Dream Finders Homes (DFH) risk factors, FY2025 10-K

Other

1. 01The homebuilding industry is cyclical and adverse changes in general and local economic conditions could reduce the demand for homes and, as a result, could have a material adverse effect on us37% rewritten
2. 02The homebuilding industry is highly competitive and, if our competitors are more successful or offer better value to our customers, our business could decline
3. 03Inflation and/or higher interest rates could adversely affect our business and financial resultsNew
4. 04The availability and affordability of mortgage loans, including mortgage interest rates for such loans, could also be adversely affected by a scaling back or termination of the federal government’s mortgage loan-related programs or policies
5. 05Our geographic concentration and regional factors affecting the homebuilding industry in our current markets could materially and adversely affect us
6. 06Natural disasters, severe weather and adverse geologic conditions may increase costs, cause project delays and reduce consumer demand for housing, all of which could materially and adversely affect us
7. 07A major health and safety incident relating to our business could be costly in terms of potential liabilities and reputational damage
8. 08Difficulties with appraisal valuations in relation to the proposed sales price of our homes could force us to reduce the price of our homes for sale
9. 09If the market value of our inventory or controlled lot position declines, we may incur write-downs of our real estate assets and our profits could decrease
10. 10We are subject to warranty and liability claims arising in the ordinary course of business that can be significant
11. 11Any limitation on, or reduction or elimination of, tax benefits associated with homeownership would have an adverse effect upon the demand for homes, which could be material to our business33% rewritten
12. 12Federal income tax credits currently available to certain builders of energy-efficient new homes may not be extended by future legislation52% rewritten
13. 13New and existing laws and regulations or other governmental actions may increase our expenses, limit the number of homes that we can build or delay completion of our projects
14. 14Changes in U.S. trade policies and retaliatory responses from other countries may significantly increase the costs or limit supplies of building materials and products used in our homes
15. 15We and our subcontractors are subject to environmental, health and safety laws and regulations, which may increase our costs, result in liabilities, limit the areas in which we can build homes and delay completion of our projects
16. 16Environmental laws and regulations relating to climate change and energy can have an adverse impact on our activities, operations and profitability and on the availability and price of certain raw materials, such as lumber, steel and concrete
17. 17Our inability to successfully identify, secure and control an adequate inventory of lots at reasonable prices could adversely impact our operations
18. 18Increases in our cancellation rate could have a negative impact on our homebuilding revenues and gross margins38% rewritten
19. 19Our business and results of operations are dependent on the availability, skill and performance of subcontractors
20. 20A shortage of building materials or labor, or increases in materials or labor costs, could delay or increase the cost of home construction, which could materially and adversely affect us
21. 21If we are unable to develop our communities successfully or within expected time-frames, our results of operations could be adversely affected
22. 22We may be unable to obtain suitable bonding for the development of our communities
23. 23We may suffer significant financial harm and loss of reputation if we do not comply, cannot comply or are alleged to have not complied with applicable laws, rules and regulations concerning our classification and compensation practices for independent contractors
24. 24Our homes are constructed by employees of subcontractors and other third parties. We do not have the ability to control what these parties pay their employees or the rules they impose on their employees
25. 25Poor relations with the residents of our communities could negatively impact sales, which could cause our revenues or results of operations to decline
26. 26Information system failures, cyber incidents or breaches in security could adversely affect us
27. 27Competitors or other entities may integrate AI into their information systems and business operations more swiftly or effectively than us, potentially impairing our competitive edge and negatively impacting our financial performance
28. 28Our business is subject to complex and evolving U.S. laws and regulations regarding privacy and data protection

Risks Related to Our Financial Services Businesses

1. 29Competing effectively within the mortgage banking and title service sectors may be difficult
2. 30Our reserve for title claims losses and related reinsurance agreements subjects us to risks related to potentially incurring losses related to reserve assumptions, claim loss prevention procedures and credit risk of our counterpartiesNew
3. 31We attempt to mitigate claim losses through underwriting and risk assessment procedures. However, due to inherent limitations, these procedures may not prevent all losses, and failure in our loss prevention methods could result in substantial unexpected lossesNew
4. 32Use of independent agents may increase the frequency and severity of title claimsNew
5. 33Our financial services segment is subject to risks related to our hedging strategiesNew
6. 34Our mortgage banking business is subject to risks related to mortgage sales and loan repurchase obligationsNew
7. 35Investors in mortgages could require that we repurchase loans or compensate them for losses stemming from mortgages we have sold
8. 36Our mortgage banking and title services businesses may be adversely affected by changes in governmental regulation

Strategic and Financial Risks

1. 37We cannot make any assurances that our growth or expansion strategies will be successful, and we may incur a variety of costs to engage in such strategies, including through targeted acquisitions, and the anticipated benefits may never be realized
2. 38We may not be able to complete or successfully integrate our recent acquisitions or any potential future acquisitions or experience challenges in realizing the expected benefits of each such acquisition
3. 39Our joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on the financial condition of our joint venture partners and disputes between us and our joint venture partners

Risks Related to Our Indebtedness

1. 40We have a significant amount of debt and interest expense on debt that may limit our cash available to fund our growth strategiesNew
2. 41Our current indebtedness also includes, and any additional indebtedness we subsequently incur may have, a floating rate of interestNew
3. 42Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our respective businesses to pay our substantial debtNew
4. 43Our ability to access and obtain capital in the future could be adversely affected as a result of a downgrade in any of our credit ratings
5. 44Our current financing arrangements contain, and our future financing arrangements likely will contain, restrictive covenants
6. 45Volatility in the credit and capital markets may impact our cost of capital and our ability to access necessary financing and the difficulty in obtaining sufficient capital could prevent us from acquiring lots for construction or increase costs and delays in the completion of our homes under construction
7. 46Access to financing sources may not be available on favorable terms, or at all, which could adversely affect our ability to maximize our returns

Risks Related to Our Organization and Structure

1. 47We depend on key management personnel and other experienced employees
2. 48Mr. Zalupski owns a significant amount of our stock and his interests may conflict with those of our other stockholders
3. 49Sales of shares pledged for margin loans or prepaid variable forward sales contracts by our directors and officers could cause our stock price to decrease80% rewritten
4. 50Provisions in our charter documents or Delaware law, as well as Mr. Zalupski’s beneficial ownership of all of our outstanding Class B common stock, could discourage acquisition bids or merger proposals, which may adversely affect the market price of our Class A common stock
5. 51We are a “controlled company” within the meaning of the New York Stock Exchange rules, which allows us to rely on exemptions from certain corporate governance requirements
6. 52We have not declared or paid cash dividends on our Class A common stock and we cannot assure that cash dividends will be paid
7. 53Our share buyback program could affect our stock price and increase its volatility, and may reduce the market liquidity for our stock. The share buyback program may also materially impact the Company’s liquidity
8. 54Our Class A and B common stock rank junior to our redeemable preferred stock with respect to dividends and amounts payable in the event of our liquidation, dissolution or winding-up of our affairs
9. 55Shares of our redeemable preferred stock are convertible into shares of our Class A common stock in certain circumstances and, upon conversion, will dilute common stock shareholders’ percentage of ownership
10. 56Certain rights of the holders of the redeemable preferred stock could delay or prevent an otherwise beneficial takeover or takeover attempt of us
11. 57Cautionary Statement about Forward-Looking Statements and Risk Factor Summary