October 18, 2013 [Abby Hayes, US News & World Report]
If you live in a city or county with high rates of home abandonment and foreclosure, you may be able to get a good deal on a new home, either for your primary residence or as an investment property.
In areas where high rates of home abandonment and foreclosure have become a huge problem, land banks are becoming a popular solution. These are organizations, typically run by the local government, that focus on acquiring and then reselling abandoned houses and lots.
Land banks are revolutionizing the way cities deal with abandoned or foreclosed properties, which have traditionally taken years to acquire, clean up and resell. Since the recent mortgage crisis, more and more cities have been opening land banks as they deal with huge numbers of abandoned, foreclosed properties.
Rather than letting abandoned homes drag down property values, reduce tax revenues and generally become a burden, local land banks are working to encourage homeownership, especially in urban areas with high rates of abandonment.
Land banking is an interesting phenomenon, but what does it mean for you and your homebuying journey?
Well, depending on where you live, you may be able to get an excellent bargain on an abandoned home with “good bones” or excellent redevelopment potential.
How the purchase process works. So how do you purchase a home from a local land bank? The short answer: It depends.
Different land banks have different rules and ways of operating, so the main thing is to check with your local land bank.
Some land banks sell primarily to nonprofits, while others open up sales to for-profit developers.
Often, nonprofit community development corporations (CDCs) work in tandem with their local land bank to acquire properties cheaply. These CDCs then renovate the properties and sell them at a still-discounted rate to individual homebuyers. If you’re interested in affordable housing but don’t want to do the renovation that land-banked homes often require (because they’ve often been abandoned for years), check out local CDCs to see about affordable housing opportunities in your area.
Other land banks sell directly to individual buyers in certain circumstances. Be aware, though, that land bank properties – particularly those in the most desirable conditions and locations – tend to sell quickly. So if you plan to buy a land-banked home on your own, be prepared to move quickly.
Here are the procedures for a few U.S. land banks, just to give you an idea of how purchasing a home through a land bank works:
Genesee County Land Bank (Michigan): The Genesee County Land Bank, one of the oldest in the country, has a residential buying program that allows individuals to by land-banked homes. Although many of the county’s properties need heavy renovation, some of the featured homes (which will, of course, have a higher purchase price) do not.
To buy a home from this land bank, you’ll need to meet certain down payment requirements, and you’ll need to fill out the Residential Property Interest Application to begin the purchasing process.
Dallas Land Bank (Texas): The Dallas Land Bank focuses on getting primarily empty lots to for-profit and nonprofit developers. These developers have to have built at least three housing units in the three years preceding their land bank purchase.
The Dallas Land Bank sells lots for about $4,500 each, and developers have to complete a proposal for the land bank property and be approved by the land bank board and city council before purchasing lots. Individuals in need of affordable Dallas housing should check with local nonprofit developers who specialize in buying and developing land bank properties.
Cuyahoga County Land Bank (Ohio): The Cuyahoga Land Bank, which includes Cleveland, lets owner-occupants buy homes in need of renovation for as little as $4,000. The land bank also runs a fixer-upper loan program, so buyers can access funding to complete necessary repairs on homes they buy from the land bank.
Under Cuyahoga’s Owner Occupier Advantage Program, owner-occupants have a 30-day opportunity to purchase homes that need moderate work before developers can jump on the properties. Owner-occupants have to go through the bidding process, agree to complete certain renovations and agree to live in the home for at least three years to qualify for this program.
As you can see, land bank procedures vary dramatically from one land bank to the next. But as more and more cities and counties open land banks, it’s worth a Google search to see if your city has a land bank program that could help you pick up a new home for a rock-bottom price.