The city of Clinton is poised to offer a one-year lease for a vacant city-owned home on West Lee Street, built more than two years ago toward offering affordable housing in District 5. After one year, the home will be subject to the upset bid process but the tenant will have the chance to rent-to-own if there is no bid to purchase the home outright.
After a great deal of research, city manager John Connet presented that process to City Council, which gave an informal go-ahead. A public hearing is scheduled for the Council’s March 5 meeting to announce the city’s intentions.
The city has been attempting to sell the house at 115 W. Lee St. for more than two years. While there have been numerous inquiries into the property, only one serious offer to purchase has been made. That individual ultimately could not obtain bank financing so the house remained on the market.
Last month, Connet updated Council on unsuccessful efforts to sell and the board authorized city staff to use all means necessary to get the house sold or leased. Over the past two months, the city has received two inquiries regarding the renting of the house.
The first could not afford the proposed rent of $604 per month. The second felt she could afford the rent and wished to pursue a lease agreement for the house. Connet has proposed financing the purchase of the house over a 12-year period — $62,000 financed for 144 months at 4 percent interest rate would equate to monthly rent of $604.11.
“That covers our cost for the house and the annual insurance cost, which is nominal,” said Connet. “We want to get them into the house and have a situation where they would ultimately own the house. The only way they would own it is if they stay 12 years. If they leave before the 12 years, it’s just like renting it and the money comes back to us. The idea is to get somebody in it long term, and they don’t own it until they pay that last payment.”
However, in order for the city to sell the home and meet legal requirements, it must follow N.C. law that requires the home to be subject to the upset bid process. That process, which the county has utilized several times in recent years, requires the bidder to put down 5 percent, the city to publish a notice and wait 10 days for an upset bid.
“Unfortunately, our interested party does not have the 5 percent — $3,100 — down payment,” said Connet, who laid out a process through which the house could be leased to the tenant for a year. “After we had a public hearing to fully disclose that the city is doing this, we would lease the house for a year, and as part of that lease 50 percent of her monthly rent would be credited toward the 5 percent down payment.”
So in a year, the tenant will have the required amount to go through the upset bid process.
Following the March 5 public hearing, a one-year lease agreement will be entered with the tenant with the stipulation that half her rent will go toward the down payment and she can make an offer to purchase the house on March 5, 2014.
“We would still have to go through the lease-purchase — so there is a little bit of risk — but in order to get it sold we would go through the upset bid process,” said Connet. “We would stipulate in the advertisement that if anybody was to buy it they would have to make an offer of $62,000.”
If an offer of $62,000 is made on March 5, 2014, and the City Council accepts that offer, the city will advertise that a bid has been received and upset bids will be accepted for a 10-day period. If the bid is raised within the 10 days, the procedure begins again with another notice published. N.C. law states the new bid must be no less than 10 percent of the first $1,000 of the old bid and 5 percent of the remainder.
Any buyer would have to live in the house, which was constructed through a partnership between the city of Clinton and Sampson Community College. Deemed the Clinton Affordable Homeownership Program, the goal was to have a revolving program through which SCC students and professionals build a home that the city would place and sell. The cost could be recouped and the build and sell process could begin all over again.
Not only would low-cost, well-built homes be available, they would take their place where nuisance homes and unsafe structures were previously condemned and demolished. In April 2010, the City Council approved purchasing its first house as part of the agreement for $65,000. Just a couple weeks later, the house was placed at the city-owned West Lee Street lot, where an unsafe home was previously demolished. Work was completed by the end of the year.
“The whole idea of the program from the Council was to provide safe housing, and we know there is a need for safe housing,” Connet said at the time. “As we sell one house, we plan to purchase another vacant lot with those proceeds in order to place another house from the community college. The ultimate goal is to continue providing safe, affordable homes for low to moderate-income families.”
But then the house sat.
More than two years later, city officials said there needs to be an occupant.
With three bedrooms and two baths, SCC placed a value of $52,855 on the 1,200-square-foot house. It was professionally appraised at $85,000. While a lease is now being offered, that lessee would have to agree to stay in the home for at least 12 years. The same would go for a potential buyer should they bid in a year’s time.
The goal of providing affordable housing to those who need it has not changed, said Connet.
“They would have to agree to live in the house,” the city manager said. “The idea of having the house is for affordable housing, so we don’t want anybody who’s going to buy the house and rent it. In a year, when we advertise, it would have to be upset bid but it would be limited to people who would agree to live in the house for a term of 12 years or the city has the right to purchase it back.”
If no additional bid is received, the house will be sold to the tenant using a lease-purchase arrangement. If there is an upset bid, the city will follow the process until there is no upset bid.
“It would be unlikely that we receive a bid, but if we did, we would go through the process,” said Connet. “Under the law, since it’s public property and public dollars, we would have to go through the upset bid process.”
The City Council gave its informal consensus.
“Our goal is to get someone in and we want to be open to the public about it,” said Mayor Lew Starling. “This is a fluid situation. We’re just trying to get somebody in there.”
Chris Berendt can be reached at 910-592-8137 ext. 121 or via email at cberendt@civitasmedia.com.
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