Tempted by Detroit’s $500 Properties? 5 Things to Know

Beth J. Harpaz, MSN, March 12, 2015

Sixty-two thousand properties have faced foreclosure in Detroit this year over unpaid taxes. About half will likely be auctioned for $500 apiece this fall.

Buying homes or vacant lots for $500 might sound inviting, even in a city as troubled as Detroit. After all, look at New York: Decades of crime and decay gave way to a real estate boom that has gentrified even outlying working-class neighborhoods. Properties that sold for thousands in the bad old days are now worth millions.

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Here are five things to consider before buying property in Detroit.

The house may be occupied

Are you prepared to evict former owners, longtime tenants or even squatters? Loveland Technologies, a mapping company that has surveyed every property in Detroit, estimates that half the properties facing foreclosure are occupied, housing about 100,000 Detroiters.

Critics question the morality of buying occupied homes and fear the program may increase Detroit’s homeless population. They say many owners stopped paying taxes because they weren’t getting city services in return. Others say those who failed to pay taxes contributed to Detroit’s troubles.

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The most expensive $500 you’ll ever spend

Demolishing dilapidated properties and building from the ground up can be cheaper than rehabbing. But some buyers choose renovation to save historic architectural details found in much of Detroit’s early 20th century housing stock: turrets, gingerbread trim, pillars and antique woodwork amid broken windows and sagging rooftops.

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But beware of hidden costs and scams. Properties may come with liens, water bills and back taxes totaling thousands of dollars, in addition to renovation costs. It’s also not unusual to hear of homes sold to buyers in other states and countries, with purchase prices rising with every flip.

Absentee landlords not welcome

If you buy a home through the Detroit Land Bank, you have six months to bring it up to code–nine months for historic properties. The policy discourages speculators from buying and leaving property unattended. {snip}

Looting and vandalism are also major problems. Homes under renovation risk having fixtures ripped out and tools stolen if the property is not lived in and secured. {snip}

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City services have improved, but . . .

Garbage pickup, snow removal, water service, and police and fire department responses have improved in the last 18 months, but may still be less reliable than what you’d expect elsewhere.

Foreclosure sales are controversial

Are you willing to wade into controversy?

Supporters say foreclosure sales help the city recover by forcing homeowners to pay up or move on. Auction buyers then decide what’s salvageable.

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But critics say foreclosures may increase blight. Repossessed properties often don’t sell at auction and they deteriorate faster once occupants leave.

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