March 1, 2005
SUBJECT: Request Approval to Purchase and Prepare for Resale 969-2 Asilomar Terrace, Sunnyvale, A Below Market Rate (BMR) Ownership Property
REPORT IN BRIEF
Approval is requested for the purchase and preparation for resale of 969-2 Asilomar Terrace. The purchase price of the unit is $134,589.02 and rehabilitation costs are estimated at $15,000 to $20,000. Council has previously appropriated funds from the Housing Mitigation Reserves that will allow the City to take action, when needed, to make timely purchases of BMR units that may be at risk of being lost from the City’s BMR housing stock.
A notice of sale at foreclosure will be issued on March 21, 2005. In order to retain the unit in the BMR Program, the City must act as the interim purchaser of 969-2 Asilomar Terrace to allow for the sale to a new BMR buyer. Staff is recommending that the City purchase the unit, complete repairs including all deferred maintenance, and then resell the unit to a qualified BMR buyer.
BACKGROUND
The BMR property was previously over-financed by the current owner in the amount of $90,411, and the owner has defaulted twice on the Deed of Trust during the past eleven months. A Notice of Sale date is scheduled for March 21, 2005. On December 9, 2004, the City informed the owner that they have breached their obligations under the City’s Deed of Trust due to the default on their loan, and requested that they cure the breach. On February 15, 2005 the owner informed the city that they have permanently vacated the unit and agree to sell the property to the City. This purchase will allow the City to obtain the BMR property prior to a foreclosure sale.
The unit’s estimated market value is approximately $400,000. The BMR purchase price to the City is $134,589.02, using the resale price calculation authorized by deed restriction. The result of the sale will be that the seller will receive no cash proceeds from the sale, and the lender will receive substantially less than what was lent on the property due to the over-financed situation noted.
EXISTING POLICY
Land Use and Transportation Sub-Element (1997)
Goal C2 Ensure ownership and rental housing option in terms of style, size, and density that are appropriate and contribute positively to the surrounding area.
Housing and Community Revitalization Sub-Element (2000):
GOAL A Foster the expansion of the Housing supply to provide greater opportunities for current and future residents given environmental, social, fiscal, and land use constraints.
GOAL D Maintain diversity in tenure, type, size, location and cost-of-housing to permit a range of individual choice for all current residents and those expected to become city residents.
GOAL E Maintain and increase housing units affordable to households of all income levels and ages.
DISCUSSION
There are two actions that the City may take; 1) City purchase which retains the BMR unit in the City’s BMR housing stock; or 2) allowing the unit to be sold in the open market at full market price with the City receiving all proceeds above the BMR value. City purchase ensures that the unit remains in the City’s BMR housing inventory and enables another BMR buyer to purchase a BMR home at a value less than the current price for a newly constructed two-bedroom BMR unit.
In order to prepare the unit for resale repairs will be needed. Although staff has not had access as yet to the property to inspect it, it is anticipated that repairs will be necessary to prepare it for resale. These typically include carpeting, painting, and deferred maintenance. Staff estimates $15,000 to $20,000 to make all needed repairs. The costs for repairs will be included in the sale price to the new BMR purchaser.
FISCAL IMPACT
There is no fiscal impact to the General Fund. A balance of $325,213.56 remains in Project #814700 BMR Acquisition Fund/Account and will fund the purchase and repairs of the BMR unit. Proceeds from the sale of the property, upon close of escrow, will be returned to Housing Mitigation Reserves.
Conclusion
City purchase of 969-2 Asilomar Terrace would enable the property to remain in the BMR housing stock. The unit’s purchase price is $134,589.02 and maintenance and repair costs are estimated at $15,000 to $20,000. Council has previously appropriated funds from the Housing Mitigation Reserves that will enable the City to purchase, repair and resell the unit. City acquisition of the property would benefit a low income buyer and support the Council policy of maintaining and increasing affordable housing units.
PUBLIC CONTACT
Public contact was made through the posting of the Council agenda on the City’s official notice bulletin board, posting of the agenda and report on the City web page, and the availability of the report in the Library and the City Clerk’s Office.
ALTERNATIVES
1. Approve the purchase and repair of 969-2 Asilomar Terrace, Sunnyvale.
2. Do not approve the purchase and repair of 969-2 Asilomar Terrace, Sunnyvale.
RECOMMENDATION
Staff recommends Alternative 1-Approve the purchase and repair of 969-2 Asilomar Terrace, Sunnyvale.
Reviewed by:
Annabel Yurutucu, Housing Officer
Prepared by: and Lupita Gaeta, Housing Program Analyst
Reviewed by:
Robert Paternoster, Director, Community Development
Approved by:
Amy Chan
City Manager