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Buyers told to be careful on $1 house in Detroit

By Hu Haidan in New York | China Daily | Updated: 2013-04-05 11:53

House for Sale: $1. Location: Detroit. Condition: In need of work. Date Constructed: 1905.

An April Fool's Joke? A ploy to get would-be buyers' attention? Or for real?

Whatever it was, it got responses, said Lisa Gray, who has worked as a real estate agent in metropolitan Detroit for 13 years. She said she received phone calls every day for that $1 house and other $1 houses that were listed for sale in the financially ailing city two months ago. She put the number of calls at 30 a day, and said all came from Chinese who live in the US or China.

The house built in 1905 was first listed on on April 1 - April Fool's Day. The same real estate agent listed two other $1 houses a month ago. There was no answer at the phone number for the listings; a recording said the office was closed. There also was no answer for the listed cell phone number.

While a property may be listed for $1, in reality buyers end up paying a lot more, and many Chinese potential buyers have no idea about the total costs involved, Gray said. "And don't' mention the high property taxes based on subjective valuations by the government," said Gray.

"You cannot buy a distressed house and just leave it there," she said. "You have to pay lots of attention and money to fix it."

She explained to get a certificate of occupancy from local building officials, owners must make repairs, such as new plumbing and electrical rewiring. "In China, we don't have such requirements," she said.

"Even if a house is for sale at only $1, it's not worth it," said Guo Jinsong, a metro-Detroit real estate agent for 12 years. "I received many phone calls asking why the properties were at such a low price," Guo said about the $1 houses. "But no one actually purchased them."

Most $1 houses in Detroit are bank foreclosures, are heavily damaged inside and outside, and usually are located in dangerous neighborhoods, he said. recently reported that about 1,000 people called a hotline to join a tour in Detroit after news reports that dozens of properties in the city were selling for under $100.

The website also quoted a Georgetown University professor warning investors that even if they buy a property for $500, the government might value it at $300,000 and the tax on it could be $6,000 a year.

"If there is such a great deal on real estate in Detroit, we (local potential buyers) will buy them all before potential buyers come from overseas," said Wu, an operations manager at a Detroit auto company, who declined to give his first name and his company's name. "I didn't see a group of Chinese potential buyers in Detroit," Wu said.

Detroit was the fifth-biggest city in the US in the 1950s, with a population of 1.8 million. Today, it ranks 18th with a population is 700,000 and the cash-strapped city has been taken over by the state.

On March 14, Michigan Governor Rick Snyder named a leading bankruptcy lawyer to run the city, a last-ditch effort to turn the city's financial problems around short of filing for bankruptcy.

Detroit is the long-time home of the US auto industry, which has had a resurgence in the last few years. Despite that, the city is mired in financial problems.

The city faces a cash shortfall of $100 million by June 30, and its long-term liabilities exceed $14 billion, according to a state review board.

Gray and Guo said they think the city's real estate prices are making a rebound. "Property prices have increased in 2013," said Gray. "The price dropped to the bottom in 2009."

Gray said a house that was listed for $600,000 in 2007 dropped to $300,000 in 2009, and now lists at around $450,000.

"Chinese potential buyers should be aware that it is impossible to invest a $1 or $500 in a house in Detroit and earn a big profit in a short period of time," said Guo.

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