Land Bank’s Foreclosure Sales Helping Stabilize Neighborhoods
By Dennis Rodkin, Crain’s Chicago Business | November 22, 2016
A Cinderella story is playing on 101st Street in the city’s Washington Heights neighborhood, and there are more than 200 others like it scattered around the city and suburbs.
After lingering in foreclosure for almost six years, a modest 1960s bungalow started 2016 with mold growing on its basement walls, holes in its roof and busted pipes from standing empty for at least one winter. Now it’s a fresh-looking place with a new roof, stylish tile and fixtures in the updated kitchen and baths.
“This used to be one of the worst houses I’d seen,” said Jason Williams, who rehabbed the Washington Heights bungalow with his wife, Esther, after buying it from the Cook County Land Bank in August for about $17,000. “We had to do everything to it, all the way down to the studs.” The Williams’ foreclosure rehab firm, Ultimate Real Estate Group, put the house on the market in early November, asking $154,900.
The house is one of 230 properties, nearly all residential, that the land bank has sold to rehabbers since late 2015, according to a report the organization’s officials compiled for Crain’s.
Together, the 230 make up “a really good effort to help our neighborhoods get restabilized,” said Diane Limas, a longtime rental-housing activist who is part of Roots (Renters Organizing Ourselves to Stay). As part of a partnership, ROOTS acquired 19 apartments in nine foreclosed two- to four-flats in North and Northwest Side neighborhoods through the land bank. The group is rehabbing them and will then put them up for rent.
Of the 230 land bank properties sold, 187 were sold this year and 43 in the latter months of 2015. They are in 13 Chicago neighborhoods and 14 suburbs, according to Rob Rose, the land bank’s executive director.
In the previous two years, the land bank spent $7.2 million to acquire the 230 properties from foreclosing lenders and others. (The land bank paid nothing to acquire some one-third of the properties; banks and others gave them to the land bank at no cost.) It has sold them for a total of $8.5 million, clearing about $1.3 million.
The report did not specify what the land bank spent on the 126 properties it hasn’t yet sold.
Now, having unloaded about two-thirds of the 356 properties it has acquired since it started buying in mid-2014, the land bank “has reached self-sustaining status without using taxpayer dollars,” said Bridget Gainer, the Cook County Commissioner who quarterbacked its creation in early 2013.
The land bank’s startup funding was $4.5 million, provided in 2014 by Lisa Madigan, Illinois attorney general, out of the state’s $1 billion share of a $25 billion national settlement from the nation’s five largest mortgage servicers in 2012.
The agency isn’t a pass-through, acquiring a property merely to turn around and sell it. Before selling the properties in poor physical condition to rehabbers, the land bank puts them through a kind of cleanup that can be complex. The land bank cleans liens, fines and other red tape off the property’s title, a process Williams estimates has saved his firm as much as $10,000 in legal fees on each of the four houses it’s bought from the land bank.
“Cleaning up the title is huge,” said Frank Montro, a Keller Williams agent who has represented more than a dozen former land bank homes after their rehab, including a three-bedroom on South St. Louis Avenue in Auburn-Gresham that is on the market now at $214,900. “The back taxes and liens can make it unfeasible for a small rehab firm to take on a house,” Montro said. As a county program, the land bank has access to red tape-cutting maneuvers a rehabber may not.
After selling a property to a rehabber, the land bank holds on to some controls: The contract requires that redevelopment happen within 12 months and that the land bank inspect all work. The land bank also holds a “soft mortgage” on the property until it’s resold to a homeowner. All of these controls, Gainer said, point to the bank’s goal of “harnessing the market to help stabilize communities,” and ward off fast-buck investors.
Williams said there’s one more control that works to his advantage: The land bank sells only to local firms in an effort to keep money and jobs in the area it serves. What that means for Williams and his wife is that “we’re not bidding against people from California. When they’re spending $300,000 to get properties out there but they can get them here for $50,000 or $100,000, they think it’s cheap, and they outbid us.”
Gainer said the 230 properties have been sold to 135 developers. The land bank has sold just 10 of its properties directly to end-user homeowners, she said, but a new effort next year may increase that.