Real Estate Deals Help Clifton, Buyers

Real Estate Deals Help Clifton, Buyers

Quietly, with little fanfare, the Town of Clifton has become a real-estate mogul — in a nice way.

Through an agent, it's purchasing homes throughout Virginia, fixing them up and then selling them below market value to people who, otherwise, couldn't afford them. In just three months, Clifton's bought 25 homes — worth more than $2 million total, sold the first one last week and has sales contracts on eight more.

Town Mayor Jim Chesley couldn't be happier with the venture's success, but readily admits it surprised even him. "Tough financial times make people look at creative ways to make money," he said. "I thought it sounded like a good idea, but I didn't expect it to take off like this."

The deals involve homes whose owners purchased them with Federal Housing Administration (FHA) mortgage loans. When these owners default on the loans, the homes revert back to the U.S. Department of Housing and Urban Development (HUD), which then lists them for sale.

And that's where Clifton's agent, Commercial Lending Corp. (CLC) of Fairfax comes in. "We pull up HUD properties from the Web site and do studies on each of the homes," explained CLC Pres. John Eubank. "We do research on the home's condition, the repairs needed, how much the work will cost, the neighborhood it's in and what it'll sell for. That determines whether it would be a viable property to buy to make money for the town."

Actually, the idea's been percolating in Clifton for more than a year and finally came to fruition in November. Before then, the town considered other fund-raising ideas — such as real-estate or meals taxes or leasing fees from a telecommunications tower — but none proved popular with the residents or Town Council.

Instead, the town relied on the proceeds from its annual Haunted Park event at Halloween. And with only 200 residents, Clifton couldn't accomplish all the town improvements that had been planned.

"I'm strapped for money," said Chesley. "We haven't been able to match the federal grants we got six years ago to put in the sidewalks and trails that are an extension of the bike-plaza project. The old house we [formerly] used for Town Council meetings needs repairs, but we can't afford to do them."

Although the first agent Clifton chose didn't pan out, Eubank — who lives right outside the town and had been a volunteer helper on previous Clifton fund-raisers — didn't give up. "This seemed like a natural fit," he said. "I kept calling and said, 'I'm still interested.'"

The town then turned to attorney and Clifton resident Brant Baber. "[He] was the town watchdog," said Chesley. "He has lots of experience with HUD foreclosures, so we asked him to look into Commercial Lending's offer to the town and evaluate the program — because it was almost too good to be true."

Luckily, it was true. The Town Council gave the go-ahead in November and got results immediately. "Within a week, we were starting to bid on homes and win contracts," said Eubank. "We bought two homes, that week — Nov. 18 — townhouses in Dumfries and Virginia Beach. And we've been averaging between two to three properties a week, since then."

When Clifton's purchases totaled a whopping $1.8 million, they caught the eye of Fairfax County Board of Supervisors Chairman Katherine "Kate" Hanley, who read about them in a Suffolk newspaper. "She called me up and asked where we got the $1.8 million, and I told her we didn't," said Chesley. "The agent is responsible for it."

And actually, CLC doesn't even have to put down the entire purchase price of a home — just enough to secure the sale. Usually, property purchased this way is within the buyer's local area. "But we don't have any HUD foreclosures in town," said Chesley. "And HUD gives Clifton the authority — as a nonprofit [organization] or municipality — to buy anywhere in the country."

For now, the town is confining its purchases to Virginia. It's already purchased single-family homes, townhouses, condos and duplexes in places including Warrenton, Norfolk, Newport News, Richmond, Ashburn, Sterling, Manassas, Manassas Park, Virginia Beach, Dumfries and Chesapeake.

As for those the town has already repaired and has sales contracts on, said Chesley, "These are houses I wouldn't be ashamed to live in." Eubank said the lowest-priced home Clifton currently has for sale is half of a duplex in Suffolk for $51,900. The highest one is a four-bedroom, three-bath, two-car detached-garage townhouse in Sterling for $250,000.

"Most of the time, we end up selling the homes at $10,000 to $20,000 below market, after they're all fixed up," said Eubank. Last week's sale, Thursday, Feb. 6, was a three-bedroom townhouse in Manassas. "HUD was asking $203,000 for that house," he said. "The town was the only bidder. We painted it, put in new carpet and did other repairs and sold it for $193,000."

There are some rules, however. HUD sets the maximum price each home may sell for, and the town cannot make more than a certain percent of profit from its sale. Buyers must meet income restrictions — which vary somewhat, depending on the home's location and the size of the buyer's family. And homes may not be purchased by investors — buyers must live in them as their primary residence.

Eubank said HUD currently has 400-500 properties available in Virginia and releases some of them for sale, each week. "We go into it looking to make $3,000 or $4,000 a home for the town," he said. But he stresses that the program is not designed simply as a "money-making tool" for Clifton.

"We're taking properties HUD wants to unload," he explained. "We fix them up, we put families into homes they might not be able to afford otherwise and, along the way, the town makes some money." HUD loans are geared for low-income families, and Clifton is even taking things a step further by doing a good deed for firefighters, police officers, teachers and single parents. The town will contribute up to 3 percent of their home's purchase price.

"We take that out of the town's share of the profits," said Chesley. "It's the right thing to do." Otherwise, the town receives 55 percent of the profit from a sale and CLC receives 45 percent.

Chesley said CLC only buys homes not needing more than $5,000-$6,000 in repairs, including things such as electrical work, hole-patching and new roofs. "It's helping us and we're helping people," he added. "Brant's been invaluable, and John's doing an extremely good job — I have complete faith in both of them."

Noting that "most towns aren't as small as Clifton," Eubank said he "can't think of another town [that this arrangement] would work for." He said it would be too much work for too little financial return for towns with bigger budgets. But it's just right for Clifton — to whom a few thousand dollars, here and there, means a great deal.

For Southern Virginia properties, CLC works with a Realtor in Virginia Beach. Locally, Taya Abbott of Long & Foster, Realtors in Clifton, is CLC's listing agent. Prospective buyers may call her at 703-222-5955 to learn what homes are available in Northern Virginia and to see if they're qualified to purchase them.

They may also go to, click on "HUD homes," "Virginia," "go to the requested page" and "available properties for sale." Listings change daily.

"I've been in the mortgage business for 15 years and bought and sold lots of homes, myself," said Eubank. "And this program shows that everybody — no matter how small — can make a difference in someone else's life."

Baber, too, also has a wealth of experience as a lawyer specializing in home financing. He negotiated the relationship between Clifton and CLC and is Eubank's contact in the town when questions arise about the homes and the bidding on them.

"Our objective is not to make the most profit on each house, but to do what needs to be done to make them as close to new, as possible," explained Baber. "The fact that investors can't buy them is great," added Abbott. "They'd gobble them all up and the people who really needed the homes couldn't buy them."

Baber said the average sales price of the 25 homes Clifton's bid on is $120,000, and the town's total property commitment is "something over $2 million." So far, he said, "This has been a smashing success. Time will tell how profitable it will be and how much good it will do."