2521 Stafford Housing purchaseMEMORANDUM
March 4, 2003
TO:
FROM:
SUBJECT:
The Honorable Mayor and City Council Members
Michael C. Van Milligen, City Manager
Purchase of Real Estate at 2521 Stafford
Housing and Community Development Department Director David Harris is
.recommending the City purchase a piece of foreclosed property at 2521 Stafford .Street
The Housing Department made a rehabilitation loan to the owner of this property, Diane
Courtney, in 1996. The home is a two-family dwelling; Ms Courtney lived in one unit
and rented the other.
Rehabilitation work included a new roof, new furnaces and electrical services for both
units, and complete remodeling of the upper-floor unit.
For reason of non-payment to the first mortgage holder, Citifinancial Mortgage
Company, a judgment has been entered against Ms Courtney in District Court and a
sheriff's sale set for 18 March. The first lien amount is $64 506. The City's second
mortgage is $24 022.
Total indebtedness on the property is $88,337. While the property only has a value
between $62,000 to $67,000, any money the City gets for the property over $64,315 on
a resale reduces the loss on the $24,022 City debt.
I concur with the recommendation and respectfully request Mayor and City Council
approval.
Michael C. Van Milligen
MCVM/jh
Attachment
cc: Barry Lindahl, Corporation Counsel
Cindy Steinhauser, Assistant City Manager
David Hards, Housing and Community Development Department Director
CITY OF DUBUQUE, IOWA
MEMORANDUM
4 Mamh 03
To: Mike Van Milligen, City Manager
From: David Harris, Housing and Community Development Department
Re: Purchase of real estate at 2521 Stafford
Introduction
The purpose of this memorandum is to request the City Council's approval to
purchase a two-family dwelling located at 2521 Stafford Street.
Background
The Housing Department made a rehabilitation loan to the owner of this property,
Diane Courtney, in 1996. The home is a two-family dwelling; Ms Courtney lived
in one unit and rented the other.
Rehabilitation work included a new roof, new furnaces and electrical services for
both units, and complete remodeling of the upper-floor unit.
For reason of non-payment to the first mortgage holder, Citifinancial Mortgage
Company, a judgment has been entered against Ms Courtney in District Court
and a sheriff's sale set for 18 March. The first lien amount is $64 506. The City's
second mortgage is $24 022.
Discussion
Total indebtedness on the property is $88 337. it is unlikely that a market Sale
would reach this value; an in-house estimate of value is $62-67 000. We have
been unable to view the property, due to the mortgage company's lack of
cooperation in assisting us to obtain entry. Similarly, we have been unable to
commission an independent appraiser's services to establish value.
Under a best-case scenario, we could offer the property at $88 000, with the
City's mortgage remaining subordinate and payments deferred, at no interest. A
buyer could be located given this financing, as payments would only have to be
made on a $64 000 mortgage, for a two-unit income property.
Alternatively, we could finance the entire $88 000, and similarly construct a
repayment scenario that would provide sufficient incentives to recruit a buyer.
Under a worst-case scenario, we would sell the property only at the mid-$60's
price and lose most or all of our $24 000 mortgage. Put another way: anything
we sell the property for in excess of $64 000 reduces our loss.
Recommendation
Given our record in re-selling properties we have had to acquire for reason of
foreclosures in the past, my recommendation is to purchase this property. Our
ability to offer significantly subsidized financing can make the difference. Under
a worst-case scenario, we will be no worse off by attempting to purchase and re-
sell than if we just walked away from this deat. And that means we stand a
chance of reducing our losses if we're successful.
Action Step
The action requested of the City Council is to approve the attached resolution,
authorizing purchase of property located at 2521 Stafford Street in the City of
Dubuque.
RESOLUTION NO. 78-03
A RESOLUTION APPROVING THE ACQUISITION OF REAL ESTATE
LOCATED AT 2521 STAFFORD STREET, IN THE CITY OF DUBUQUE
WHEREAS, The City of Dubuque has a secured interest in a property at
2521 Stafford Street; and
WHEREAS, this interest is subordinate to a first mortgage and will be
otherwise lost due to a legal action to cause forfeiture.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF
THE CITY OF DUBUQUE, IOWA:
Section 1. That the City of Dubuque hereby approves the acquisition of
the following legally described property:
Lot Two (2) of Lot One (1), and the East One-half (E1/2) of Lot Four (4) of
Lot Two(2), both in Geiger's Subdivision, in the City of Dubuque, County
of Dubuque, Iowa, according to the recorded plats thereof.
At the cost of sixty-four thousand five hundred-six dollars ($64 506).
Section 2. That the City of Dubuque be and is hereby authorized and
directed to accept a Quit Claim deed from the owner, conveying the
owner's interest to the City of Dubuque, Iowa for the herein described real
estate.
Section 3. That the City Clerk be and she is hereby authorized and
directed to cause said Quit Claim Deed to be recorded in the office of the
Dubuque County Recorder, together with certified copy of this Resolution.
Section 4. That the City Clerk be and she is hereby directed to forward a
copy of this Resolution to the Dubuque County Assessor and the Dubuque
County Auditor,
Passed, approved and adopted this 5th day of March, 2003.
Terrance M. Duggan, Mayor
Attest:
Karen M. Chesterman, Deputy City Clerk