Low Bid, High Gain
Forget about that oceanfront condominium on Collins Avenue your real estate agent assures you is a steal. Toss away the floor plan for that new split-level out west. The true real estate values in Dade lie in a more humble section of the county: Little Haiti.
That's where a select group of savvy property owners have chosen to stake their claim. According to neighborhood housing activists, these shrewd investors will commonly buy a home for $20,000 to $60,000, divide it into several apartments (sometimes illegally), and then charge as much as $600 per month in rent for each unit. Depending on the original investment, some buyers earn back their money in less than two years.
Many of these real estate bargains can be found through the local office of the U.S. Department of Housing and Urban Development (HUD), which takes control of properties purchased with government loans if they fall into foreclosure. When it comes time to sell those properties, the agency uses a sealed bidding process. In addition, and to the consternation of some aggressive investors, HUD also gives preferential treatment to low-income families seeking to buy their own homes. Known as "owner-occupants," these would-be homeowners are allowed to be first in line to bid on the homes, and have an exclusive ten-day period to do so.
But don't despair if you're ensconced in your Brickell condo or suburban ranch house and have no intention of moving to Little Haiti. You can take a tip from others who have found a simple way around the federal government's bothersome rules and regulations: Just lie. Declare yourself to be a prospective owner-occupant. That's apparently how some investors recently ended up owning HUD houses, and at least one competing buyer i miffed.
The Little Haiti Housing Authority (LHHA) had a keen interest in three HUD homes last year but never even got a chance to bid for them. And the homes, contrary to federal rules, are now rental properties, not occupied by the owners as intended.
A nonprofit group funded by public grants and private donations, the LHHA seeks to promote responsible home ownership by purchasing and rehabilitating foreclosed properties from HUD, then reselling them to qualified families who complete an eight-week educational program designed to enhance their chances for successful ownership.
LHHA went from buying about half a dozen HUD houses per year since 1990 to none at all in 1994. Part of that decline was due to a change in federal regulations. Nonprofit organizations previously enjoyed the same advantage as potential owner-occupants -- they were allowed to be first in line to bid on HUD homes. But after lobbying by private investors who complained of unfair competition, nonprofits lost that privilege and were forced to wait ten days before bidding, just like any private business interest.
But LHHA officials believed something else was at work, because not a single one of the most attractive HUD properties lasted beyond the ten-day waiting period. David Harder, executive director of the housing agency, noted that only about a third of Little Haiti residents are homeowners. The sudden interest in residential property (in a six-month period last year, more than twenty HUD homes were sold in the area) aroused his suspicions.
In fact, the three choice properties the LHHA had wanted for its program were bought by people who converted them to rentals almost before the ink had dried on the mortgage contracts. In each case, and at risk of criminal prosecution, the purchasers claimed on HUD documents that they would be owner-occupants. Guy Jean Jacques, who in July successfully bid $45,100 for a house at 6229 NE First Ave., even received a $1000 renter's bonus from HUD, intended to give a financial boost to those who are forced to break rental agreements when they move into their own homes. The family now occupying the house says they began renting it in September and are paying $500 monthly to Jacques. (Jacques did not respond to telephone messages seeking comment for this story.)
In late June, nineteen-year-old Suzette Pooran, whose parents own several rental properties in Little Haiti, purchased a house in her name at 344 NE 57th St. Her winning bid was $24,500. In her bid documents, Pooran described herself as an owner-occupant, even though she continues to live at home with her parents. "I prefer not to talk about it," she says. "My dad is taking care of it for me." (Pooran's father, Nandoo Pooran, was out of town last week and could not be reached for comment.) The Little Haiti Housing Authority had hoped to buy the tidy one-story house and prepare it for ownership by a low-income family. Instead it's being rented for $675 per month by Macula Etzienne, who says the price is worth it in order to live in a place that's free of rodents and has reliable plumbing.
Estela Williams pays $450 per month for one of two apartments carved out of the third property sought by the LHHA. Located at 96-98 NE 68th Terr., the ranch-style house was purchased in July by Firmin Escarmant after he bid $47,900. In HUD paperwork, Escarmant stated that he would be an owner-occupant, and in an interview he said he hopes to move into the house someday. He's renting it now, he claimed, in order to save money for renovations. (Escarmant also owns property in the prosperous Morningside neighborhood between Biscayne Boulevard and the bay.)
Laments LHHA executive director David Harder: "By the time the investors were finished, there was usually nothing left. We went from purchasing properties on a regular basis to not purchasing any."
Although the federal government recently rewrote HUD regulations to once again put nonprofit organizations on an equal footing with owner-occupants, the problem of allegedly dishonest purchasers continues to bedevil HUD officials. "You have to take someone at their word," says Sara Warren, HUD's local director of single-family housing. "It's just impossible to check everything up front." (Warren's Coral Gables office is a busy place, responsible as it is for ten South Florida counties selling about 200 houses every month.)
"We try to be fair about it, but we're not policemen," adds a HUD supervisor, who asked that his name not be used. The supervisor says he tries to double-check questionable bids as time permits. Telltale signs include buyers who swear they are moving from upscale neighborhoods such as Coconut Grove to less affluent areas like Opa-locka or Little Haiti. In those cases, the supervisor checks to see if the buyer owns other properties or if he has already received a government-insured mortgage from the Federal Housing Authority, a division of HUD. Nevertheless, Warren admits that many improper or falsified bids slip through. "We're severely understaffed," she explains. "We know they're out there, and we do catch some. But we have to believe that most people are honest."
Even when the local HUD office does spot something amiss, Warren says there's little she can do except deny the sale. In extreme cases, a buyer can be barred from participating in HUD programs for up to a year, though a cumbersome appeals process deters officials from taking that step.
According to federal statutes, anyone shown to have knowingly provided false information to HUD is subject to criminal penalties of up to two years in prison and $5000 in fines. In practice, however, prosecutions are seldom if ever pursued. "In reality, this is Miami," Warren allows. "A $50,000 mortgage is nothing compared to the millions of dollars in drug problems we have." Long-time local HUD employees say no one in memory has ever been criminally prosecuted for being dishonest on a sales contract.
Meanwhile, rental conditions in Little Haiti appall even the most hardened activists. "I don't know how to describe this any more," says Jacqueline Michel Chow, a paralegal at Legal Services of Greater Miami who has dealt extensively with Haitians trying to resolve their housing problems. "The landlords refuse to fix anything. If the tenants complain, they either increase the rent or ask them to leave. There are rats, mice, some of the apartments have scorpions coming up from the bottom of the house because the plumbing is so bad. They have mildew all over the door, the carpet smells, there are holes in the screen. It's not humanly possible for anyone to live there, yet they are paying every month.
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