Seven waterfront homes in Fargo, N.D.—with as many as four bedrooms and assessed values ranging above $500,000—will be sold at auction for as little as pennies on the dollar Monday.
Although hundreds of people saw the houses in recent walk-throughs, the residences weren't necessarily the focal point. Many would-be buyers were likely eyeing details like the stainless-steel appliances, custom cabinets and fancy light fixtures, said Jim Lakoduk, a Realtor with Pifer's Auction & Realty, which is running Monday's auction.
"These homes are some of the very best in the city," Mr. Lakoduk said.
The catch? The houses, which were purchased by the city and must be moved away from the flood-prone Red River of the North or a creek that flows into it, are so large they can't be hauled to higher ground without being cut into pieces. This leaves them with little more than their value as scrap, local real-estate experts say.
This spring, the National Weather Service expects the river—which bisects the Fargo-Moorhead region straddling North Dakota's and Minnesota's shared border—to rise to the low end of the major flood range. The city has experienced major flooding in three of the past four years, including a record flood in 2009, and the Weather Service forecasts a rise of 31 to 36 inches this year.
Fargo has purchased about 550 houses in low-lying areas since the 1970s to take them out of the flood plain or make room for levees, said Mayor Dennis Walaker. Because of a recent expansion in the flood plain by the Federal Emergency Management Agency, the city will spend about $150 million to move 200 more in the next few years.
While many houses over the years have been bought and resold to people who were able to move them, the large homes in Monday's auction—with assessed values between around $375,000 and $560,000— likely won't make it out intact.
The riverfront neighborhood where the homes are located is heavily wooded, and to preserve the trees and nearby properties, the city has imposed a width restriction of 27 and 32 feet on the homes, depending on the location. Some of the houses at auction Monday are as wide as 50 feet and would need to be cut into pieces to make it out of the neighborhood, adding to the cost the potential owner would have to pay to have the house reassembled in a new location.
"No matter what you take out of the houses, you can't get them down to those levels," said John Schmidt, a home mover with Schmidt & Sons Building Movers.
The city, which pays for the purchases via a sales tax and borrowings, has bought the properties at up to 110% of their appraised value. But Mr. Walaker said he would consider it "a bonus" if the city could recoup just 10% to 25% of that cost.
So far, the mayor said the city hasn't run into problems with owners refusing the voluntary buyouts, because they have experienced the flooding and know the city has to address the problems. Occasionally homeowners will ask for a second appraisal, the mayor said, and the city has ultimately negotiated what the owners consider "fair value" with enough time in advance to relocate.
"There's no easy way to do this when you're dealing with peoples' homes," Mr. Walaker said. "It bothers me that we have to do this, but I don't think we have any other solutions."