We know that a $500 starting auction price for the 65,000 Detroit homes that have been foreclosed on sounds incredibly enticing. At Own It Detroit, we want to encourage you to take risks and find amazing deals, but even $500 homes come with hidden costs.
The home may come with residents
Many of these foreclosed homes are still being occupied by Detroiters. When looking to purchase these homes at auction, you need to be prepared for the possibility of evicting previous owners. Morality and ethics come into play when purchasing an occupied home, and many worry that these auctions may cause the homeless numbers to rise. What can you do to combat this issue? Many real estate ventures with Detroit homes have settled on ‘cash for keys’ deals, where a simple contract of payment in exchange for the occupants to leave worked out better than eviction.
Rehabbing can be costly
As we often see in the news, Detroit is constantly at battle whether to demolish or renovate their old buildings. This holds true for these foreclosed homes as well. While it is cheaper to demolish the property and start over, many real estate investors would rather renovate the home back into its’ former glory. However, renovation of these homes can come with a heavy price tag. Purchasing a Detroit home at $500 could potentially cost you up to $100,000 to renovate, based on the quality and current structure of the building. Make sure to always look into outstanding bills, hidden fees, and back taxes on any purchase, before you buy.
Time is of the essence
If you are considering purchasing a home at auction, which is monitored through the Detroit Land Bank, then you need to remember you have a 6 month window to bring you home up to livable standards. This can mean a serious time crunch from some real estate investors, but we’ve noticed that the DLB is willing to negotiate on time if they can see you’re making a valiant effort to bring properties up to code. We recommended looking into more populated areas where these homes are located, as the DLB will be more willing to work with you to help improve the neighborhood as a whole.
Remember, in real estate there are no guarantees, but finding a great deal is always worth a second look. When looking into inexpensive homes for purchase in Detroit, make sure to always weigh the options to get the best return on investment.