Friday, April 19, 2013

Flooded With Vacant Rundown REOs, Detroit's 'Non-Foreclosure' Sales Inventory Fails To 'Appraise Out' - Leads To Lost Home Equity For Selling Owner-Occupants Despite Buyer Willingness To Pay More

In Detroit, Michigan, Bloomberg reports:

  • In most American cities, a limestone home with a large front turret and paneled library would have a waiting list of buyers at $135,000. In Detroit’s Rosedale neighborhood, it almost didn’t sell at all.

    The first offer of $150,000 fell through when the 2,600- square-foot (242 square-meter) Tudor style home appraised for $85,000, dragged down by comparisons with sales of foreclosed homes in nearby rundown areas, said Tom Goddeeris, executive director of the non-profit Grandmont Rosedale Development Corp., which rehabbed the home. A $135,000 offer squeaked by after a $110,000 appraisal, he said.

    We felt we had little choice but to take the second offer, although there were obviously willing buyers at higher prices,” said Goddeeris, who estimates similar mismatches between market value and appraisals mean the association loses about $15,000 on each home they fix up and sell in the 5,500 property area. About 10 percent of Rosedale’s homes are vacant.

    Flawed appraisals and a dearth of normal, non-foreclosure sales to serve as comparisons have put mortgages out of reach for most potential buyers, even in the best neighborhoods like Grandmont Rosedale that are the focus of officials’ efforts to revive Detroit. In a city of about 700,000, there were just 578 mortgages for purchases last year, according to RealtyTrac, an Irvine, California-based data provider.

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