MIDDLEBURY — Middlebury College this month announced a plan to sell a number of residential homes it owns to faculty at a discounted rate, while real estate professionals disagree over whether the prospective sales could depress home values in town.
The college said the initiative is part of an effort to help new faculty members find suitable, affordable housing close to campus. Presently, the college rents out the houses to faculty.
Patrick Norton, the college’s vice president for finance and treasurer, said in an email to faculty Nov. 4 that six houses would be put up for sale for the first phase of the program. The homes will be discounted by 15 percent of their market value, and are located in Chipman Park and Murdock Court and on South Street.
Right now, only tenured professors, tenure-track faculty who have passed their first review, and athletic faculty with the rank of associate in physical education are eligible to buy the homes. If that group does not purchase all six properties, the college will open up eligibility to other faculty and staff.
Faculty who currently rent from the college will be given first priority, and any eligible faculty interested in a property must submit a letter to the school by Dec. 1.
Bill Burger, the college’s vice president for communications and marketing, said the success of these initial sales will determine how many more houses the college will put up for sale in the future. The school owns about 70 homes in and around Middlebury, and is the largest property owner in town.
The sales will also not affect the town’s tax revenue. The homes, as non-educational facilities, are presently taxed as any other private home in Middlebury, so the tax designation would not change if ownership changes from the college to faculty.
Longtime Middlebury real estate broker Nancy Foster, co-owner of Re/Max Champlain Valley Properties in Middlebury, said she is concerned that by selling the homes at a discount Middlebury College will depress home values.
Foster said that the discounted home prices will become part of what appraisers use to evaluate the value of homes in Middlebury, especially over time if the college sells more properties in the future. Buyers, she said, could also point to the lower sales in negotiating with sellers.
“They’re selling below market value, so these will be the new comparables,” Foster said. “It’s going to bring down values of what appraisers will be able to say is the value of properties in Middlebury.”
College officials and a local appraiser do not agree, however.
Burger said the college does not believe that selling the homes at a discount will lower property values in Middlebury because it retains the right of first refusal over future sales. This means that should a faculty member want to sell it, the college can prevent the home from going to the open market at a discounted rate.
“There’s a formula around the repurchase agreement so that it doesn’t affect the open real estate market,” Burger said.
Vergennes real estate appraiser Bill Benton, also Middlebury’s town assessor, said he does not believe the college discount sales would affect property values.
He said appraisers do not compare homes sold at fair market value to homes sold with special accommodations, such as a discount. Benton said he wouldn’t use such sales as comparables because they would not be arm’s-length transactions, meaning that the parties are not independent of one other and thus have an incentive to strike a bargain.
“When those homes go through sales analysis, I would just throw them out because they’re not at arm’s length,” Benton said.
He added that if the properties are in the same neighborhood, an appraiser might want to compare a property sold at fair market value with a sale not at arm’s length, but a responsible appraiser would note why a price discrepancy between the properties existed.
“They’re recognized as discounted and don’t affect true market value,” Benton said.