The dot-on-the-map town of Clifton may have only three part-time employees and an annual budget of $106,431, but like any other government these days, it feels pinched for cash.

Clifton's solution, however, is believed to be unique in all the country: Working with a local lender, the town is buying federally owned foreclosed houses elsewhere in Virginia, contracting to get them repaired and then selling them at a small profit.

By the end of this year, officials in the southwestern Fairfax County town, where Presidents Chester A. Arthur, Rutherford B. Hayes and Theodore Roosevelt traveled to escape Washington's summer heat, think they might be able to sell 40 to 50 houses and amass a $100,000 nest egg.

That amount, said James C. Chesley, the town's unpaid elected mayor for 12 years, would enable Clifton to start fixing its cracking sidewalks, repair the town sewer, add some landscaping and spruce up the Town Hall, a small house now used mostly for storage.

"We're trying to be inventive," said Chesley, 55, a civilian worker at the Naval Surface Warfare Center in Bethesda. "We think we can provide a decent house at a decent price, much cheaper than on the market."

Numerous local governments throughout the United States buy houses within their own boundaries that were financed by the Federal Housing Administration and then foreclosed on when the owners stopped making mortgage payments, according to the U.S. Department of Housing and Urban Development. But only Clifton is buying houses elsewhere to repair and sell, said HUD spokesman Lee Jones.

Thus far, the quarter-square-mile town, which has 250 residents and both state and national historic landmark designations, has bid on 50 houses. It has won the rights to 25, gone to settlement with HUD on 16 and has contracts to sell six after repairs are made, according to John Eubank, president of Commercial Lending Corp., the Fairfax firm that Clifton hired to put up the purchase money, oversee the paperwork and repair and resell the houses.

Brant Baber, a Clifton resident and housing lawyer who volunteered to oversee the operation for the town, said the prices of the foreclosed properties, mostly townhouses, have ranged from $60,000 to $250,000. The Town Council decided to limit the purchases to Virginia and has acquired properties in Dumfries, Ashburn, Sterling, Warrenton, Manassas and Manassas Park in Northern Virginia, and Virginia Beach, Newport News and Chesapeake in the Tidewater region.

The purchases have flowed from an unusual collaboration that is mutually beneficial, both sides agree. In addition to putting up the money and orchestrating the rehab work, Commercial Lending assumes all of the risk -- for example, if the firm bids too much and then can't resell the house within HUD's strict buyer-income limits.

"There is no downside" for the town, said Baber.

At the same time, the town's legal status enables Eubank to purchase the homes at a discount. Under HUD mandates, Clifton, as a governmental body, can get a 10 percent discount if it buys one to four houses at any weekly sale, and a 15 percent discount for purchases above that. It can resell for up to 110 percent of the combined purchase and repair costs, but only to buyers whose incomes do not exceed 115 percent of the median income in that community. By that standard, a Washington area family of four looking to purchase could have an annual income of up to $105,225.

In addition, Baber said Clifton will discount its selling price or closing costs by 3 percent for any buyer whose income is less than the median and who is a teacher, firefighter, law enforcement officer or single parent living with at least one child.

"Our town, like many governmental bodies, was wondering how we're going to do all the things we want to do and how we are going to pay for them," Baber said. "Then we thought we ought to not just do it to make money, but do some good, too," by offering discounts to some public employees and single parents.

Eubank and Baber said they expect each sale to generate $3,000 to $4,000 in profit, of which Clifton would get 55 percent and Commercial Lending 45 percent.

Town residents pay their real estate taxes to Fairfax County. Clifton's revenue, what there is, comes from business license, sales and cigarette taxes, Chesley said.

"We're like Pip -- we have great expectations," Baber said, referring to the orphan in the Charles Dickens novel. "Since the town is not spending any money to do this, we hope it will make some. But if it doesn't, we won't have lost any. We will do this unless it doesn't make money or is more trouble than it is worth."

The cost of repairs has typically totaled about 10 percent of the price of the house -- about $6,000 to $20,000, Eubank said. All the interiors are repainted and often recarpeted, he said; some houses need new roofs, as well as repairs of broken drywall and windows.

HUD gives bidders a list of some repairs it thinks are necessary, but the list is often incomplete and HUD's cost estimates are extremely low, Eubank said. HUD does not check whether any repairs are made, but Eubank said he could not sell a house as is because buyers cannot get loans for dilapidated properties.

Eubank lives near Clifton and has done volunteer work in the community, and thus was inclined to work with the town on the money-raising project. The arrangement is an extension of the business he already does with private investors buying foreclosed houses.

"I make a little, the town makes a little and it puts people in houses," he said. "It's not often you have a program that is win-win for everybody."

The process is not without its pitfalls, however.

The town won the rights to one house, Baber recalled, only to discover that the "moisture" HUD said existed in the basement was actually two feet of water.

"We pumped it out, then went back the next day and found two feet of water again," Baber said. The town opted not to close on that deal.

"Now it's somebody else's opportunity," he joked.

John Eubank, who is handling the house purchases for Clifton, stands in a Manassas home that the small Fairfax County town has bought and resold.