Andoned properties are the biggest eye sore in a neighborhood. But it takes a village to make things right.
The Community Reinvestment affordable housing program—jointly introduced by the City of Reading, the Reading-Berks Association of Realtors and the Pennsylvania Association of Realtors—offers a special tax incentive to buyers who purchase abandoned Reading properties.
Realtor members have been working with city officials to customize the program to the specific needs of Reading, says Chuck Liedike, government affairs director of the Reading-Berks Association of Realtors.
One feature that makes the Reading CoRe program unique is a real estate transfer tax incentive for participating borrowers.
The real estate transfer tax has been reduced from 5% to 1%. “It is the main tax incentive offered,” he said. It earned the unanimous approval vote of local government bodies such as the municipal school board and other local entities.
The residential tax abatement program benefit is one of the most important features, Liedike says, since the tax is waived for up to 10 years.
It means the homeowner becomes eligible to pay full residential tax abatements only 10 years after the property purchase, once all the planned renovations have been completed.
As co-owners of abandoned properties the City of Reading and the Reading Redevelopment Authority create for-sale listings that are passed on to local Realtors.
Borrowers have the option to choose from at least three participating local or regional banks.
Qualifying buyers need have a good credit score and acceptable debt-to-loan ratios, he adds, nonetheless the most important qualifying criteria, by far, is a well-crafted financially sound property renovation plan.
The buyer is required to present a detailed home repair plan that includes repair costs and monthly budgeting.
The homebuyer must complete and file a home repair plan to both the City of Reading and the lender before mortgage loan origination and closing.
The program is a collaborative effort of local- and state-based private and government entities.
Participating lender-servicers, Realtors, appraisers, construction companies, or other housing repair and management professionals ensure a home repair plan meets the criteria necessary to qualify for the program and comply with property codes.
For example, real estate appraiser reports and feedback from Realtors help determine neighborhood values and surrounding housing prices to ensure the property is listed for sale at the appropriate price, Liedike says.
CoRe-designated vacant homes often need extended renovation.
To compensate that disincentive the purchasing price is calculated by deducting total home repair costs (as they appear in the approved home purchase plan) from the area average property price. The math implies that after the buyer has completed the repairs (by investing the money to implement all the home improvements described in the repair plan) the property value upgrade will make the price comparable to the average property price.
Property prices in the area vary. According to PAR president, Frank Jacovini, many first-time buyers and working families of teachers, firefighters, police officers and other professionals whose services are detrimental to the wellbeing of their community “are priced out of today’s real estate market.”
The first vacant home placed with the program for market testing was in a neighborhood where prices range from $70,000 to $120,000.
It was selected because it is one of the nicer neighborhoods of the city, Liedike says, which makes the property more attractive to buyers and at the same time “has an uplifting effect” to the neighborhood and surrounding homes.
Affordability and the preservation of property values appear to appeal to local officials and potential buyers alike. He reports there is an encouraging level of interest for the program.
According to Liedike, City of Reading officials and its 80,000 residents have taken the lead in a state project designed to minimize the depreciation effect of abandoned vacant properties in affected neighborhoods.
Local officials are in the process of inspecting, reporting and monitoring vacant properties in the area. “I do not have current vacant property inventory data,” says Liedike who argues that the number, however small, is a statistic everyone in Reading would like to improve.