News

City poised to buy foreclosed home

 

Menlo Park's City Council at its Jan. 12 meeting could approve the purchase of a home in the Belle Haven neighborhood. It would be the first such purchase through the city's $2 million neighborhood stabilization program, designed to counteract a rash of foreclosures.

The home on Hollyburne Avenue would cost $250,000, according to city management. The money would come from the below-market-rate fund, paid into by land developers.

The city plans to carry out $160,000 in repairs using environmentally friendly building practices, before re-selling the home to a person or family on the city's below-market-rate wait list.

The meeting will start at 7 p.m. in the council chambers, located in the Civic Center between Laurel and Alma streets.

Comments

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Posted by Interested
a resident of another community
on Jan 11, 2010 at 10:48 am

So the City is going to spend $410k for this property. Add to this the cost of the City's time and other expenses it will cost approx 500k. What a shame the Almanac didn't bother to report the appraised value of the property.....

Come on Almanac get on the ball.


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Posted by Interested
a resident of another community
on Jan 11, 2010 at 10:53 am

and another thing. A 2 million stabilization project can at most purchase 5-6 properties...A conservative estimate of 8000 properties in Menlo Park (a very conservative estimate)seems to indicate this program is a complete and total waste of time and money.


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Posted by enough
a resident of Menlo Park: Felton Gables
on Jan 11, 2010 at 1:16 pm

No no no! The city needs to stay out of the real estate ownership business. When will this end? We're going to wake up one day and find out that we're bankrupt and our whole city has been foreclosed!


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Posted by WhoRUpeople
a resident of another community
on Jan 11, 2010 at 2:40 pm

Interested - I read the staff report on this. It doesn't mention the appraised value, but it does say that Staff expect the sales price to the selected person from the BMR list will be about $350K. The property has been on the market for quite some time at $270K without any takers, and was recently reduced to $250K which prompted the City's offer. My first reaction in terms of how far 2 million will go was the same as yours, but according to the staff report, the way this will work is the City will be in to the place for the $410K out of the $2 million fund, then the fund will receive the $350K that the buyer pays for the house, so the fund will absorb the net 60K loss. So, without commenting on whether the City should be in this or not, or whether this house is a good candidate, it does appear that if it is a typical deal as others to come, the 2 million could handle 30-35 such properties. One big concern I have is that, again according to the staff report, this property is not in forclosure-a requirement to be eligible for this fund-but is, rather, a short sale where the mortgage holder and current owner have agreed that the loan will be forgiven for whatever the sales price generates. Not so sure that was Council's intent when they approved the program.


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Posted by Downtowner
a resident of Menlo Park: Central Menlo Park
on Jan 11, 2010 at 3:20 pm

This is nuts! Which genius is sure that somebody will pay $350k for the house? Which relative or close friend of a City employee gets the $160k contracting job? Or will this expenditure be put out for open bidding? Who decided that the place is worth $250k? If it isn't selling at that price, logic suggests that might be too high a number. Why is it Menlo's place to get involved with either a foreclosure or short sale? Helping out the lender, maybe?
This is another really bad idea, one of many.


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Posted by Interested
a resident of another community
on Jan 11, 2010 at 5:24 pm

Thanks WhoRu. I get it now. The point I missed was that MP intends to lose the two million dollars in order to keep home prices up and thereby secure higher property taxes based on those values. Given that understanding, I still feel the program is a bit sleazy, especially given the recent story in the Almanac about how the city had to deal with a BMR owners refusal to pay their current mortgage.

This whole issue is surely worth more reporting.

How many BMR units are there in MP?
How many are planned?
How much has been expended so far?
How much will be spent on this program?
What is the expected return?

Just a few questions


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Posted by Interested
a resident of another community
on Jan 11, 2010 at 5:30 pm

and perhaps more importantly, what is the loss to the city coffers if thirty residences are sold at relatively low prices, or worse yet, remain unsold. Is the amount greater than two million dollars (plus the cost of staff time)....I don't know, but I would like to.


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Posted by enough
a resident of Menlo Park: Felton Gables
on Jan 11, 2010 at 5:52 pm

On average, cities keep about 20% of the property tax collected (the rest going to the county, schools, fire district, etc).

If the city invests $160,000 in a house, and the house sells for $350k vs 250k, that resident will be paying approximately $1000 more a year in property taxes than s/he would have paid at the lower price. So the gain to the city is about $200/year. Doesn't seem like much of a payback on a $160,000 investment, does it?


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Posted by POGO
a resident of Woodside: other
on Jan 12, 2010 at 10:15 am

I wouldn't mind this activism so much if this came AFTER the Council (a) got our streets in better shape, (b) properly funded our fire and police departments, and (c) restored our sound fiscal position by getting future pension liabilities in order.

For the city to venture into the housing market is clearly a bad and risky idea. Unfortunately, it will have no real impact on pricing (other than to raise prices) or on foreclosures.

It will, however, make Council Members and a small group of citizens feel really good about themselves. Pretty expensive therapy provided by all Menlo Park taxpayers!


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Posted by WhoRUpeople
a resident of another community
on Jan 12, 2010 at 10:23 am

I have another question to add to Interested's list. Assuming the $2M set aside for this program eventually does fund about 30 of these deals, will the City have assumed any future liability with regard to having to bail out lenders on these homes should any of the 30 deals go into default? Hopefully the answer is no, but I've seen instances where government entities get involved in private deals if only to guarantee performance or indemnify the parties, and later wind up holding a bag they didn't want to hold after the original program funding is long gone.


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Posted by Sean Howell
Almanac staff writer
on Jan 12, 2010 at 11:40 am

Sean Howell is a registered user.

The city would buy and refurbish 10-15 homes through the program. See earlier story:

Web Link


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Posted by WhoRUpeople
a resident of another community
on Jan 12, 2010 at 1:58 pm

Thank you, Sean, for the information. A follow up question--the May article indicated that about $500K of the $2M would go to fund the program with HFH. Is that still the case? I heard somehere (?) that initiative ran into some problems.


Sorry, but further commenting on this topic has been closed.

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