Thanks to a unique arrangement between the Town of Clifton and Commercial Lending Corp. (CLC) of Fairfax, Clifton's making gobs of money and people throughout the state are able to buy homes.
Since the real-estate venture began in November 2002, the town has bought 83 homes, fixed up and sold 66 and made a whopping $312,000. But that's just part of the picture.
"The most important part is the individuals that it helps," said CLC President John Eubank. "It's definitely a feel-good program and makes a real difference in people's lives."
CLC acts as Clifton's agent. It purchases homes, has them repaired and sells them below market value to people who, otherwise, couldn't afford them. These houses were initially bought with Federal Housing Administration (FHA) mortgage loans. But when their owners defaulted on the loans, the homes reverted back to the U.S. Department of Housing and Urban Development (HUD).
After that, HUD posts them for sale on its Web site and Eubank scoops them up. First, he researches each home's condition, sees what repairs are needed, how much the work will cost, what neighborhood the home is in and what it will sell for. That helps him determine if the town can make any money from its sale.
Clifton bid on its first HUD houses in December 2002 and closed on its first one in January 2003. Since then, the program's succeeded beyond anyone's wildest dreams.
"This has been a smashing success, not only for the town, but for the buyers of the homes," said Clifton resident Brant Baber, an attorney experienced in HUD foreclosures. CLC administers the program, and he reviews its files to make sure they comply with HUD requirements and town standards.
"We've doubled our expectations, in large part due to fortuitous market conditions," said Baber. "The interest rates were sufficiently low so that it allowed people to purchase higher-priced homes than they would have been able to otherwise. And they would all be priced higher, but for the program limits."
HUD SETS the maximum price each home may sell for, and the town cannot make more than a certain percent of profit from its sale. Buyers must meet income restrictions — which vary somewhat, depending on the home's location and the size of the buyer's family. And homes may not be purchased by investors — buyers must live in them as their primary residence.
"Buyers must have a household income of less than 115 percent of the [HUD] median income where the house is located," said Baber. "For a family of two in Northern Virginia, you can't make more than $78,000," added Eubank. "In the Tidewater area, it's $50,000 for a family of two; and in the Lynchburg area, it's $45,000."
And Clifton can only sell the house for a maximum, 10-percent profit on its invested cost — the purchase price, fix-up cost, loan cost and sales cost. As a result, said Baber, "Our sales prices are the lowest in the neighborhood for the nicest houses in the neighborhood."
Most of the properties are single-family, detached homes and townhouses. And once they're spruced up and put on the market, they go fast. "It generally takes 90 days or less from the time we buy them to the time we sell them," said Baber.
"A home in Norfolk built in 1910 took six months to sell," he said. "But townhouses in Sterling are sold almost before we put them on the market." Added Eubank: "The average home is on the market for two or three weeks."
THE WHOLE THING has Clifton Mayor Jim Chesley practically doing cartwheels. "It's a very unique way that our town is helping the underprivileged around the state to buy their first houses," he said. "Ninety percent of the homes sold went to first-time buyers, and 30 percent went to firefighters, police officers, teachers and single parents [of children living at home]."
These latter four groups are given special discounts. The town contributes up to 3 percent of their home's purchase price. The money comes out of Clifton's share of the profits. Otherwise, the town receives 55 percent of the profit from a sale, and CLC receives 45 percent.
Most of the houses are in Richmond, Portsmouth and the Tidewater area. "I've gone to see some of these homes, and I'd be happy to live in them, myself," said Chesley. "For example, in Portsmouth, we sold a three-bedroom, brick home, with an in-ground pool, in a nice subdivision like Greenbriar. A Navy dentist bought it for himself and his family. It would have cost him $375,000 or $400,000, if it was up here — and he bought it for about $175,000."
Clifton generally buys homes not needing more than $5,000 or $10,000 in repairs. Chesley said they're good houses just requiring cosmetic things, such as a new roof, paint, carpeting and/or holes patched in walls. Sometimes, they also get new heating and air-conditioning systems.
"We're not buying houses that are falling down," he said. "The buyers are getting a better deal than they would normally, and it's made us feel satisfied to help them buy homes."
Baber says the rule of thumb is that the fix-up cost shouldn't exceed 8-10 percent of the home's purchase price. In Northern Virginia, a $200,000 house could cost $16,000 to $20,000 to repair. But in Madison, Va., Clifton would only spend $3,500 to $5,000 to fix up a $50,000 house.
Besides bidding on the homes, listing them for sale with real-estate agents and closing the deals with qualified buyers, CLC also retains the contractors to do the repairs. "In a number of areas, we have one or two contractors that give us priority because we give them a steady volume of work," said Baber. "It also enables us to get a good price for the work done."
ALTHOUGH CLIFTON'S sold a townhouse in Centreville and a house in the City of Alexandria, most HUD foreclosures are in other areas of the state. Therefore, the town's purchased homes in Dumfries, Woodbridge, Sterling, Virginia Beach and Norfolk, as well as in western Virginia, in the Madison Heights area outside Lynchburg.
"Halfway through the year, we looked at southern Virginia, south of Charlottesville, to pick up homes in that area," said CLC's Eubank. "And this year, we're targeting Richmond and Petersburg. Our goal has been to do the entire state of Virginia because there are housing needs all over the state."
Baber said Clifton's doing good for others and doing well, at the same time. He said the program's made money for the town and stabilized neighborhoods that otherwise would have been blighted by foreclosed houses sitting in them, vacant and unpurchased.
"And it's also helping the town raise funds in a financially tough time, so I don't have to go to Fairfax County saying, 'I need more money for this or that,'" added Chesley. "Now, we're generating our own funds, and it's a good feeling, all around."
He said Clifton's total budget for a year is about $275,000 or $280,000, and the town already made more than that amount, from its real-estate sales, in one year. "We're a small town that doesn't usually have the luxury of having such money," said Chesley. "To us, it's a Godsend."
He said Clifton will be prudent and develop a list of priorities for the new Town Council to consider, this spring. For example, years ago, the town received federal grants to put in the sidewalks and trails that are an extension of its bike-plaza project. But with only 200 residents, Clifton could never raise enough money to match these grants so it could use them — until now.
CLC WORKS with four brokers in Northern Virginia; the most local one is Taya Abbott with Long & Foster, Realtors in Clifton. Prospective buyers may call her at 703-222-5955 to learn what homes are available in Northern Virginia and to see if they're qualified to purchase them.
Or go to www.hud.gov, click on "HUD homes," "Virginia," "go to the requested page" and "available properties for sale." Listings change daily. Baber noted that CLC maintains strict compliance, not only with HUD program standards, but with the contract requirements with the town — which require more record-keeping than HUD does.
Eubank said two-thirds of the revamped homes have been in the lower price range, under $100,000. And CLC doesn't have to put down the entire purchase price of a home — just enough to secure the sale. "We provide affordable housing for needy families," he said. "I really like helping these people."
In Virginia Beach, the lowest-priced home Clifton sold was $45,900 for a 1,200-square-foot townhouse with three bedrooms and two bathrooms. "We put in a brand-new kitchen, all new appliances, fresh paint and carpet and a new roof and air-conditioning unit," said Eubank. And he couldn't be prouder.
"When we're buying a property and re-selling it to somebody of a needy caliber, you want it to be their dream home — and something in very good condition — not a nightmare of repair and expenses," he explained. "We're selling them a home that's been completely repaired, updated and cleaned — and with immediate equity because we're selling it below market."
Eubank said Clifton's been selling homes where the appraisals after repairs came in $10,000 higher than the selling price. "People sometimes think there's no way out and they'll never be able to buy a home," he said. "But in Virginia Beach, people came out of Section 8 housing to buy a HUD home."
Now, he said, not only does Clifton have a real, money-making business, but it's the kind of venture that makes everyone feel good to be a part of it. "When you deal with the people buying the homes, you see the lives that the town has touched and changed," he said. "It's a beautiful thing."