No funder or lender will take a project proposal seriously unless the developer can show irrefutable site control. Acquisition of all of the properties on a single street or block may require using several acquisition techniques such as:

1. Negotiated Purchase from Private Owner

Nonprofit corporations can negotiate with private owners to buy property at a mutually agreeable price. Sometimes a bargain sale can be negotiated, under which the nonprofit pays less than full market value for the property, and the owner taxes the balance as a tax deduction. Sales from the Estates of the Deceased are also negotiated private purchases. Estate sales present opportunities for below-market and expedited purchases when the heirs need a tax deduction or need to dispose of "problem properties" quickly. While most property sales take place through a Contract of Sale, which binds the buyer to acquire the property, an Option Agreement, which is the right to purchase for a set period, is often used, particularly with respect to vacant land purchases where zoning and building approvals are in question. Realtors can be a good source for referring properties for sale in the private market. Unless the CDC has engaged in a Buyer's Broker Contract with a Realtor (where a Realtor is paid to find properties for the Buyer), the Seller is responsible for paying the cost of the Realtor. Cold calls and letters to owners of properties targeted for acquisition, yet not list for sale can be effective in initiating a private sale negotiation. Owners of properties can be found by researching:

Multiple Listing Service City Tax Assessor Records Preliminary Title Insurance Policy

The Tax Assessor records can provide information on whether or not the property owner is up to date on payment of City real estate taxes. If the address to where the tax bills is sent is different from the address of the property, then it is reasonable to assume that the property is a rental. A preliminary Title Report is the most effective way to verify ownership and amount of liens owed for a property.

2. Acquisition From City Or County

Often the City or County department that manages sales of tax foreclosed properties is separate from the typical housing and community development department with which you may have a relationship. It is critical that your organization develops a relationship with both City and/or County departments so that they look for acquisition opportunities on behalf of your target neighborhoods. Some CDCs have prevailed in getting their organization designated as Developer of Record for a target area. This designation gives the CDC first right to acquire City/County owned property so long as what is developed is consistent with a neighborhood revitalization program. A. Acquisition from the Municipality at Auction - Most municipalities periodically hold auctions of city- owned properties. Municipalities can establish specific conditions for purchases at auction, including requirements that the buyer rehabilitate the property within a specific period of time. B. Acquisition from the Municipality by Negotiation - Some counties may have local land and building laws that permit municipalities to sell, on a negotiated basis, land or buildings to nonprofit developers to construct or rehabilitate city-owned properties for low- and moderate-income housing. Often, the property does not have to be put up for auction or other competitive bid procedure, and the price can be negotiated between the municipality and the nonprofit developer. C. Acquisition from the Municipality by Negotiation for Redevelopment Areas - Some counties have redevelopment and housing laws that permit municipalities to sell land or buildings in redevelopment areas on a negotiated basis to nonprofit or for-profit developers for any purpose consistent with the redevelopment plan for that area. The property does not have to be put up for auction or other competitive bid procedure, although some municipalities use a Request For Proposal procedure to select the purchaser. The price can be negotiated between the municipality and the developer. The municipality can broadly impose performance requirements and conditions as a condition of sale.

3. Gift

Nonprofit corporations may be able to obtain property from private owners as a gift, since the owner can treat the value of the property as a tax deduction. Consult with a tax attorney to make sure that you know what documentation is needed so that the Seller can comply with tax laws.

4. Purchase from Lender

Lenders, including banks, the Federal Housing Administration (FHA), and others, often obtain properties as a result of foreclosure, which they are eager to unload. A nonprofit corporation may be able to negotiate attractive terms to take properties off such lenders' hands. These lenders often use local real estate brokers to manage the disposition of these properties. It is worthwhile to call lenders for their list of disposition brokers and invest in developing relationships with the parties responsible for loan workout within the financial institution.

5. Purchase from State, Federal and Other Public Sector Agencies

In some communities targeted for revitalization, there are parcels that may be owned by State, Federal or other public sector agencies. These parcels are often vacant buildings, staging areas or lots that are likely to be considered surplus or no longer vital to the agency. Some strategies for getting one of these agencies to consider selling may include:

Letter of Interest to Real Estate Property or Asset Management Departments; Letter of Interest to Executive Director of the Agency; Ask your Mayor, City Council member or Housing and Community Development Director to seek an introduction to a decision-maker; If a Federal Agency owns the property, contact a district office member of Congress or Senate and present this as a request for constituent service. Once you know who the decision-maker is, ask the member of Congress or Senator to write a letter or make a phone urging the agency to convey the property at fair terms in a timely manner.

How Municipalities Acquire Properties

A sign of a good working relationship with your local government is when they commit to use their resources to acquire problem target properties on your CDC's behalf. The following are some tools cities and counties can use for analysis:

1. Tax Foreclosure

If property owners do not pay property taxes on their land or buildings, the municipality puts the property up for tax sale, offering investors a tax lien on the property. If no investor buys the lien, the municipality gets to hold the tax lien. If the property owner does not pay the tax arrears to the municipality within a specified time frame after the tax sale (check with your local government), the municipality may take the property through tax foreclosure. A tax foreclosure, if done properly, wipes out any liens, such as mortgages or judgments, held by private parties against the property.

2. Condemnation Via Eminent Domain

If a municipality needs a piece of a property for a public purpose, it has the power to take the property, or compel the owner to sell the property to the municipality. This procedure is known as condemnation via eminent domain. The municipality must pay the owner fair market value. Public purposes include the removal of blight through a redevelopment project, or the creation of affordable housing. In both cases, the municipality can use the power of eminent domain to acquire property, which it can sell to a developer or nonprofit corporation. Some municipalities have "spot condemnation" powers where individual scattered-site properties can be condemned. Spot Condemnation requires a local ordinance. Most municipalities that do have condemnation powers under eminent domain require that an Urban Renewal Area (URA) be established with defined borders and a certification of blight. A Redeveloper of Record (such as a CDC) can petition the municipality to condemn properties within the URA on their behalf. Condemnation is not cheap and it not speedy. CDCs that seek acquisition through condemnation must factor the following issues into their plans:

Properties acquired through Condemnation via Eminent Domain must be purchased at fair market value and the CDC must show that they have the funds to pay for this Owner-occupants and/or renters are entitled to federal relocation benefits Approval of an Urban Renewal Area and the properties to be condemned are subject to public comment and a vote by City council and signature by the Mayor

Gift or "Donor / Taker" A municipality may accept property as a gift from the property owner. The owner is entitled to take a tax deduction for the value of the property, just the same as if it were donated to a tax-exempt nonprofit corporation. A gift of property to the municipality does not wipe out any liens, such as mortgages or judgments, held by private parties against the property.

3. Negotiated Purchase

A municipality may negotiate to buy property from its owner, just as a private party may buy property for a mutually acceptable price. As with a gift of property, a negotiated purchase does not wipe out any liens, such as mortgages or judgments, held by private parties against the property.

Next: A1. Site Selection and Acquisition Issues to Consider

OHIO CAPITAL CORPORATION FOR HOUSING