From the Star Ledger:
This time last year, John Errico and Shannon Guy took what they believed would be the first step toward their shared dream.
Newly engaged, the two attorneys spotted news clippings detailing vacant lots in Newark being offered for just $1,000 each as part of a couples-only Valentine’s Day sale. They were among the first to arrive at City Hall that morning, and jumped at the chance to build on a small plot on Garside Street in the city’s North Ward.
“It was an emotional decision,” Errico said. “We wanted our forever home.”
A year later, the purchase that seemed too good to be true has been just that.
While construction for the three-family home they envisioned would have required a loan of at least $250,000, properties just up the road from their tract were selling in the high five figures.
“We didn’t really drill down into what are the actual financials of it (at first),” Errico said. “It was kind of hard to swallow spending $300,000 or even $350,000 to build a new home, when you can get an older home for $90,000.”
Errico and Guy’s story is not unique.
They are among 21 couples (or former couples) who have walked away from the Valentine’s Day properties. Dozens of others have found their own hopes delayed by difficulties securing construction loans.
As of Sunday, only five couples who forked over an initial $500 last Feb. 14 have officially closed, though city officials say another seven are in the pipeline. Eleven others have received approvals to begin construction, but are still pursuing loans.
Allowing for two other properties that had to be pulled back after city officials realized they were zoned for commercial use, that leaves 54 lots.
The owners of those 54 total lots have struggled, officials say, to navigate the financial and governmental channels needed to start building.
The city did not require proof of financing until home designs and site plans were approved, and despite the immediate equity gained through the cheap purchase, most buyers found themselves unable to secure financing to put shovels in the ground.
“We’re still in an economy that’s post-recession, and it’s really hard for the average Joe to get a construction loan,” said Baye Adofo-Wilson, Newark’s deputy mayor for housing and economic development.
On Sunday, officials announced a second phase of the sale, which will enlist the Newark Community Economic Development Corporation to guide many buyers as they look to obtain architectural renderings, construction documents and approvals from city boards.
In many cases, the lots will be sold to a handful of developers, who will build one and two-family homes for sale back to owners at $179,000-$249,000. The 21 lots already returned to the city will also be sold to a local developer for sale back to the public.
Initial agreements signed with buyers require construction to begin within 18 months of closing on the vacant lots, and owners must live in the property for a minimum of five years once the home is built. Adofo-Wilson said that while a handful of lots are on track to meet the requirements, the city has shifted its focus to encourage construction regardless of pace.
“Our goal is to sell all the city-owned lots that we can sell. We believe that’s true economic development. It doesn’t really make sense for the city to hold these lots,” he said. “We learned from the experience.”