generally closed within one to two months, although home closings have been, and may continue to be, delayed. In addition, we may experience cancellations of purchase contracts at any time prior to closing. It is important to note that net orders, backlog and cancellation metrics are operational, rather than accounting data, and should be used only as a general gauge to evaluate performance. Backlog may be impacted by customer cancellations for various reasons that are beyond our control, and in light of our minimal required deposit, there is little negative impact to the potential homebuyer from the cancellation of the purchase contract. 

Our net orders decreased for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to the increase in new communities which typically open at a slower sales pace and overall lower demand.  The number of homes in our backlog at March 31, 2025 decreased 22.1% compared to March 31, 2024. The decrease generally relates to the impact of ongoing affordability constraints and our decision to limit the use of incentives during the three months ended March 31,