Schenectady to put houses up for bid to contractors for rehab, sale

PHOTOGRAPHER: Kathleen Moore

The city is putting houses on the market next week as it tries to jump start a new policy that might eventually put Schenectady on solid financial footing.

Prudential will market 15 to 20 houses beginning next week, and then will begin an aggressive campaign to get people to buy houses that are being rehabilitated, Mayor Gary McCarthy told the City Council on Monday.

About 50 houses will be rehabbed by experienced contractors who have been screened for ability and financial resources. An architect will draw renderings for those projects, which Prudential will use to drum up interest in houses that still look like construction zones.

About 50 other foreclosed properties are vacant land, which will also go on sale this month. Staffers are negotiating with owners of adjacent properties and others who might be interested in the land.

That will leave about 15 to 18 properties in need of demolition, Building Inspector Eric Shilling said.

“I was very surprised by the quality of the structures we were investigating,” he said.

Even in Hamilton Hill and Mont Pleasant, where many of the foreclosures are located, most of the houses were in good shape, he said.

A single contractor has been designated to design all 50 projects, and detail all the work needed to bring the properties up to code and into saleable condition.

Rehab plans will take into account the neighborhood — a house in a poor neighborhood might not sell for as much as a house in a middle-class neighborhood — but Shilling said he’s not going to reduce quality significantly to keep prices low.

“We should be trying to raise the bar a bit,” he said.

Pre-screened contractors will bid on each project, with the lowest bidder winning the house. That bidder can market the house any way they like, and can choose a Realtor, or work with Prudential to find buyers. Those who buy the house early in the process could even choose to change parts of the rehab plan — adding granite countertops for an additional cost, for example.

So far, 10 to 12 contractors have been approved to bid, with two more in the process, Shilling said.

He’s hoping for more contractors.

“But we certainly have enough to create a bidding war,” he said.

If the house sells for more than what the contractor bid, the city and the contractor will split the profit. If the house doesn’t sell, or doesn’t sell for what the contractor bid for it, the contractor suffers the loss.

Each house sale must also cover for the cost of the broker, the architectural renderings and the initial project design before the city and contractor split any profits.

Corp. Counsel John Polster said that the typical house might sell for $100,000 and need $60,000 in renovations. In that case, he said, the city would end up with about $15,000.

If the city was to recoup all the taxes owed on each property, it would need to collect $16,000 per property. While that’s unlikely for vacant land and the houses that need to be demolished, Polster said it should be achievable on most rehabs and the houses going on sale next week.

Some properties might not be on the rehab list much longer, though.

Polster said he has been contacted by several former owners who want to buy back their properties, paying the taxes in full. He warned the City Council that if it allowed buy-backs, it might get stuck once again with owners who do not regularly pay their taxes.

But council members said they were wholly in favor of letting owners prove that they would be responsible.

“I would like to take every opportunity to get someone their property back,” said Councilwoman Leesa Perazzo.

Council President Denise Brucker suggested each owner make their case to the property disposition committee, which could make a recommendation to the council.

She warned that she would ask why owners didn’t pay their taxes. If they were receiving rent, she said, she would question why that money wasn’t spent on taxes.

The council informally approved that plan; a formal vote could come as soon as Sept. 24.

The council has already agreed to let owner-occupants buy back their property for the cost of the taxes plus $1,000. If other owners are also allowed to buy back their property, they will have to pay the full tax bill as well as the city’s costs to foreclose on their property. Some properties cost much more than others, depending on legal challenges and complications in finding the owners.