Turning abandoned homes into fresh starts

EVAN WILLIAMS/FLORIDA WEEKLY Jackie Chang looks for foreclosed properties, like this Lehigh Acres home, to fix up for her lease-to-own program. Her clients lease the homes for a year or more and a percentage of their rent is applied to the down payment. Jackie Chang has been on the lookout for abandoned homes, which is not a difficult task with thousands of them dotting neighborhoods in Southwest Florida. She either buys them outright or fixes them up for the lenders who own them.

With each new property, she plans to help someone who otherwise couldn't afford a home to "rediscover the dream of home ownership" through her new program, Fresh Start Homes.

Some of the houses are squalid upon first inspection, Ms. Chang says, "from every light fixture being taken, to every appliance being removed, to every room spread with dog feces." But others "are really pristine."

As owner of The Chang Group, a Fort Myers-based property management company, she uses some of the homes as rental properties. They are located in places like Naples, Cape Coral and Lehigh Acres, as well as in Charlotte, Sarasota and Broward counties.

But most of the empty houses she finds now are used for her new Fresh Start program under her sister company, Precision Real Estate, Inc. Since beginning Fresh Start last November Ms. Chang says, business is booming. She has managed to make deals with lenders or buy about 50 homes per month — ones that were previously abandoned after being foreclosed upon. She plans to double that rate this year.

Ms. Chang, 44, says she goes about her work with the same passion and enthusiasm she once had for studying fruit flies. Slight and quietly methodical, she was a biology professor at Barry University in Fort Lauderdale until May 2006 when, she jokes, "I got into real estate the logical way — through science."

Actually it was to help out her parents after her mother (also a Realtor) needed quintuple bypass surgery in 2004.

Ms. Chang was raised in Brooklyn, going to Catholic Schools — "I was a geek, right?" she said. "I did well in school."— and earned a doctorate in microbiology from Princeton. While at Barry, she started in real estate by rehabbing older homes and selling them to investors, until the market dried up. In May 2006, she moved to Fort Myers to pursue her new career and start The Chang Group and the Fresh Start program.

"It's completely different, right?" she says, with an amused smile. "But the skill sets are completely transferable, having that background of being analytical. It's so ingrained in how I think, some people would joke about it: 'oh, that's the scientist in her.'"

In the field

Ms. Chang drove through Lehigh Acres, where there is a glut of abandoned properties, in her black BMW. Some homes in Lehigh seemed to randomly appear in the middle of fields and others were clustered at the end of dead end roads.

"You see all these houses sitting vacant," she says. "It does something to the morale of these communities."

While parts of Lehigh were devastated by the housing crisis, leaving nothing but "houses and trees and buzzards and snakes," Ms. Chang says, other parts are starting to recover. And her program, getting people back in the homes, aims to help.

"People are riding bikes, out on walks," she says. "Kids are playing in the yards. It's palpable."

Fresh Start homeowners

Fresh Start homebuyers are generally people with less-than-stellar credit, such as Santiago Martinez Jr. and his wife Ana, who were living in an apartment in Lehigh Acres with their two teenage children, and saw no chance at owning a home until last February.

They now lease their home with an option to buy through Fresh Start, run by Ms. Chang's Precision Realty Services, Inc.

He is a Sergeant who works third shift at the prison in Moore Haven and she had lost a part-time restaurant job. Mr. Martinez heard the ad for Fresh Start on a Spanish radio program while driving home. His wife was suspicious that the deal was a scam.

"I was like 'yeah, well they said it but we've heard it before,'" she says.

Now, 75 percent of their rent payments go towards their new house, with three bedrooms, two baths, a two car garage, a lanai and a big front yard — just what they'd dreamed of.

"Everything turned around when we bought the house," Ms. Martinez says. "We were able to get another vehicle and I got a job…." She works at a Winn-Dixie grocery store now. "Within a week, they promoted me up to management…"

A Fresh Start for lenders as well

So far, local Southwest Florida lenders and some national ones have been happy to make a deal with Ms. Chang and her clients, who keep the property in good repair.

"Rather than leaving the property vacant, there is somebody in there that can protect assets from vandalism or theft," says William Tierney, vice president of residential lending for Numark Credit Union. "We work very closely with The Chang Group. It frees our ability to do other things.

"I think they take the whole picture into consideration, the market ability of the property, the circumstances surrounding the credit problem, the likelihood that the person will improve their credit and make timely credits on the lease. There are varying degrees of credit and (the Fresh Start program) reaches a deeper level than would otherwise be available, clearly. It gives people the option to establish a payment pattern."

Rob Scharlau, senior vice president of special assets at Fort Myers-based Busey Bank, also uses the program.

"We're obviously not in the business of trying to hold onto property, so the Fresh Start program is one more opportunity to get the inventory whittled down," he says.

Ms. Chang also checks to make sure clients have steady jobs and are in a good position to make the monthly payments.

"You don't really want to set someone up to fail," she says. "Not everyone gets into the program."

Failures happened, for instance, when people bought adjustable-rate mortgages with no money down, but those years are gone for now. It also happened, she says, when people are advised to use credit cards to improve their credit scores.

"The irony is, to become credit worthy in the minds of lenders, what do they tell you to do?" she asks. "Get a credit card. Go rack up debt to show you're credit worthy."

Ms. Chang isn't willing to call any one person or group villains when it comes to the housing crisis.

"There's no one entity (responsible for the housing crisis). It was the banking industry, Wall Street, the local real estate agent seeing an opportunity. And people getting swept up — you know when you're a kid and you do stuff and don't worry about the consequences? It's kind of like that. It was just a wave of frenetic buying."

Then, during the boom, the houses they bought doubled in value and people took out home equity loans for far more than the houses are worth now. "They bought the boat, the cars, the vacation," Ms. Chang says.

The Fresh Start plan

Amarylis Alonso and Eduardo Hernandez bought a home through Fresh Start Homes in Cape Coral for $150,000 after being kicked out of an apartment their landlord wasn't paying the mortgage on.

They'll pay rent for 12 months in their new home, and 66 percent of their payment will go towards their downpayment.

"I know the economy's bad, but we should all look at our future," says Ms. Alonso, 35. "It's better to pay for something that's going to give you something in the end."

Most of Ms. Chang's clients in Fresh Start are people who have low to average credit scores, who wouldn't otherwise be able to afford the downpayments and costs associated with purchasing a home or get funding from a bank.

The Fresh Start program asks a client to pay $2,500 up front, sort of like the first and last month's payment on an apartment; instead though, the money goes toward taxes and closing costs on the home.

Then the client leases the property at market price, with an option to buy after 12 or 18 months. But this is nothing like the "rent to own" deals that balloon in price when the fine print is magnified.

For clients in the Fresh Start program, anywhere from 30 to 75 percent of their monthly payment goes into a savings (escrow) account set up by Ms. Chang, and is used as the downpayment on the home — at least 5 percent of the purchase price. This interim period of leasing is also used to groom clients to be credit worthy. Ms. Chang provides training on how to repair their credit, and reports their payments to a credit scoring agency to boost their scores.

"It really sets them up to win," Ms. Chang says. "And it's a win for the lender. They've got a house that's occupied and won't be vandalized. They've got some social value. And they've got someone committed to buying the house, whether it's eight months or two years down the road."

Ms. Chang and her partners, including 10 other Realtors, work with maintenance crews like electricians, cleaning staffs and air conditioning repairmen who help maintain the properties as needed.

Her days involve communicating with lenders and clients and reporting anomalies to banks. "Sometimes you get a hot spot of vandalism," she says.

Of course, another possibility is that one of her clients would lose a job or become sick, and the program would fall apart. Or they would decide not to buy the home, even though their payments would go up smoke like other renters' payments.

"Those are the things you can't control," she says. "But for all the other things, you put processes and structures in place. There's no guarantees in life, right? But you do plan for unforeseen events."