Tauranga City Council has agreed to make offers to buy the 21 Bella Vista properties - but not at the market value homeowners wanted.
Tauranga Mayor Greg Brownless said elected members voted unanimously to make the offers in a closed-door meeting yesterday afternoon.
He said the offer was based on the price homeowners paid for their houses plus expenses.
It was based on advice about what would constitute fair compensation from retired Court of Appeal judge Rhys Harrison QC.
Homeowners have previously said they wanted market value as if there were no defects.
The Mayor said confidential offers would be sent to homeowners' lawyers today.
Council chief executive Garry Poole said the council was also looking into prosecuting Bella Vista Homes for non-compliance with the Building Act.
He said the council was reviewing the evidence and would make a decision about whether to take legal action by the end of next week.
Poole said the goal of the prosecution would not be to recover money from the developer.
"I don't think that would be a realistic option. Bella Vista Homes has gone into liquidation and I understand the liquidators are already seeking large sums from the developer.
"This is about non-compliance with the Building Act."
Danny Cancian, former director of Bella Vista Homes, said he was "excited" about the prospect of having his day in court.
"I'm saying go for it. Then the truth will come out."
Poole said he expected the "vast majority" of the buyout cost would be covered by the council's insurers, however, discussions were ongoing.
He said that in court rulings from other comparable cases where the developer was still operating, courts have apportioned 80 per cent of the blame to developers and 20 per cent to the territorial authority.
Poole defended the time the council had taken to make an offer, saying it had been a complicated process.
"Throughout this process, the council has needed to balance the interests of the homeowners with the interests of ratepayers.
"I think we landed in the right place."
Poole said the council was in talks with people who could potentially lead an investigation into why the development failed.
The "why" investigation was one of the recommendations of Paul Heath QC who previously looked into what happened and the council's role in it.
Poole said the first priority was to settle with the homeowners. He hoped the why investigation could begin in five or six weeks.
Brownless said while it would be "nice" if the offer would be accepted outright, the council was realistic this may be the beginning of a negotiation process.
He said the offers were based on confidential advice from a retired judge that would also be supplied to homeowners' lawyers.
David Heaney, QC, who has filed a class action lawsuit against the council on behalf of, so far, two sets of homeowners, said he had not received the offer yet but suggested it may arrive later in the day.
The offer came 47 days after Tauranga City Council agreed on June 6 to buy the homes affected by the failure of the Bella Vista subdivision in The Lakes.
This week homeowners complained the council was taking too long, leaving them in limbo and feeling unsupported.