East Hampton Town has purchased more than a dozen waterfront properties in the last two years, mostly in Springs, with each to be cleared of structures and restored to a natural state.
The town has touted the initiative as an environmental advance in the face of rising sea levels and water quality degradation from residential septic systems. But, at a recent hearing, critics said the town’s Community Preservation Fund has become a bailout program for homeowners who can’t find a buyer on the open market—and is overpaying for properties that should be looked at as vacant and unsalable.
“This is just another example of someone who may not be able to sell their home on the open market because of FEMA flood rules,” Martin Drew, a Springs resident and regular critic of the town’s CPF buys, told the Town Board at a hearing on the proposed purchase of a house at 50 Fenmarsh Road in Springs on November 17. “You are the last ditch for these people.”
At that meeting, the town agreed to pay $930,000 to Daniel and Eileen Molloy for their 1,600-square-foot, three-bedroom home, on a shy-acre lot off Hog Creek that is too constrained by wetlands to allow a pool or significant expansion of the house. The house had been on the market for well over a year. The asking price had dropped to $1 million when the owners brought the proposal to the town.
Earlier this year, the town purchased a property at 243 Gerard Drive for $1.6 million, just $5,000 less than the asking price. Another purchase, at 18 Oyster Shores Road, was bought for $1.4 million, which had been the original asking price for the property, but it had been upped to $1.5 million by the time the town agreed to buy it.
A property at 267 Old Stone Highway, which had been on and off the market for years, came up for sale in April at $1.795 million. It dropped to $1.675 million in May. In September, the town agreed to pay $1.55 million for it.
Town CPF purchases are limited to paying no more than the appraised value of a property. The town does not make the appraisals available to the public until after the closings, so as to prevent other potential buyers from outbidding the town.
With the $930,000 they will receive from the CPF—which is funded by a 2-percent tax on most real estate sales—the Molloys will have to pay to have their house demolished and the foundation and septic systems removed.
To that end, David Buda, a Springs resident and Town Board hawk, has said he thinks the town is overpaying for many of the waterfront parcels it has bought with the CPF. The appraisals, he has said on several occasions, should be based on the property being vacant land, since that’s what the town is getting in the end.
Town Supervisor Larry Cantwell defended the town’s approach, saying that it is unfair to compare the price the town pays to asking prices. The goal for the town, he added, is to remove homes from the waterfront, so assessing the property with the structure on it is reasonable since that is what the owners are being compensated for.
“From the property owner’s perspective, they are selling a property with a house,” Mr. Cantwell said. “And they have to incur the cost of removal. We try to be as objective as we can, especially if we’re buying waterfront parcels, but opportunities are fleeting.
“The alternative is you don’t buy it, in most cases,” he added.
Also, in most cases, Mr. Cantwell said, the town has offered and ended up paying less than the appraised value.
The town’s offers have found eager sellers. While the town has made a public appeal to waterfront property owners across Springs to sell lands, most of the recent purchases have been brought to the town by the owners’ representatives. One real estate professional, who asked not to be named, said that it is well known that the town bases its offers on appraisals and typically offers less than the appraisal. But it’s also a reliable buyer that can go to closing quickly and is, therefore, an attractive alternative for homeowners constrained from expansion who are struggling to find buyers at market rates.
Mr. Cantwell said that the town may do a report at some point soon that outlines what it has paid for its CPF purchases in comparison to the appraisals.
In the case of the Molloys’ property, even Mr. Buda said that if the town is overpaying, in that case it may be excusable.
“This property, with its dredged boat basin, would be an ideal location … for launching non-motorized watercraft for all town residents, not just the members of the property owners association,” he said. “I’m not so upset you are overpaying for the property because of that potential.”