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Nearly half SPP homes on market are foreclosures, short sales

Almost half of the St. Paul Park homes for sale in July were foreclosures or short sales, a recent study shows.

According to a Minneapolis Area Association of Realtors study, St. Paul Park ranks third in the Twin Cities for the percentage of homes for sale in July that were lender-mediated.

The study data shows that of the city's 59 homes for sale last month, 26 of those -- or 44 percent -- had been foreclosed on, or were being sold at prices less than the outstanding mortgage debt, in most cases, to prevent foreclosure.

In Cottage Grove, the rate was 28 percent and in Newport it was 22 percent, according to the study.

The higher-than-typical foreclosure rate means the Public Works Department and community service officer have taken on some extra work, but city staff is also looking for opportunities to possibly rehab homes during this slow housing market.

St. Paul Park's Public Works department has seen a jump in requests to shut off the water to homes, and has had to step in and perform yard maintenance three or four times due to code violations on vacant homes, said Public Works Supervisor Lee Flandrich. In one instance, the department even had to take down a tree, he said.

When a code violation on a vacant property comes up, the city first contacts the property owner -- the lender in the case of a foreclosure -- and tells the owner what the violation is. It's only when the owner doesn't fix the problem themselves, that the city ends up doing the work for a fee, he said.

Flandrich said he's seen a lawn service out around town that he suspects is being paid to take care of some of the bank-owned properties.

Vacant homes have the potential to visibly damage a neighborhood, but when foreclosure is involved they can also damage the bottom line for others trying to sell their homes.

Michael Smith, a Cottage Grove Realtor who specializes in foreclosures, said a high percentage of foreclosure sales affects the sale prices of surrounding homes on the market. Banks want to get the most they can out of a house, said Smith, of Smith & Forbes Real Estate Group, Edina Realty, but they'll steadily drop the price on it until it sells.

The effects of a high foreclosure rate might seem obvious, but why the percentage of lender-mediated sales is so much higher in St. Paul Park than in neighboring cities isn't so clear.

Smith said he doesn't think there's anything unique that would have caused more foreclosures in St. Paul Park. Troubled homeowners there just fell into the same predicament that so many others have -- they assumed that home values would continue to rise, and ended up with mortgage payments that increased too steeply for their budgets.

St. Paul Park City Administrator Kevin Walsh also said he's not sure why the city's level of foreclosures and short sales would be higher than in other areas. He did say that much of the city's housing stock is affordable, and the areas with cheaper housing seemed to be hit harder by foreclosures due to sub-prime loans.

According to Washington County's 2008 Assessment Report, the average home value in St. Paul Park is $192,500 compared with $217,500 in Newport and $243,900 in Cottage Grove.

There could be a silver lining to the problem of foreclosures in St. Paul Park. The city is studying the possibility of purchasing some of the foreclosed homes, renovating them and selling them at an affordable rate, Walsh said.

It's possible the city might be able to use money from a housing tax increment financing district to do it, Walsh said.

The district had a fund balance at the end of 2007 of nearly $2 million, a portion of which, if not spent by 2012, must be given up, said Kimberly Sommerland, city finance officer.

Walsh said city staff members are still researching whether they can legally use money from that fund to rehab homes, and he couldn't say when the issue would come before the St. Paul Park City Council.

Patricia Drey Busse can be reached at