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Fair Value Measurements
 6 Months Ended
Jun. 30, 2019
USD ($)
Fair Value Disclosures [Abstract]  
Fair Value Measurements FAIR VALUE MEASUREMENTS

Fair Value of Financial Instruments
The Company’s financial instruments, none of which are held for trading purposes, include cash, restricted cash, receivables, earnest money deposits, other assets, accounts payable, accrued expenses, customer and builder deposits, borrowings on lines of credit, and notes payable.

Per the fair value hierarchy, level 1 financial instruments include: cash, restricted cash, receivables, earnest money deposits, other assets, accounts payable, accrued expenses, and customer and builder deposits due to their short-term nature. The Company estimates that, due to the short-term nature of the underlying financial instruments or the proximity of the underlying transaction to the applicable reporting date, the fair value of level 1 financial instruments does not differ materially from the aggregate carrying values recorded in the condensed consolidated financial statements as of June 30, 2019 and December 31, 2018.

Level 2 financial instruments include borrowings on lines of credit. Due to the short-term nature and floating interest rate terms, the carrying amounts of borrowings on lines of credit are deemed to approximate fair value.

The fair value of the contingent consideration liability related to the GRBK GHO business combination was estimated using a Monte Carlo simulation model under the option pricing method. As the measurement of the contingent consideration is based primarily on significant inputs not observable in the market, it represents a level 3 measurement. 

Key inputs in measuring the fair value of the contingent consideration liability are management’s projections of GRBK GHO’s net income and debt, the discount rate that reflects the risk associated with achieving the milestones of the contingent consideration payments, and expected volatility of earnings. The discount rate used in the simulation was an estimated risk free rate which ranged from 1.8% to 2.0% over the term of the contingent consideration. The expected volatility as derived from comparable publicly traded companies ranged from 25.0% to 50.0% over the term of the contingent consideration.

The reconciliation of the beginning and ending balances for level 3 measurements is as follows (in thousands):
 
Carrying Value
 
Estimated Fair Value
Contingent consideration liability, balance as of December 31, 2018
$
2,207

 
$
2,207

Payment of contingent consideration
(514
)
 
(514
)
Payment of contingent consideration in excess of acquisition date fair value
(1,332
)
 
(1,332
)
Change in fair value of contingent consideration
257

 
257

Contingent consideration liability, balance as of June 30, 2019
$
618

 
$
618



There were no transfers between the levels of the fair value hierarchy for any of our financial instruments during the three and six months ended June 30, 2019.

Fair Value of Nonfinancial Instruments
Nonfinancial assets and liabilities include inventory which is measured at cost unless the carrying value is determined to be not recoverable in which case the affected instrument is written down to fair value. Per the fair value hierarchy, these items are level 3 nonfinancial instruments. For additional information on the Company’s inventory, refer to Note 4.
Fair Value Measurement Inputs and Valuation Techniques [Line Items]  
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Transfers, Net $ 0
Measurement Input, Discount Rate [Member] | GHO Homes [Member] | Minimum [Member]  
Fair Value Measurement Inputs and Valuation Techniques [Line Items]  
Business Acquisition, Percentage of Voting Interests Acquired 0.018
Measurement Input, Discount Rate [Member] | GHO Homes [Member] | Maximum [Member]  
Fair Value Measurement Inputs and Valuation Techniques [Line Items]  
Business Acquisition, Percentage of Voting Interests Acquired 0.020
Measurement Input, Price Volatility [Member] | GHO Homes [Member] | Minimum [Member] | Fair Value, Inputs, Level 3 [Member]  
Fair Value Measurement Inputs and Valuation Techniques [Line Items]  
Business Acquisition, Percentage of Voting Interests Acquired 0.250
Measurement Input, Price Volatility [Member] | GHO Homes [Member] | Maximum [Member] | Fair Value, Inputs, Level 3 [Member]  
Fair Value Measurement Inputs and Valuation Techniques [Line Items]  
Business Acquisition, Percentage of Voting Interests Acquired 0.500