Commitments and Contingencies

Legal Proceedings

We are involved in various claims and litigation arising principally in the ordinary course of business. We believe that adequate provision for resolution of all current claims and pending litigation has been made for probable losses, and the disposition of these matters will not have a material adverse effect on our results of operations and liquidity or on our financial condition.

Investments in and Advances to Unconsolidated Entities

At July 31, 2014, we had investments in and advances to a number of unconsolidated entities, were committed to invest or advance additional funds, and had guaranteed a portion of the indebtedness and/or loan commitments of these entities. See Note 4, “Investments in and Advances to Unconsolidated Entities,” for more information regarding our commitments to these entities.

Land Purchase Commitments

Generally, our purchase agreements to acquire land parcels do not require us to purchase those land parcels, although we, in some cases, forfeit any deposit balance outstanding if and when we terminate a purchase agreement. If market conditions are weak, approvals needed to develop the land are uncertain, or other factors exist that make the purchase undesirable, we may choose not to acquire the land. Whether an option and purchase agreement is legally terminated or not, we review the amount recorded for the land parcel subject to the option and purchase agreement to determine if the amount is recoverable. While we may not formally terminate the option and purchase agreements for those land parcels that we do not expect to acquire, we write off any non-refundable deposits and costs previously capitalized to such land parcels in the periods that we determine such costs are not recoverable.

Information regarding our land purchase commitments, excluding the Shapell acquisition, as of the date indicated, is provided in the table below (amounts in thousands):



	July 31, 2014		October 31, 2013
Aggregate purchase commitments:
Unrelated parties	$	972,497	$	1,301,987
Unconsolidated entities that the Company has investments in	16,336		61,738
Total	$	988,833	$	1,363,725
Deposits against aggregate purchase commitments	$	87,640	$	76,986
Additional cash required to acquire land	901,193		1,286,739
Total	$	988,833	$	1,363,725
Amount of additional cash required to acquire land in accrued expenses	$	504	$	1,439

In addition, we expect to purchase approximately 3,750 additional home sites from several joint ventures in which we have interests; the purchase prices of these home sites will be determined at a future date.

During the three-month period ended July 31, 2014, we received approximately 515 home sites from one of our Land Development Joint Ventures in consideration of our previous investment in the joint venture. We have a commitment to this joint venture to funded approximately $19.3 million representing our share of the land improvements related to these home sites.

At July 31, 2014, we had purchase commitments to acquire land for apartment developments of approximately $64.3 million, of which we had outstanding deposits in the amount of $4.3 million.

We have additional land parcels under option that have been excluded from the aforementioned aggregate purchase amounts since we do not believe that we will complete the purchase of these land parcels and no additional funds will be required from us to terminate these contracts.

Surety Bonds and Letters of Credit

At July 31, 2014, we had outstanding surety bonds amounting to $585.3 million, primarily related to our obligations to governmental entities to construct improvements in our communities. We estimate that $385.2 million of work remains on these improvements. We have an additional $76.4 million of surety bonds outstanding that guarantee other obligations. We do not believe that it is probable that any outstanding bonds will be drawn upon.

At July 31, 2014, we had outstanding letters of credit of $97.7 million, including $94.7 million under our Credit Facility and $3.0 million collateralized by restricted cash. These letters of credit were issued to secure our various financial obligations including insurance policy deductibles and other claims, land deposits, and security to complete improvements in communities which we are operating. We do not believe that it is probable that any outstanding letters of credit will be drawn upon.

Acquisition of Shapell Industries, Inc.

On February 4, 2014, we completed our previously announced acquisition of Shapell. The Purchase Agreement provides that SIPI will indemnify us for any loss arising out of or resulting from, among other things, (i) any liability (other than environmental losses, subject to certain exceptions) related to the Shapell Commercial Properties, and (ii) any liability (other than environmental losses, subject to certain exceptions) to the extent related to Shapell Mortgage, Inc. See Note 2, “Acquisition” for more information regarding this acquisition.

Backlog

At July 31, 2014, we had agreements of sale outstanding to deliver 4,204 homes with an aggregate sales value of $3.10 billion.

Mortgage Commitments

Our mortgage subsidiary provides mortgage financing for a portion of our home closings. For those home buyers to whom our mortgage subsidiary provides mortgages, we determine whether the home buyer qualifies for the mortgage based upon information provided by the home buyer and other sources. For those home buyers that qualify, our mortgage subsidiary provides the home buyer with a mortgage commitment that specifies the terms and conditions of a proposed mortgage loan based upon then-current market conditions. Prior to the actual closing of the home and funding of the mortgage, the home buyer will lock in an interest rate based upon the terms of the commitment. At the time of rate lock, our mortgage subsidiary agrees to sell the proposed mortgage loan to one of several outside recognized mortgage financing institutions (“investors”) that is willing to honor the terms and conditions, including interest rate, committed to the home buyer. We believe that these investors have adequate financial resources to honor their commitments to our mortgage subsidiary.

Information regarding our mortgage commitments, as of the date indicated, is provided in the table below (amounts in thousands):



	July 31, 2014		October 31, 2013
Aggregate mortgage loan commitments:
IRLCs	$	262,365	$	247,995
Non-IRLCs	642,274		645,288
Total	$	904,639	$	893,283
Investor commitments to purchase:
IRLCs	$	262,365	$	247,995
Mortgage loans receivable	90,316		107,873
Total	$	352,681	$	355,868