Vanessa Garcia was just one would-be homeowner against an army of property investors.
The 24-year-old Burien woman searched for a home for eight months with her real estate agent, Vicki Angus. She was outbid time and time again.
One home was listed at $119,000. Garcia offered $135,000 but lost out to someone who offered $180,000.
As the real estate market recovered, investors snapped up the cheap homes, said Glenn Crellin, associate director for research at the Runstad Center for Real Estate Studies at the University of Washington. He sees a lot more homes bought with cash, a clear indication that an investor, not a homeowner, bought the property.
A single mother pregnant with her third child, Garcia had a tight budget and an even tighter deadline. She was due to deliver in the fall, and she wanted to be in her own home by then.
After months of frustration, Garcia’s real estate agent recommended Homestead Community Land Trust, which had a house available in West Seattle that suited her family.
It’s a fixer-upper. Asbestos paneling runs along the base of the house outdoors, the walls haven’t been painted in decades, and one bedroom carpet is worn down to the mesh.
But Homestead Community Land Trust will make $90,000 in repairs in the home within three months.
It’s not your ordinary home sale. Garcia is buying the house, but Homestead will own the land underneath it. Over time, Garcia will build equity (the accumulation of her payments on the house) and gain a consistent but modest increase in the value of her home.
The 24-year-old bookkeeper, who now rents an apartment in Burien for $900 a month, will end up paying a mortgage of $800 a month on the home’s $130,000 selling price.
Community land trusts, which originated in India, have been in the United States for decades but have grown over the past 20 years. The economic downturn, with its abundance of foreclosures, has spurred their expansion.
In Seattle, community land trusts have gotten new help from the government. The city has provided a $1.2 million line of credit to Homestead plus $50,000 per family for repairs through an affordable housing levy passed in 2007.
With that funding, Homestead purchased 12 homes from foreclosures and short sales. Half of those are almost ready for families, and the rest await repairs so they can be sold to families like Garcia’s, who make less than $65,000 a year.
The community land trusts helped Garcia become a homeowner now, not someone who can cash in later.
“We’re trying to bring some sanity back to home ownership not as a savings account or money market account, but as a home,” said Erika Malone, spokesperson for Homestead.
Homestead allows the 140 homes it manages to appreciate at 1.5 percent a year. That means the home value won’t skyrocket in value, but it won’t plummet either.
When Garcia is ready to sell, she gets the equity and modest growth and sells the home to another first-time buyer at an affordable price.
Foreclosures stand to fuel the growth of community land trusts. It’s something Crellin has been anticipating.
Up until now, community land trusts “haven’t had the investors behind them or the resources to take on more than one or two properties at a time,” Crellin said.
The down economy provides community land trusts with the opportunity to expand their housing stock, he said. With this financial backing, community land trusts become investors themselves.
Community land trusts also stand to gain from the legal fight against the banks that contributed to the foreclosure crisis. In February, 49 state attorneys general won a $25 billion settlement from JP Morgan Chase, Bank of America, Wells Fargo, Citigroup and Ally Financial. Washington will receive $618 million, of which $43 million is meant to go foreclosure relief.
Foreclosure relief isn’t necessarily direct aid, though. Community land trusts have little to offer families experiencing foreclosure because the trusts require banks willing to make a loan. By the time homeowners face a short sale or foreclosure, they lack the resources to become homeowners again, at least for a time.
“There still has to be a mortgage, which involves credit checks,” Crellin said, adding, “Credit repair takes a while.”
Community land trusts benefit people with stable incomes; they are not an answer to homeowners facing foreclosures. Their advantage comes largely to first-time buyers, who in some cases, benefit as a result of foreclosure. Most of the 12 houses Homestead has purchased in the last year came from families who could no longer afford to pay for them.
At Vanessa Garcia’s new place on Southwest Portland Street, this notion hits home.
Garcia wandered through the dining room, which still held a table and chairs with faux leather cushions held together with masking tape. Just a few months ago, an elderly couple lived here, but when they couldn’t manage the mortgage, they did a short sale, said Lindsey Sargent, Homestead’s homeownership program director.
Standing in the dining room of the foreclosed home, Sargent paused, and acknowledged Garcia’s new house was made possible by an elderly couple who could not afford to keep living there.
“Houses like this are the hardest,” she said.