The City Council's agenda-fixing session Monday is packed with important discussion items along with lots of proposed resolutions and ordinances. Click here to see it.
As usual, some of the captions tell little about the true subject matter. Take this one, for instance: MC 2010 – 21 AN ORDINANCE TO AMEND AND SUPPLEMENT CHAPTER 6 BUILDING ARTICLE 5 CERTIFICATE OF COMPLIANCE OF THE MUNICIPAL CODE OF THE CITY OF PLAINFIELD NJ 1971. INSPECTIONS DIVISION.
According to information the council packet at the Plainfield Public Library, the proposed amendment would permit an exemption from the Certificate of Compliance rules for "short sales," where a bank may be selling a property as is, for less than the amount owed, rather than go through a lengthy foreclosure process. Some such homes may even be vacant.
Plainfield's Certificate of Compliance ordinance calls for a house or apartment to be brought into compliance with the city's Property Maintenance Code, either by the buyer or the seller, before it changes hands. The amendment states that after closing, it would be subject to all rules of the Certificate of Compliance. This suggests that a buyer or investor might be waiting in the wings for the lender to complete the short sale, then to snap up the property at a low price. Perhaps it is just a way to get things moving in a slow market, although online sources paint investment in real estate short sales as a fairly complicated transaction among the seller, the lender and the investor.
It would be interesting to hear who called for the exemption and what guarantees there are that a house would be brought up to code eventually. Certainly neighbors don't want a vacant house in their midst, which might attract squatters and vandals. On the other hand, Plainfield's main ratable base is residential property, so a lot of short sales could bring down the value of a neighborhood.
Plaintalker welcomes any comments or explanations from those knowledgeable on real estate short sales. Here is one viewpoint, here is another.
There are many other items of interest. Plaintalker hopes to post more later.
--Bernice Paglia
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This sound like a giveaway to the banks, where they're dangling the carrot of getting troubled properties into stronger hands at the potential cost of degrading the housing stock through non-compliance.
ReplyDeletePresumably, as a community, we have a vested interest in maintaining compliance. The banks have an interest in maximizing their profits.
There is a price at which a real estate transaction will take place AND the property will be in compliance.
If we exempt these sales from being in compliance then the properties won't be compliant and the community will suffer the costs of non-compliance while the banks and new buyers would share the savings from not having the cost of maintaining compliance.
If there is no exemption then there remains the cost of maintaining compliance and the benefit to the community of such maintenance. A new buyer who still has to pay the cost of compliance won't be willing to pay as much for a property. So the banks lose out there. But the banks don't care if there's a transaction with or without compliance. It's just another expense; the market will clear with or without it. We either decide compliance has value or not, in terms of property degradation and community values. Banks are looking to reduce expenses to maximize profits.
That's my read, and it will be interesting to find out, as you suggest, who called for the exemption, and of course the meandering line to who gets to save a bundle.
Thank you for your valuable service bringing our attention to these things. It's a real minefield out there.