San Marcos Mercury | Local News from San Marcos and Hays County, Texas

March 9th, 2010
City outbids private buyer for low-income home

030910capistranoSan Marcos City Councilmembers, left, used a federal grant to buy a home on Capistrano Drive, right, for $4,200 more than the asking price.

By SEAN BATURA
News Reporter

Two 1,300-square-foot homes may soon be on the market in San Marcos with the city as seller and the state as lender. In one case, the city went into competition with a private buyer.

An overwhelming city council vote last week favored using a federal stimulus grant to buy the foreclosed properties.

San Marcos City Councilmember Ryan Thomason cast the lone vote against purchasing one of the homes. Thomason said that when he found out the city was offering $4,200 more than the seller’s asking price, he made inquiries and was horrified to discover why: the city had entered a bidding war.

“We cut someone’s legs off from under them as a municipality,” Thomason said. “Am I correct on this?”

City of San Marcos Development Services Director Chuck Swallow said staff viewed the purchase as an opportunity to prevent blight in neighborhoods and offer affordable housing to new families.

After saying Thomason’s evaluation of the situation “may be a bit simplistic,” Councilmember Kim Porterfield referred to the city’s bidding competitor as “the people that the city stole this house from,” repeating Thomason’s earlier use of the word “stole,” albeit in a different tone. After Porterfield finished her question, San Marcos Mayor Susan Narvaiz interjected a warning to her colleagues to “think about how you’re posing your questions” because of concerns about press coverage.

“Everything you say is going to be written up as if that is actually what is occurring here, and that is not what is happening here,” Narvaiz said. “So I just — please keep that in mind.”

Narvaiz, on behalf of councilmembers, advised staff to refrain from competing with other buyers in future acquisitions.

Armed with $450,000 in grant money, councilmembers plan to acquire a third property later and re-sell all three to low-income buyers, who would qualify for 30-year, zero-interest loans and mortgage buy-downs of as much as $30,000.

Councilmember Fred Terry echoed Thomason’s concern about public-private competition, but expressed confidence in the ability of Janis Hendrix, the city’s community initiatives administrator, to conduct due diligence and find the appropriate buyers.

“As I am a realtor … I don’t appreciate having another competitor in the marketplace, but I do like the idea of what this program is,” Terry said.

Terry and Thomason are in the real estate business.

Before accepting the stimulus grant, the city agreed to offer homes to buyers who are at 50 percent of the city’s median income level. Hendrix said the maximum income level of a single person qualifying for the homes is $25,650, and an individual’s debt-to-income ratio cannot exceed 45 percent, including long-term debts. Hendrix said not every family that applies for the housing program may be eligible.

The house the city won in the bidding war, at 221 Capistrano Drive, is reportedly in “like new” condition, is four years old, has three bedrooms, two full baths, a two-car garage, a utility room, and is 1,302 square feet. A stove and refrigerator are not included, though energy efficient models will be supplied by the city with stimulus grant money.

The second house under consideration, which councilmembers voted unanimously to buy, is located at 1700 Ramona Circle, was constructed in 1994. It is appraised at $135,380, has three bedrooms, two full bathrooms, a two-car garage, a utility area, and is 1,380 square feet. City staff said the foundation under the master bedroom/bath of the Ramona Circle has settled.

The city will analyze the foundation and withdraw its offer without loss of earnest money, depending on the estimated cost of repairs. City councilmembers offered to pay $110,000, plus customary closing costs for the Ramona Circle home. Any costs for rehabilitation of the homes is covered by the grant and will be added to the sale prices offered by the city. Hendrix said she expects the city to offer the Ramona Circle home for $105,000 or less.

Hendrix said the same stimulus grant used for home purchases provides $50,000 for house demolition. City Manager Rick Menchaca said eight demolitions have been budgeted and the city “may be able to do 12 more” pursuant to the Keep San Marcos Beautiful program. Menchaca credited Hendrix for San Marcos being among the top two cities in Texas for using the stimulus grant.

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15 thoughts on “City outbids private buyer for low-income home

  1. Sounds like a lot of work on the part of the city to benefit a very few people. And did I miss where Janis Hendrix is introduced into the story?

  2. Thank you Mr. Thomason for being the only person on the council to stand up for the citizens and say “This is wrong”. I can’t understand how anyone at the city could justify, not only out bidding, but paying OVER list price for a home. Ryan was the ONLY council member to vote against this.

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  4. “Thank you Mr. Thomason for being the only person on the council to stand up for the citizens and say ‘This is wrong’.”

    Ditto.

  5. At least it’s federal grant money and not money from the coffers of the City. That’s about all I can say about this deal that’s not negative.

    I would like more clarification about what Porterfield meant when she said the party competing with the City was “the people the city stole this house from”. Was this a foreclosure property?

    What makes the City think that someone with $25K in annual income can afford a $115K house????

  6. Dano,

    As I understand it, it had to be a foreclosed property to qualify for the Stimulus program $. The City went to the auction and got into a bidding war with a private party, and to secure the house, the City agreed to pay more than what the property was offered in the MLS pre-foreclosure. So the City paid too much, stole the house from a private party (that was spending their own money), and used federal tax money for a purpose for which it was not intended just so the money would not return to the taxpayers from whence it came. I know as a taxpayer, the city takes out of my right pocket, the county and state take out of my left and the federal government takes out of my back pocket. It pains me just as much when someone takes money out of my back pocket even if it is relocated to my right pocket before it leaves — taxes are taxes; debt is debt.

  7. This town has plenty of apartments for those who can’t afford a house yet. If these families would cut off the cable, quit dining out, take away the kid’s cell phone and shop Goodwill they could save enough for a down payment all by theirselves.

  8. Maybe the city could let Springtown go into foreclosure, then use federal stimulus money to buy it (paying more than the asking price and outbidding a developer or two), and then use our tax money to subsidize the developer who eventually buys the property from the city (perhaps the same developer we out-bid).

    To complete the circle, the city can pay Alamo Drafthouse to move out in a couple of years and start all over again.

  9. “At least it’s federal grant money and not money from the coffers of the City. ” Don’t you mean, at least it is US taxpayer’s money, ie, mine and yours, instead of city money, i.e., mine and yours? Oh wait, both sources are still mine and yours! We need to STOP with this attitude of “It’s not our money” when talking about federal money.

  10. Don’t get me wrong – I’m not any more for federal government spending than I am on local government spending. My thought process was threefold:

    1. local tax money being spent has a more direct impact on us,
    2. local spending should (at least in theory) be easier for the voters to influence, and
    3. the federal government is giving that money to *someone* so it might as well be us

    I know it sounds bad but I have given up on the federal government (especially the current administration) when it comes to even hoping that there will be any sort of fiscal responsibility. I still at least have hope for the City.

  11. Who exactly is the competitive bidder against the city? Is it someone that was a part of the reason for the homeowner losing the home in the first place? I’d like to know more about the private person and/or entity bidding against the city… could someone fill me in?

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