A controversial and now defunct Bahama Village land trust is causing residual and unforeseen problems for homeowners who bought land trust homes about a decade ago.
Jim Marquardt and his partner, Norman Laurendeau, could save $1,000 per month by refinancing their Olivia Street home, which sits on land that was formerly owned by the nonprofit Bahama Conch Community Land Trust (BCCLT).
The homeowners pay a $35-a-month land lease for use of the ground underneath their home, but they own the home with a traditional mortgage.
The land trust went belly up a few years ago after a 2009 audit revealed serious financial mismanagement by its founder and former Executive Director Norma Jean Sawyer, who was convicted last year of scheming to defraud.
Sawyer was sentenced a year ago this week to two years in prison, and the Key West Housing Authority bought the land trust's rental properties -- and assumed management of the land leases on the seven homes that are owned by individuals but on land-trust land.
"Now we can't refinance our home because we need an appraisal for the banks, and we can't get an appraisal without any comparable sales of similar properties within the past three years," said Marquardt, who works as general manager at The Gardens Hotel and bought his house in October 2001. "With interest rates now around 2.75 to 3 percent, we could save about $1,000 a month, but there's no apples-to-apples comparisons to appraise a land trust home and assign it a value, which the banks need."
Mortgage-holding financial institutions need to see comparable sales of similar properties in the area within the past three years in order to issue a mortgage or refinance, Marquardt said.
"There are three ways to appraise a home, but banks require what are known as 'comps.'"
But no land trust homes have been sold in the past three years, putting Marquardt and Laurendeau in an indefinite holding pattern.
"This is one of those unforeseen things with the land trust," said Marquardt, who long supported the land trust concept and was a board member of the nonprofit. "We thought we'd live there for about five years and then sell the house to another family that qualified for a land trust home. But if the BCCLT was still in existence, I believe there would have been sales of these homes, so we'd have comps. But we've been to every bank in town, and are stuck."
Paul Ciceri is in a similar situation trying to refinance his land trust home, which he bought in 2004.
Ciceri didn't have a problem getting an appraisal, but said the clause in his land lease that gave the BCCLT -- and now the housing authority -- right of first refusal before Ciceri sells is the problem.
"I got a notice from Quicken Loans that said I was eligible for a refinance," said Ciceri, who works at The Home Depot in Key West. "They did their own appraisal, and that wasn't a problem, but they didn't like the right-of-first-refusal clause, and suggested I try a local bank."
Ciceri said he called a local bank he assumed would be familiar with the land trust issue, but never got a call back.
"I'm sitting on a 6.25 percent mortgage that could be refinanced down to 3 percent," he said. "I could take 12 years off my 30-year mortgage and still pay the same amount each month."
He doesn't have any plans to sell his home at 222 Olivia St., but said he certainly would like to refinance.
"I've had my mortgage for more than eight years and have never once been late with a payment. I have excellent credit and am just surprised that the local banks aren't willing to help," he said, adding that his next step may be to contact Manuel Castillo, who heads the Key West Housing Authority.
"I haven't yet called Mr. Castillo to see if we could possibly take that clause out of the land lease," Ciceri said.
Castillo could not be reached for comment on Friday.
Vicki Gordon, a licensed property appraiser who owns Barefoot Appraisal Co., is trying to help Marquardt, but her hands are also tied without any sales history of similar situated homes, Marquardt said.
He asked rhetorically why the banks wouldn't use the home value assigned by the Monroe County property appraiser.
"They tax me based on that value, why can't the banks refinance me based on that value?"
Marquardt and Ciceri continue to pay their higher-rate mortgages, while researching land trust situations in other states, and awaiting word from local banks about whether anything can be done to help produce a significant monthly savings.