Fixer-upper: Soon, you can't sell it 'til you fix it

Grappling with a glut of vacant houses, several suburbs are considering a controversial policy: Before you sell it, you have to fix it.

Brooklyn Park now requires houses to be inspected and brought up to code before they can be sold. This summer, St. Paul began requiring the same for vacant homes in rough shape. Robbinsdale and Coon Rapids are discussing similar programs.

The cities are trying to maintain quality housing stock in the midst of a couple scenarios: People buying cheap houses without understanding that they might need $80,000 in repairs. Or investors buying vacant houses only to flip them without doing necessary fixes.

A policy that requires repairs when homes are sold -- often called a "point-of-sale" ordinance -- saves neighborhoods, they say.

"We want to make sure that when a house comes back online that it's serviceable," said St. Paul City Council Member Dan Bostrom, whose city passed its policy in June.

But real estate agents have resisted. They say the extra step bogs down an already complicated process, interferes with owners' rights and burdens sellers. In short, it keeps vacant homes vacant.

"It's frustrating to no end," said Frank D'Angelo, broker and owner of Blaine-based EXIT Realty Executives. "As much as they had great intentions, it's really jeopardizing the housing stock."

Cities' programs differ, sometimes dramatically. Brooklyn Park requires repairs for all homes, while St. Paul requires them for only certain classifications of vacant houses. Hopkins allows independent evaluators to do the work, while Brooklyn Park requires the inspections be done by city staff. The cost of an inspection also varies, from about $50 to $200.

Many cities allow buyers and sellers to set up an escrow for the repairs. All cities say they focus inspections on "hazardous" conditions, not cosmetic issues.

"We're not looking at carpet and paint," said Jim Hilgendorf, a building official with Brooklyn Park. "It's plumbing systems, electrical systems, roofs -- sticks-and-stones kinds of stuff."

Some cities have required such inspections and subsequent fixes for years. Osseo, for example, began its program in 2000, because of its aging housing stock, said city planner Jeffrey Dahl. Bloomington and St. Louis Park have long-standing programs as well.

But more cities have explored the idea recently because of the surge in vacant and foreclosed properties. Robbinsdale has discussed point-of-sale inspections "on and off" for years, said City Manager Marcia Glick, but might be more likely to pass such a measure now as a way to make banks responsible for repairs. The City Council will discuss the issue at a work session this week.

Plymouth, at this point, says no. The city is gathering information about such an ordinance, but "it's probably not the right time," said Steve Juetten, community development director.

"Doing it will require some additional expenditures -- either on the part of the homeowners or the buyer," he said. "That's not something we want to add onto the equation, given the current housing market."

Officials in Columbia Heights expected an inspection and repair ordinance to pass this summer, but when the issue had a public hearing in July, more than two dozen residents spoke against it. The City Council dropped the proposal.

Local realtors associations count that as a victory.

At least two have drawn up position statements against time-of-sale inspection ordinances. The North Metro Realtors Association approved its statement last week. It states that although the group "has an interest in maintaining high-quality housing stock," cities should drop broad ordinances and target "problem properties" instead.

Since passing its ordinance last fall, Brooklyn Park has conducted 2,200 inspections, and nearly all houses have required at least some small repairs, Hilgendorf said. The city has modified its requirements so homeowners and buyers can establish an escrow for those repairs, although city staff isn't sure that's working.

City workers have caught dangerous situations, such as vents that have been cross-wired and electronic panels without cover plates. And they've gotten banks to take responsibility for properties they're selling, they said.

"We might have delayed some sales, but ultimately, when people buy a home in Brooklyn Park, they can feel comfortable signing the papers," said Gary Brown, city engineer and director of engineering and building inspections.

St. Paul passed its requirements after working with real estate agents to craft a measure satisfactory to both sides. Council Member Bostrom considers it an important step in restoring neighborhoods dotted with foreclosures.

"I'd like to feel bad for the banks, and I'd like to feel bad for the Realtors," he said, "but, really, I feel bad for the people who still live in those neighborhoods. They're the ones living in a tough situation."