What Price That Home?

http://www.theguardian.com/money/2014/nov/27.detroits-young-gentrifiers-face-a-daunting-task-in-buying-500-homes-evicting-poor-residents

Detroit home
detroit.curbed.com

Hello Everyone:

Buying a home is always a daunting process. Whether you are buying a new or previously occupied home, the process is fraught with all sorts of challenges to try one's patience.  Now add having to evict the current residents into the mix and you have a whole new set of ethical issues that would drive even the most patient person insane.  This is the dilemma faced by young gentrifiers in the City of Detroit, Michigan.  Rose Hackman reports for The Guardian, in her article, "Detroit's young gentrifiers face a daunting task in buying $500 homes: evicting poor residents."  Buying a home for $500, yes you read correctly, sounds like too good a deal to pass up.  However, if it means having to evict a family from their longtime home, you begin to question if this house is really worth the bargain price after all.

Rundown Detroit neighborhood
huffingtonpost.com

Let us look at the example of Oren Goldberg, a Detroit-based filmmaker who had the opportunity to buy a previously owned house at auction for $500.  What stopped him from completing the sale was the prospect of having to evict the homeowner.  Mr. Goldberg has traveled this road before and hit a nasty bump. He made a previous purchase at an annual tax foreclosure auction but the purchase turned sour when confronted with having to remove the occupant for cost of $7,000, twice what paid for the house and half of what the occupant owned in back property taxes.

This experience has turned Mr. Goldberg away from purchasing anymore previously owned homes.  Quoting Mr. Goldberg, Ms. Hackman writes, "It goes into this long-term narrative of Detroit is vacant and empty and there's no one here.  So when you look at it and you think oh my god, we're going to develop this area, no thinks that you might be pushing people out."  Mr. Goldberg's dilemma is similar to the one facing many young, educated, mostly Caucasian gentrifiers.  Would-be property owners with a conscience.

Detroit Urban Meadow
zfein.com

It is estimate that 62,000 Detroit area properties will be facing tax foreclosure auction in 2015 unless their owners payoff their tax debt before April 1.  Over half of the properties are occupied, usually the previous owner, who has paid off the mortgage and whose family has resided in the house for a long time.  The result, many, predominantly, young, white, educated professionals and creatives who were lured to the city by tax breaks and incentives, are participating in Detroit's renaissance.  While the surface, this sounds exciting, participation in Detroit's "renewal" is at the expense of "...mainly black Detroiters, struggling with bills, are simultaneously-and silently-being shown out the back door."

Winter in a Detroit neighborhood
movetodetroit.org

This trend is affecting a major portion of Detroit's small poor demographic.  This past autumn, the Wayne County treasurer handed out tax foreclosure notices to 62,000 property owners, who were at least three years behind on their taxes.  This totals to about over $709 million in back taxes and penalties, a series burden in a city where 39 percent of the residents are living below the poverty line. The mind reels at what could be done once the revenue is collected but this thought is tempered with a sense of empathy toward the property owners who are struggling to simply put food on the table.  To give you some idea of what this means, let us turn to Ms. Hackman:

Of those properties, 37,000 are classified as occupied.  With an average of 2.74 people per household, this means around 100,000 Detroiters are at risk of losing the current roof over their head. That is 1 in 7 Detroit residents, this coming season alone.

Detroit's Northeast Side, 2010
davejordano.com

The above numbers should give you pause for real concern.  Say what you will about why 100,000 Detroiters are at risk of losing their homes but the bottom line is that home foreclosure will quickly happen unless the owners manage to workout a payment plan or pay of the entire amount in the next few months.  The first auction will take place in September, where the homes are sold for the amount of the taxes and liens owed.  The leftover homes from the first round go up for sale in the second round of auctions with a starting bid of $500.  According to a city generated reported, after a decade of this system, "Detroit has completed 125,000 tax foreclosures."

Detroit's Brightmoor Neighborhood
teamowens313.wordpress.com

"It's different kind of housing crisis," writes Rose Hackman.  Jerry Goldberg, an attorney with Moratorium NOW!, lays cites the loss of one-quarter of the city's population between 2000 and 2010 "...as a direct result of both tax and mortgage foreclosures."  While Marilyn Mullane, the executive director of Michigan Legal Services, which works with Detroiters undergoing foreclosures, links the tax and subprime foreclosures crises.  The key connection is the lack of information.  Ms. Hackman quotes Ms. Mullane,

Low-income homeowners are eligible for tax exemptions.  While many residents would meet the requirements, they must file requests before their taxes are due, neither of which are readily known pieces of information...Owners can buy their homes back with debts cleared at auction for $500 as a solution of last resort...The payment plans are unrealistic for many Detroiters already desperately behind on their bill.  It is very disturbing because most homeowners want to keep their homes.  If only the treasurer were willing to take whatever they could pay.

Abandoned homes next to occupied homes
Delray neighborhood
detroitnews.com

To put it in simple terms, "The flow of information is unequal-asymmetric,...between the often wealthy buyers and the low-income residents who suffer foreclosure."  The real estate challenges before the city appear to favor outsiders.  For example, Trevor Epps, the chief of staff to a Michigan state representative found a tax foreclosure notice on the door of her house in northwest Detroit.  Ms. Epps took over the tax payments from her grandmother a few years and has been playing catch up since then.  Ms. Epps's grandmother had once been an active member of the community until Ms. Epps came to help.  By that point, renovations were necessary, expenses had to be cut, and debt to be paid.  Ms. Epps began making payments towards the property taxes but fell short.  She is looking into payments plans to address the debt and avoid foreclosure but the whole process has left her frustrated and ready to find an apartment for herself outside the city and put her grandmother in a home.

Southwest Detroit neighborhood
archive.freep.com

Leila Timmons, Trevor Epps's grandmother describes the block as previously being "vibrant."  Now all is silent-two thirds of the homes are empty.  Those still occupied are in similar situations with multiple generations living under one roof-"Grandfather homes."  The new buyers are not the "distinguished Detroit grandfathers.  Anecdotally, they are well-funded and relatively young."

One example is Darrin McLeskey who has been buying Detroit properties through the tax auctions since the age of nineteen.  When he began, he thought it would be a great idea to own a city block and wanted a stake in the city's future.  Presently, he owns five buildings, one of which he lives in, and nearly forty lots.  "Some of the lots had trees planted on them already," says Mr. McLeskey.  Over time, he found it best to purchase still occupied properties. Two of the buildings he owns were purchased from native Detroiters two year in arrears, just one year shy of foreclosure.  In the case of one couple who owed $3,000 in taxes and $1,000 in utilities, Mr. McLeskey offered them $8,000 on their house, which allowed them to pay off their debts and walk away with an extra $4,000.  Mr. McLeskey said, "These are residents who were planning on moving away from the city anyway.  Six of his former housemates have also bought property.

City Airport neighborhood
zerohedge.com

Thus far, the city and the Wayne County treasurer's office have turned a deaf ear to the plight of the homeowners struggling to pay their taxes.  Citing David Szymanski, Wayne County assistant treasure, Ms. Hackman writes, "the hardest part of his job is having to foreclose on people who have not paid their bills.  Those who cannot afford property taxes should consider renting."  Mr. Syzmanski says this so casually, appearing not understand that for some struggling homeowners, even renting is difficult.  Even those who rent to own-land contracts-are not shielded from tax foreclosures.  Under such contracts, the property owner replace largely absent banks and become the de facto lenders towards whom monthly installment payments are made.  At the end of the contract, theoretically, a property is passed from an owner/former landlord to a new owner/former tenant.

Historic Detroit neighborhood
blog.preservationleadershipforum.org

Cornelius Washington, a single father, native Detroiter, and carpet-layer found out a few months ago that the house he and his four children had been living in under a land contract had be foreclosed and was going up for auction.  Mr. Washington suffers from job-related disabilities and works part time, thus not qualified for disability benefits.  Two years ago, Mr. Washington signed a land contract, agreeing to put $2,000 down and pay $400 a month for four years, after which he would outright own the house.  Half way into the contract, Mr. Washington contributed $12,000 and an additional $10,000 in renovations.  He attempted to bid on and buy his home at auction after all the taxes and liens were cleared in the second around.  Unfortunately, he was out outbid, the final price, $3,000.  He and his family have nothing but hope and prayer left.  He is hoping to to put the $1,400 he budgeted for the second round toward fully buying it back from the owner.  What else can he do?