Clark County wants to amend a $6.8 million program aimed at assisting homebuyers in purchasing foreclosed homes. According to county officials, HUD’s Homebuyer Assistance Program isn’t viable in the Las Vegas market, despite Nevada having the highest foreclosure rate in the country.
The program, which was launched last year, is part of the larger federal Neighborhood Stabilization Program, a $6 billion project created by Congress in 2008 that brought nearly $30 million in funding to Clark County.
Clark County’s Homebuyer Assistance Program enlisted four nonprofit groups that aimed to help hundreds of homebuyers find homes, make down payments and aid in closing costs. Since its launch, the program has helped about 20 people purchase homes, to the tune of about $1 million.
Mike Pawlak, Clark County’s manager of community resources management, says he doesn’t know the exact reason the program hasn’t succeeded, but thinks that a variety of issues account for the struggle. “The speculation is that the federal guidelines and rules that we have to pass on to our nonprofits, which they have to pass on to the homeowners, are too stringent and too slow.”
Those requirements ranged from price (homes must be purchased at a minimum of 1 percent below fair market value) to lead-based paint and more. But the biggest obstacle was the competition for foreclosed properties.
“Folks out there, investors and others, are making cash offers and really just buy property sight-unseen if it’s in a certain price range,” Pawlak says. “The sellers just didn’t respond to the offers from the NSP consumers.” The program targeted nearly 200 eligible homebuyers, and the participants were making multiple offers. “We heard from some of our nonprofit partners that an individual might make up to 30 offers and none of them get accepted,” Clark County grants coordinator Lyndee Lloyd says.
Dennis Smith, CEO of Home Builders Research, says that the foreclosure frenzy has made it nearly impossible for the average homebuyer. “The competition with investors on the foreclosed homes, it’s almost eliminated the typical homeowner-occupant from buying a foreclosed home,” he says. “They put in an offer and then they get beat out by a cash offer from an investor 98 percent of the time.”
Smith was more direct in his criticism of the Homebuyer Assistance Program, and other similar government programs. “Most of these programs don’t stand a chance from the beginning, because the programs are put together by politicians and bureaucrats instead of industry professionals,” he says.
Although this particular program has struggled, Pawlak says there are other programs under the Neighborhood Stabilization Program umbrella that have been successful. His goal is to reallocate funds from that program into those areas that have been doing well. “It [the Homebuyer Assistance Program] was only one activity among several that we were doing, so we didn’t have all our eggs in one basket,” he says.
Other areas include a redevelopment project to construct a 22-unit affordable and wheelchair-accessible apartment complex, and a Rehab Resale program, in which three nonprofit groups are in the process of acquiring and rehabilitating 27 affordable single-family homes.
Pawlak emphasizes that the $6.8 million will, indeed, be used, and the redirection is a necessary step in making that happen.
“There has been criticism early on that we weren’t obligating money. We have over $22 million that has been obligated,” he says. “We’ve purchased 140 properties. We’re well ahead of the national average in terms of our obligation rate. And I would fully expect that we will obligate all of our money and be ahead of schedule.”