Mass auction of Sandy-damaged houses on Long Island begins Tuesday

Christopher McCrory of Farmingdale, his wife and three children are looking for a modest home to buy, fix up and call their own.

"It's for ourselves, first-time home buyers," he said while inspecting a superstorm Sandy-damaged small bungalow in Lindenhurst last month. "I used to do a lot of bathrooms and kitchen work, engineering jobs. We're looking small and low maintenance. We have three kids. This one still needs a lot of work but it's one of the less damaged ones we've seen."

The McCrorys have joined hundreds of other more experienced speculators, builders and contractors in sifting through housing stock damaged by nature's wrath.

Next week, in the first auction of its kind on Long Island, according to organizers, the first batch of homes struck by Sandy and sold to the state at pre-storm value will go on sale again Tuesday -- this time to the highest bidder.

The potential buyers of the first 150 of 700 state-owned properties are as varied as the real estate stock, which itself includes everything from waterfront McMansions to inland bungalows, some with starting bids as low as $29,950.

Curious prospectors who toured the homes last month during a three-week series of open houses from Aquebogue to the Five Towns area ranged from experienced contractors like Robert Simeone of Smithtown to part-time flippers like Rick Timmins of Ardsley.

Less common but far from absent were traditional home-seekers like the McCrorys, couples or young families who saved every penny with hopes of attaining the American dream of homeownership.

It's unclear who will show up on Tuesday and Wednesday when the auctioneer's gavel goes up at the Hyatt Regency Long Island hotel in Hauppauge, but based on the number of people who registered for the sell-off, organizers expect up to hundreds of people to come with cashier's checks in hand.

Proceeds from the sale may be reinvested and used in accordance with the State's Community Development Block Grant Disaster Recovery Action Plan, which includes allocations for multifamily affordable housing and Public Housing Assistance Relief, officials said.

Unprecedented sale

Misha Haghani of Paramount Realty USA of Manhattan and Garden City, hired to run the auction by the state Governor's Office of Storm Recovery, said thousands of people have downloaded material about the auction from their website or called expressing interest in the properties despite repairs the homes might need, and the expense and legal red tape to get them to meet local code.

"From a strictly real estate perspective it's definitely exciting to do this on this scale and to do it on my own turf is particularly exciting for me on a personal level," said Haghani, a Great Neck native. "The storm was obviously a major event for many, many New Yorkers and residents of New Jersey and other states, and to be able to play a role in the rebuilding of these communities is awesome."

Haghani said there has never before been a sale on Long Island of so many non-foreclosed properties at once -- 81 in Nassau on Tuesday and 69 in Suffolk on Wednesday.

The properties, in 26 towns and villages, range from 600 square feet to 4,000 square feet in size, and are on lots from 2,500 square feet to 10,000 square feet, he has noted.

All of the properties have been sold to the state through NY Rising's acquisitions program, which paid homeowners pre-storm value for them, the highest reaching above $1 million.

NY Rising was created to administer billions in Community Development Block Grant funds from the U.S. Department of Housing and Urban Development for storm recovery, as well as to buy distressed houses. To be considered for acquisition or buyout, the homes had to be declared "substantially damaged," a key designation meaning the property sustained damage of 50 percent or more of its pre-storm market value.

Cash, commitment needed

For a bid card at the auction, serious bidders must purchase for $50 the due diligence documents that include reports, surveys, appraisals, terms of sale, property photographs, and purchase and sale agreements. Bidders have been asked to bring cashier's checks of either $25,000, $35,000 or $45,000, depending on the price of the property they hope to buy.

Dan and Nick Leo, brothers who have a safety consulting business -- Dannick Inc. in Bohemia, are looking for investment opportunities. Dan Leo said, "We're going to narrow it down to 10 we're really interested in, and that are realistic and hopefully we'll get something."

While the homes on offer have starting bids that are a fraction of the cost of what they could command before Sandy struck on Oct. 29, 2012, they must be elevated to conform to Federal Emergency Management Agency requirements. They are storm-damaged properties that, in many cases, have been idle since the day of the deluge, and must be rehabilitated to meet local codes.

Both of those undertakings require considerable amounts of cash, with elevation running well into the tens of thousands of dollars.

"It's a great deal but you absolutely need to raise the houses and you can't raise the house until you own it, and you are unlikely to get traditional financing because you can't get a certificate of occupancy" until the house is raised, said Kathy Carleton, an investor who grew up in Holbrook.

"I met a lot of people who didn't know they'd need to raise the house," she said.

That was also a deterrent for Simeone, the Smithtown contractor.

"I looked at about seven or eight homes, probably," said Simeone, who was eyeing some Suffolk properties in Patchogue and Mastic Beach. "Some of them are so far gone it isn't even worth it. Like I said, you've got to jack the house up and for the lifting, like 30 grand, and the foundation is going to be about 12 or 15 grand. There's a lot of cost involved in it. I had to back out."

Hopes for dream houses

But Susan B. Lyons is, in real estate parlance, a "motivated buyer."

An acting Freeport village court justice, attorney and Realtor in Baldwin, Lyons said she finds it fun to flip houses on the side as she inspected a partially gutted three-story house at 260 Arthur St., in Freeport, with her subcontractor, Michael DiGiacomo.

She said the house has "good bones," adding, "I know the people who owned this and they flooded many times and Sandy just did them in. I really have to see if the village had slated this to be demolished or elevated . . . I'd knock down walls, make bigger rooms."

Others were hoping to find their dream house.

Dawn Haggerty, a nurse who lives in Lynbrook, said she was looking for a fixer-upper to live in by the water -- "my little saltbox by the sea."

She'd looked at several bungalows in Long Beach with her fiance, she said, as she stood outside a white stucco home on Clocks Boulevard in Massapequa. "My fiance says this isn't for beginners," she said. " . . . He said it's more expensive than to just buy something."

Haggerty said that with her own modest income, in order to elevate she'd need the kind of financial help that the state has provided to homeowners who decided to fix up and stay in their homes through NY Rising's Housing Recovery Program. But investors who buy the homes at the auction are not eligible for that program, officials said.

"If you read the ads, they make it sound like it's for a home buyer, but the reality is it's really meant for builders and contractors who know the system," she said.

Some see an investment

Indeed, several other potential bidders viewed the properties with an eye toward making a low-risk purchase.

Dan Ziegler of Levittown, a retail manager, was looking in Lindenhurst for his second real estate investment property.

The first was his family's house in Long Beach that he and his brother inherited and repaired after Sandy. They then started their own company, EZ Homes LI.

"I know it's a lot of money and probably a lot of stuff I don't know about yet," he said. "I'm going as low risk as possible. The higher the risk, the less likely I'll bid."

Joe Fedele of Massapequa, an electrician who installs security alarm, audio/video and central vacuum house systems, said he'd repaired his own Sandy-flooded house and was now looking to "buy something in a good deal if we can do what's required, and then rent or flip it. I think it's too early to flip; it will take a while before people will be comfortable again to buy at a good price."

At one showing of a house in Lindenhurst, which had been totally renovated after Sandy before its acquisition by NY Rising, the former owner stood watching as potential buyers came and went. "It's bittersweet for me," Barbara Caiazza said. "Our kids were raised here."

She said she and her husband sold the house because elevating it would have been too expensive for them. If it sells, she said she hoped its new owners "have good memories here as I did, because I have great memories of this place."