Wednesday, August 13, 2008
Foreclosure fallout: Houses go for a $1
Ron French / The Detroit News
DETROIT -- One dollar can get you a large soda at McDonald's, a used VHS movie at 7-Eleven or a house in Detroit.
The fact that a home on the city's east side was listed for $1 recently shows how depressed the real estate market has become in one of America's poorest big cities.
And it still took 19 days to find a buyer.
The sale price of the home may be an anomaly, but illustrates both the depths of the foreclosure crisis in Detroit and the rapid scuttling of vacant homes in some of the city's impoverished neighborhoods.
The home, at 8111 Traverse Street, a few blocks from Detroit City Airport, was the nicest house on the block when it sold for $65,000 in November 2006, said neighbor Carl Upshaw. But the home was foreclosed last summer, and it wasn't long until "the vultures closed in," Upshaw said. "The siding was the first to go. Then they took the fence. Then they broke in and took everything else."
The company hired to manage the home and sell it, the Bearing Group, boarded up the home only to find the boards stolen and used to board up another abandoned home nearby.
Scrappers tore out the copper plumbing, the furnace and the light fixtures, taking everything of value, including the kitchen sink.
"It about doesn't make sense to put the family out," Upshaw said. "Once people are gone, you're gonna lose the house in this neighborhood."
Tuesday, the home was wide open. Doors leading into the kitchen and the basement were missing, and the front windows had been smashed. Weeds grew chest-high, and charred remains marked a spot where the garage recently burned.
Put on the market in January for $1,100, the house had no lookers other than the squatters who sometimes stayed there at night. Facing $4,000 in back taxes and a large unpaid water bill, the bank that owned the property lowered the price to $1.
$1 sale to cost bank $10,000
While it's not unusual for $1 to be exchanged when property is transferred for legal reasons, listing a home in the Multiple Listing Service for $1 was surprising and unsettling to Kent Colpaert, the listing real estate agent for the property.
"I've never seen a home listed for $1," Colpaert said.
"But it's been hit hard: It's just a shell."
On Tuesday, Realtor.com listed one other single-family home, one duplex and one empty lot at $1 in Detroit.
Dollar property sales are the financial hangover from the foreclosure crisis, said Anthony Viola of Realty Corp. of America in Cleveland.
Lenders that made loans to unqualified buyers during the height of the subprime market now find themselves the owners of whole neighborhoods of vacant, deteriorating homes.
"No one has much sympathy for these banks that made subprime loans," Viola said. "And in some cities like Cleveland, judges aren't letting them sit on the properties -- they're ordering them to tear them down or sell them."
So desperate was the bank owner of 8111 Traverse Street to unload the property that it agreed to pay $2,500 in sales commission and another $1,000 bonus for closing the $1 sale; the bank also will pay $500 of the buyer's closing costs. Throw in back taxes and a water bill, and unloading the house will cost the bank about $10,000.
"It doesn't make sense in some neighborhoods to keep paying costs and costs," Colpaert said. "It can make more financial sense to give it away."
Buyer calls it an investment
Colpaert declined to provide the name of the prospective purchaser, because the deal had not been through closing. The agent did say that the buyer agreed to pay the full list price of $1, and planned to pay cash.
The buyer, a local woman, considers the home to be an investment property and will not live there, Colpaert said, though exactly how soon the buyer can expect to recoup her four-quarter investment is questionable. Replacing the guts of the house will costs tens of thousands of dollars, and the owner will have trouble keeping scrappers from stealing the improvements as quickly as they're installed. Home demolition costs about $5,000, Colpaert said.
Meanwhile, the new owner will owe $3,900 in property taxes in 2009 on her dollar purchase unless she challenges the tax assessment.
While selling a home for the amount of change most people could find between their couch cushions is unusual, some abandoned homes in Detroit sell for $100; vacant lots can be purchased for $300.
"My 14-year-old son could buy a block of Detroit property," said Ann Laciura, senior servicing specialist for the Bearing Group.