Detroit has a national reputation as a leader in foreclosures – not a great thing for the real estate market. However, this doesn't mean the city, or its huge potential market, are dead in the water. That will all depend on who buys these properties, when they buy them, and what gets left behind.
One of Detroit’s gravest barriers is the pervasiveness of foreclosure, with some estimating that only half (50%) of Detroit residents are paying their property taxes. This has left the city missing about $250 million in property taxes, leaving the local and state government in greater peril.
At this point, Detroit has about 4,500 foreclosed homes available for purchase – this leaves well over 1,000 homes that should have been foreclosed, but the overwhelmed city cannot keep up with the demands of its failing system. Many of the homes are occupied by squatters or former owners, leaving the city with quite a complicated problem.
The positive side of this complex issue is that potential homeowners in Southeastern Michigan have an incredible opportunity to own a house for cheap – really cheap. It is not uncommon to see homes listed between $10,000 and $25,000. Some of those homes are still in great condition, and would make great homes with just a little time and money.
Detroit’s foreclosures are unique in their frequency and, in some areas, their dilapidation. Buyers need to be very well informed as to what the home repairs and remodeling will entail, and what the limits to their budget and abilities will be. Buyers should pay special attention to structural security (looking for cracks or rotting beams), roofing, and plumbing. For homes that have been long-abandoned, potential buyers need to proceed with caution. Even if the property has already been purchased, buyers should invest in a good inspection, and they should follow the inspector’s advice.
With the right owners, foreclosed homes can become beautiful and safe again. It also seems that Detroit is making its way back to a stable city with the help of passionate people who want to save the city.
As Detroit re-images itself, with an influx of young entrepreneurs and artists working to revamp and save the city, more and more people want to live in Detroit. If this recent trend keeps itself alive, Detroit properties may begin to regain value and entice more buyers. For families who want to live in the area, investing in a foreclosed home is a great long-term plan. Detroit seems to be on the upswing, and these homes deserve saving.
Detroit has many other challenges and barriers as a city, a region, and a community, but it remains to be seen what will happen with the many foreclosed homes and vacant properties of Detroit.