NEW YORK (MainStreet) Detroit filed for the largest municipal bankruptcy in our country's history a little over a week ago. Many questions remain unanswered about the future of the city's infrastructure from pension plans to public schools. It seems new questions pop up every day. While many of us struggle to save towards paying down principals on mortgages or for a down payment on a primary residence it is possible to find a house in Detroit for $1. A consumer can even find a five-bedroom house for $10,000.
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But before you get too bug-eyed and lick your chops at the prospect of your very own Motown manse, take a prudent step back.
"The truth is that no one knows if Detroit is a 'deal' at the moment, because it has been drowning in a steady downward spiral for the last 60 years," said Jason Abrams, co-founder of the Abrams Team national real estate firm and host of the HGTV show Scoring the Deal. "40 years ago, people said 'it is a deal, now is the time to buy.' Then they said it again 30 years ago, then again 20 years ago, then again 10 years ago. So far, it has not been such a great deal."
There are roughly 80,000 empty buildings within Detroit city limits, Abrams added, but many of them are crumbling and unappealing.
"Once you get into the higher priced homes - $15k to $25k - then the answer is 'yes, many of them are very much livable,'" he said. "The problem is that there are very few people who really want to live there."
Habitability, indeed, is the crux of the matter and with nearly one-third of Detroit abandoned, Abrams describes the 138-square-mile metropolis as "latterly devolving."
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That means there's a dovetail effect on the community ammenities surrounding the real estate.
"There are roads that need to be repaired, there are poor schools and there are no funds within the city budget to make those improvements," said Leslie Piper, a consumer-housing specialist for Realtor.com.
The properties themselves are often derelict, even if the price is right.
"When there are six houses that have been on the market that have not been cared for that is going to effect what comes on the market," Piper said. ""Many of the homes in Detroit are so dilapidated they have to be torn down and built from scratch."
This is really an unprecedented situation due to the size of the bankruptcy, the amount of abandoned property, the amount of violent crime and the $443,818,881.92 owed in overdue taxes and penalties.
And even if you want to throw caution to the wind and get in on the Rust Belt real estate trend, you might find manuevering the logistics rough sailing.
There are 384,861 properties in Detroit, and of those, around 100,000 are owned by various government agencies, banks and mortgage companies, according to Jerry Paffendorf, CEO of Detroit-based Loveland Technologies, which develops crowdfunding and social mapping systems in the area.
"Most of those properties are technically available for application and purchase, although the formal processes are currently difficult to navigate and the bankruptcy has put a freeze on the city selling properties,"
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Paffendorf highlighted concern over Detroit's Gini coefficient, which measures income and wealth differences within a population. Detroit may be bankrupt and devolving, but Paffendorf sees it as a symptom of a much larger problem for the middle class--one that make you hold the trigger finger on that real estate purchase.
"I think Detroit is at a very different scale than most other cities and municipalities going through this," Paffendorf said. "It honestly makes me think more about the future of the country as a whole rather than other individual places. Where's it going to go?"
--Written by Leigh Held for MainStreet