MODESTO -- In an effort to stabilize the city's real estate market, a federal stimulus program has spent nearly $1.5 million on eight Modesto homes that ended up being worth less than $1 million.
Example: Taxpayers paid $223,641 to buy and fix up a foreclosed south Modesto house that was built in 1992. But when the city's 16-month renovation project was done, the home appraised and sold for only $114,000.
The government lost $109,641 on that just completed deal.
Taxpayers also have spent $109,494 to buy and renovate a 1948-vintage two-bedroom home in Modesto's airport neighborhood. That house has appraised for only $55,000, and a buyer has yet to be found.
The federally funded Neighborhood Stabilization Program is being managed by the city of Modesto, which plans to resell an additional 18 or more rehabilitated homes this year.
The eight refurbished Modesto homes have cost taxpayers, on average, 34 percent more than appraisers determined they were worth after repairs were complete. That's an average of $61,487 each.
That loss is more than twice as much per home as a similar program run by the Housing Authority of Stanislaus County. The countywide agency has bought, renovated and resold 41 homes in the past two years, and on average it has spent 14 percent, or $21,869, more per house than the resale price.
Modesto officials defend how they have spent the federal money.
"We're buying the worst of the worst of the foreclosed homes, the ones private investors won't touch," said Cynthia Shallit, who now runs Modesto's stabilization program.
Shallit said such distressed homes require more repairs — and money — than typical foreclosed homes, but she wasn't familiar with why specific spending decisions were made on those eight homes. Shallit was hired in November as part of a staff shake-up.
Since last spring, there has been controversy and allegations of wrongdoing concerning aspects of Modesto's $36 million Neighborhood Stabilization Program.
That includes conflict of interest issues involving Councilman Joe Muratore, who is affiliated with developer Trinity Ventures. There also have been spending and tenant issues involving the Stanislaus Community Assistance Project.
But neither Trinity Ventures nor SCAP are part of the city's buy, fix and resell initiative, which began more than two years ago.
Modesto's resale program is taking far longer than originally planned. Those delays have increased the losses.
The airport neighborhood home at 802 Kerr Ave., for instance, was renovated and appraised for $60,000 in January 2011. But it still hasn't sold, and a new appraisal shows it is worth $5,000 less than last year.
According to the city's Web site, the stimulus program's mission is to stabilize neighborhoods by buying and renovating foreclosed residential properties. "The goal of the program is being realized," the Web site contends.
Some Modesto builders and appraisers disagree, and question the city's spending decisions.
Rich Paddock, a veteran Modesto appraiser with his own firm, said the city's staff sought his advice in 2009 before it began the stabilization program.
The staff, Paddock said, "could not understand why the program could not buy a poor quality, poor condition home, pour lots of money into it and then sell it for enough to cover their expenditures."
Paddock said he "explained that the cost to acquire and repair a home does not equal the selling price." He said the city "apparently made the classic mistake of not determining what the property would sell for after repairs before making an offer to purchase."
RSS
E-Mail
Print
reprint or license
