Detroit's $1,000 houses may be a lousy deal
The price is right, but good luck turning a profit, house flippers say.
For sale: A spacious 1,600-square-foot, three-bedroom Tudor-style home built in 1929, with one-and-a-half baths, glass block windows, hardwood floors, crown molding and custom fireplaces. Within walking distance of restaurants, playgrounds and public schools.
And it’s being offered next month for as little as $1,000.
Just one catch. The single-family house on 5500 Kensington Ave. has a ZIP code that makes listing agents wake up in cold sweats: 48224.
For the uninitiated, that’s the center of Wayne County, Michigan. Otherwise known as Detroit.
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Still, if you’re the right kind of buyer, the Motor City has a deal for you. The city, which filed the largest-ever municipal bankruptcy last year and has been ground zero for urban blight for decades, is holding an online auction for more than a dozen Tudor and Colonial-style homes in tax lien-related foreclosures. The starting bid at www.BuildingDetroit.org is just $1,000, which officials hope will clear off an unwelcome inventory of more than 16,000 empty homes.
“We are moving aggressively to take these abandoned homes and get families living in them again,” Detroit’s Mayor Mike Duggan said at an April 14 press conference. “There are a lot of people who would love to move into many of our neighborhoods. Knowing that other people are going to be buying and fixing up the other vacant homes at the same time will make it a lot easier for them to make that commitment.”
The auction, which starts next month, will put a handful of single-family homes on the market for as little as a few dozen C-notes or a swipe of a credit card. You can bid up homes in $100 increments, according to the auction site.
The sales are only open to Michigan residents who owe no back taxes in Wayne County and to companies licensed to do business in Michigan that have no prior building code or blight violations or tax foreclosures.
The city will auction one house a week, most of which are in the East English Village section of town, starting May 5. An open house for all 15 homes will be held on April 27.
Auction winners still must move fast. The sales require a 10% down payment within 72 hours, while settlement must be made within 60 days. Full payment must be made within 60 days if the purchase price is less than $20,000 or within 90 days if it’s more than $20,000. And you must have a certificate of occupancy and an owner living in the house within six months.
“We are not looking for speculators,” said Erica Ward Gerson, head of Detroit’s Land Bank Authority, the agency that will administer the program. “If you’re not going to act diligently to fix up the house, you’ll lose the house and your money.”
A $20,000 deal won’t cost much, at least on the surface. A 30-year mortgage at that price and national average 4.36 percent interest would just set you back $99.68 a month, including property taxes and mortgage and property insurance, according to Bankrate.com.
But it isn’t a turnkey deal. Many of the homes lack water heaters and furnaces, need new roofs and windows, not to mention kitchen appliances and fixtures, and could do with a new coat of paint. Rehab on the properties must also begin within 30 days after getting the deed and the front door keys.
So would flipping the house, even if you bought it for a few thousand dollars, turn a profit? Given that the average sales price of homes in the English Village neighborhood on Zillow.com is just $48,000, one veteran “flipper” says no.
“I just can’t see a lot of these deals working,” said Bill Kendall, a Keller Williams realtor based in Pittsburgh who flips as many as two dozen homes a year around the country, some in as little as eight weeks.
But Kendall said if many of the Detroit homes are missing furnaces and hot water heaters, the investors could be in for $20,000 in basic necessities before any cosmetic improvements were done. “Given the neighborhood where these homes are located, you’d be better off turning them into rentals,” he said.
That’s because rentals typically require only half the cosmetic improvements a property for resale requires, according to Kendall, who has been flipping properties since 2006.
He said it’s also not clear whether the properties are free of mechanics liens, a type of lien placed by a contractor when they improve a house value by 15 percent or more but aren’t paid by the owner. “You would need a really good title search first, otherwise it’s opening a Pandora’s Box.”
Buyers also need to be aware that they could be on the hook for as much as $5,000 to $10,000 in property taxes a year even though the properties are distressed, said John Dingell III, a scrap metal dealer in Detroit and the son of former Michigan Congressman John Dingell, in a phone interview.
“Under Michigan law, the property value for tax purposes does not reset to the sales price for distressed or foreclosed auction sales,” he said. “This is why there (will be) few takers on these houses.”
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a) you must not drive a car at all especially one good looking one
b) you must not have any valuables in your home
c) you must not wear nice jewelry
d) you must never smile or look like you have a good life
or....you will suffer haha and now with the bankruptcy they don't even have extra cops (which youll need) or extra ambulances (which youll need as well)...good luck bidding!
Would you buy a $1,000 house in Detroit?
No...Detroit is a lost cause; it went bankrupt for a reason. "Detroit" needs a culture turnover; I'm not willing to be a part of it. "Detroit" can swim or sink on its own; no more bailouts.
I like how the survey answers in themselves create controversy. MSN at their finest. I am surprised we don't have to go to Bing to get the vote results and to vote.
With that being said. I would purchase one with out any other debts tied to them. I am not going to purchase someone else's debts. If it sold for 1000 or even 10000 without any further obligations it would be a good deal. The other issue would be the location of the home itself. The history of the neighborhood, and the local conditions of the neighborhood. The conditions of its infrastructure.
Of course there are a few other items to consider in the purchase as well. but you get the idea.
So it is not just a yes it is a great deal, no it is to much work, I don't know and what ever the other one was. It could be yes, no or maybe.
This poll tell the story of what has happened to America. Voted – No too much work 43%.
Voted – yes good deal 18%.
Less than 1 in 5 are willing to bust a nut and make something positive happen. 43% say too much work….give me something for nothing and undoubtedly are flaming liberals. Funny, 43% is very close to the number of voters putting Mr. progressive into the Whitehouse
Interesting, they are going to sell 16,000 homes at a rate of 1 per week. And its only open to people there.
Are'nt these the people in the same area that lost these homes ?? And are'nt the rest of the tax payers picking up this tab for bankruptcy ???
I wonder when they will figure out that at the rate the article says there going to sell these houses, it will take over 307 years. Oooooooooops