The real estate market has hit an all time low: buyers are now scooping up homes for as little as $1,000. There are 18 listings in Flint, Mich., for under $3,000, 22 in Indianapolis, 46 in Cleveland and 709 in Detroit according to Realtor.com. It is evident that all of these communities have been hit hard by foreclosures, and most of these homes are being sold by the lenders that repossessed them.
“Foreclosures have turned banks into property management companies,” said Heather Fernandez, a spokeswoman for Trulia.com, the real estate Web site. “And it’s often cheaper for them to give these homes away rather than try to get market value for them.”
The lenders are obviously not looking to make any money on these deals with the low prices; they just want to rid themselves of the responsibility of maintaining them and paying property taxes.
Although the deals on these homes sound too good to be true, these houses almost always need to be re-vamped: wiring, plumbing and heating systems have to be replaced, walls and ceilings sheet-rocked, plumbing and light fixtures installed and new kitchen cabinets and counters put in.
Furthermore, buyers are legally required to rehab these homes to bring them up to code. For example, in Detroit, buyers are required to sign Affidavits of Compliance Responsibility, which obligates them to make repairs outlined in an inspection report. Only after that can a certificate of occupancy will be issued, which makes the house legal to live in. But even factoring in these costs, they’re still bargains.
The good news for buyers is that most of these $1,000 homes can be renovated relatively inexpensively, and buyers can actually get government help to finance these repairs. The U.S. Department of Housing and Urban Development (HUD) has a special loan program for just such purchases.
Its rehabilitation mortgage insurance, available through FHA-approved lenders, encourages banks to issue single, long-term loans to buyers that cover both the acquisition and rehabilitation of a property, according to HUD spokesman Brian Sullivan.
Also, grant money is available from the $4 billion Neighborhood Stabilization Program, which was a part of the massive housing rescue bill passed by Congress in July, to assist buyers with grants for down payments.
These cheap homes are generally not in the safest of neighborhoods and they’re often surrounded by many other vacant and deteriorating homes. However, some of these neighborhoods may turn around and provide residents with inexpensive housing.