By Mary Ellen Podmolik
The brick bungalow in Chicago’s Auburn Gresham neighborhood doesn’t look like much from the outside, with its windows covered with plywood, silver tape dangling from a second-floor eave and a blue tarp stretching across much of its roof. Its interior looks even worse.
But unlike a similarly boarded bungalow two doors away and tens of thousands of other vacant homes across the city and suburbs, this one and another in the Avalon Park neighborhood are special. They will be the first vacant houses to be overhauled and put up for sale as part of the Cook County Land Bank Authority’s ambitious, long-awaited effort to stabilize communities by ridding them of eyesores and attracting new residents and businesses.
Launched in early 2013 by the Cook County Board, the land bank has acquired 23 foreclosed properties through either donation or below-market pricing from lenders or Freddie Mac. An additional 35 are under review or scheduled to close soon.
The goal is to obtain properties in areas that may be risky but are ripe for a turnaround, clear title to them and find a suitable developer, a process that’s more laborious than it sounds, said land bank Executive Director Brian White. And in the case of residential property, that developer is preferably someone who will sell the rehabbed home as an affordable, owner-occupied home, not as a rental property.
In the past few years, investors, including large publicly traded funds, have descended on a wide swath of the Chicago area’s housing market, snapping up foreclosed homes, bidding up the sales prices, paying cash and amassing large portfolios of rental homes. Smaller investors couldn’t compete.
In July, the land bank’s strategy took a big step forward when The PrivateBank committed $10 million in purchase-rehab financing to qualified entities that acquire homes from the land bank. Other banks have donated properties and demolition funds, but PrivateBank is the first to make a direct investment with the land bank in communities, White said.
Listing for sale the two rehabbed homes next spring, then selling them, will validate that a land bank can succeed in Cook County, as it has in other cities and counties hard-hit by foreclosures and abandoned homes.
“We’re being opportunistic, where we have opportunity to work in scale or turn around the worst house on the block,” White said. “We want people to see that these homes that (were) considered to be blighted, nuisance properties are really just waiting for the right developer to put the right attention to it and turn it around. It’ll prove the model does work.”
But first, there’s an awful lot of work to do.
The dark brick home in Auburn Gresham, once used as a two-flat, has been vacant for more than two years and, at times, has been unsecured, according to reports filed with the city. On the plus side, it is large, the basement is dry, there’s a bit of nice molding around some doorways and there are no signs of squatters or animals.
But its interior is a patchwork of exposed wood lath, crumbling ceilings, mold and floors made bumpy by substantial water damage caused by a leaky roof. Like many foreclosures, the home is missing its boiler, water heater, radiators, kitchen appliances and toilets.
Bank of America donated the property to the land bank, and this week, Alpine Capital Realty Group, a local firm that has rehabbed homes, is expected to close on the $3,000 purchase of the home and start a gut rehab. When completed, the home will have four bedrooms, 21/2 bathrooms, central air-conditioning and a kitchen with granite countertops and oak cabinetry. If the home sells for more than $155,000, the land bank will get an additional $8,000 from Alpine.
Jamil Taylor, Alpine’s founder, is optimistic.
“It’s right in a neighborhood where we can see the progress,” he said.
If the land bank can obtain a vacant home two doors away, Taylor also hopes to renovate it.
Another property, a corner home in the city’s Avalon Park neighborhood, will be tackled by Jason and Esther Williams, whose Ultimate Real Estate Group has rehabbed and sold a dozen foreclosed, bank-owned homes on the city’s South Side during the past eight years.
After they close on the purchase of the home for about $45,000 from the land bank, the plan is to gut the two-bedroom, one-bath home, add a second-floor dormer to create a master bedroom suite and sell it for more than $180,000.
“It’s a neighborhood where a lot of young professionals are buying,” Jason Williams said. “There’s one other board-up on the block, but otherwise, it’s a quiet block.”
If these two test-case houses prove successful, PrivateBank and the land bank want to expand it, quickly. The lender plans to issue a request for proposals from other for-profit and nonprofit developers, with a track record, that are interested in getting involved, said Geoffrey Koss, a managing director at PrivateBank.