The nonprofit group Habitat for Humanity is trying to put a dent in the glut of foreclosures in many parts of the country by buying up the houses, renovating them and selling them to their clients. It’s a way to help reinvigorate blighted neighborhoods, and get families into homes much quicker than building from the ground up.

"When a community has a number of vacant homes, the property value of the surrounding ones goes down, (and) the condition of surrounding homes goes down. People feel kind of discouraged," says Stephen Seidel, senior director of global program design and implementation of the Habitat for Humanity, headquartered in Atlanta. "By fixing it up we bring it back to life."

While each of the 1,500 Habitat for Humanity affiliates in the United States sets its own strategies, purchasing foreclosures has been gaining traction this year. In a typical year, Habitat affiliates complete about 6,000 homes, and about 10 percent are foreclosures. This year, Seidel expects that figure to jump to as high as 25 percent.

Buying a foreclosure and fixing it up is cheaper than building a new home, which stretches donor dollars further at a time when many nonprofits are hurting for funds.

With the foreclosures, "we can serve more families in this tough economy, and serve (them) faster," says Linda Blum, development director of Habitat for Humanity of Charlotte, N.C., where building a new home might take five to six months while rehabbing an existing home might take a month.

And Realtors can have a crucial role to play, helping their local Habitat affiliates identify and acquire foreclosed properties. "They’ve got boots on the ground and eyes on the street," Seidel says.

For Kirk Sipe, a Realtor with Springsteed Realty in Charlotte, that means "every day I keep tabs on what’s coming in" on the multiple listing service. Each day, one or two new foreclosures pop up, he says.

That abundance of foreclosures is what got the Habitat for Humanity of Greater San Francisco interested in going that route, says executive director Phillip Kilbridge.

One of the Habitat employees saw a talk by a local pastor that featured a map contrasting a wealthy neighborhood with an adjacent poorer one. Dots represented foreclosures. On the affluent side, there was one dot; on the poorer side, there were 250.

Employees with the Greater San Francisco affiliate began asking what they could do to address the problem. Each dot "represents a displaced homeowner," Kilbridge says. "We are an organization we hope can change lemons into lemonade." …CONTINUED

Instead of letting a house sit vacant, with its potential to attract crime, Habitat works to get a homeowner in place who can afford to pay a no-interest mortgage and is willing to put in hundreds of hours of "sweat equity."

That could mean working on their soon-to-be home, working at the Habitat office, or working at Habitat’s ReStore, which sells used and surplus building materials.

Under that model, the neighborhood gains, and a "new homeowner who could never afford to get in there" gains, Kilbridge says.

The affiliate has acquired two foreclosures in Menlo Park, Calif., and has a contract on a third. The homes were bought for $225,000 to $250,000, compared with the going price of about $700,000.

The properties will take about $35,000 to $70,000 worth of work — still making them far cheaper than a typical home in that area. And with a foreclosed home, the affiliate doesn’t have to pay things like school impact and other fees.

Kilbridge’s affiliate works with Arn Cenedella, broker associate at the Coldwell Banker Menlo Park El Camino office. Cenedella says he looks for only bank-owned (also known as real estate-owned or REO) foreclosed properties, and has an automatic alert set up as new properties come on the market at the right price.

The Greater San Francisco Habitat office has made offers on about a half-dozen foreclosures so far, and obtained three.

"The foreclosure market is very hot. The lender typically prices property very aggressively," Cenedella says.

In some cities, the homes need little more than cosmetic improvements. But the homes that Habitat typically acquired in Menlo Park "are pretty banged up," Cenedella says. Often a garage or detached building has been converted into an illegal living space, and that has to be remedied.

Mike Nelson, land acquisition manager for the Twin Cities Habitat for Humanity based in Minneapolis, says homes in the city’s poor urban core neighborhoods have been hardest hit. "(Some) families there were preyed upon."

On some blocks, 30 percent to 40 percent of the houses are vacant, and much of the housing stock is at least 75 years old. Nelson estimates that about 10 percent can be rehabbed, while some others will be replaced with new, energy-efficient homes that fit the character of the neighborhood.

In Colorado, contracts include a methamphetamine disclosure, and the buyer can bring in an inspector to check for traces of the drug, says Jim Vetting, employing broker at Wheeler Management Group Inc. who locates foreclosures and serves on the construction committee for the Greeley Area Habitat for Humanity. …CONTINUED

For the two houses purchased so far in Greeley, both had remnants of meth on the premises and one required remediation by the bank, which meant tearing out ductwork, cleaning the home and replacing the carpeting, says Vetting.

The rehabbed homes can be updated so they are more energy efficient, but the labor required to fix up a foreclosure is often more skilled than that needed to build from the ground up, Vetting says.

Habitat affiliates may use Neighborhood Stabilization Program funds from the U.S. Department of Housing and Urban Development, which are designed to shore up neighborhoods suffering from foreclosures and abandonment.

Sometimes the funds are granted directly to the Habitat affiliate; in other cases local governments receive funds and work with their local Habitat offices.

Under the program, purchasers can pay a maximum 1 percent above the property’s appraised value, says Merritt Card, land acquisition manager for Habitat in Charlotte. The affiliate has 13 foreclosures purchased or under contract, and plans to buy 75 to 80 homes this year.

In one case it bought a home valued at $106,000 for $42,000. With donations falling, "this replaces some of our lost sponsorships very nicely," Card says.

The lower prices also mean lower payments for families. The price Habitat charges new homeowners covers purchase and rehabilitation costs.

Purchasing resale homes can also bring added perks, says Mandy Ewing, interim executive director of the Greeley Habitat affiliate. Under Habitat guidelines for that area, new homes can’t include things like air-conditioning, garages and porches. Previously owned homes don’t have such restrictions.

Ewing says she expects rehabbed homes to cost "about $20,000 less than new construction and have all the added amenities."

That has delighted Andre Knight, a cook and single father who is preparing to move into a rehabbed home in Charlotte that has cathedral ceilings and a garden tub. "You couldn’t be more blessed when you get one of those."

Knight did everything from paint and help put on porch railings to work at the ReStore. "It’s the experience that gives you the thrill," he said. And Knight says he knows that "making a payment on your house is helping someone else" to obtain their own home.

Susan Ladika is a freelance writer in Florida.


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