All those dollars that have been amassed overseas… they’re finding their way back home. With homes in some cities literally selling for $5,000 or less, foreigners are buying them up in bulk, speculating that they can’t get any lower or that one day, they’ll have purchased an American home for cheap.
AP: “In the past few months, I’ve picked up 10 new clients from out of state that are buying in bulk,” said Mike Shannon, a suburban Detroit real estate agent. His office specialises in foreclosures in a city that’s among the national leaders.
“They’re coming to us, saying ‘Look, I want to buy 50, 100, 1,000.’ They want to own every decent and cheap house they can find.” Despite a stagnant retail housing market, real estate sales of foreclosed homes are booming. Shannon regularly fields calls from eager prospects, and recently sold 30 homes in one day to one buyer. A trio of U.K. investors has bought a half-dozen and plans many more.
Of course, this does entail risk, which we hope the foreign buyers are aware of. As this weekend’s cover story in the The New York Times Magazine noted, cities like Cleveland are trying to make out-of-town buyers responsible for demolition or other code violations. So, sure, you buy a house for $500. But your downside can be way more if the city slaps you with a monster fine. Here’s how they’re doing it, which, to be honest, sounds kind of ridiculous to us:
Housing codes, which were established in the mid-19th century, set minimum standards for housing quality. They traditionally help maintain both a city’s aesthetics and safety. In Cleveland today, they seem to be all that keeps the city from crumbling. In 2007, Pianka realised that the banks weren’t showing up in court after being cited for code violations. “They were thumbing their noses at the city,” he told me. “They were probably thinking, It’s Municipal Court. What can they do? And we thought, How loud can this mouse roar?” Pianka set up what he called his Clean Hands Docket. If a bank didn’t respond to a warrant, Pianka refused to order any evictions it requested.
Pianka’s staff also dug up a little-used 1953 statute that allowed for trials in absentia, and every other Monday afternoon for the last year and a half Pianka has held trials with a judge and a prosecutor but no defendant. The first case involved Destiny Ventures, a firm based in Oklahoma that buys foreclosed properties in bulk and then sells them. It was cited in 2007 for violations on one of its houses, but didn’t show up in court. The idea of a trial without a defendant was so unusual that when the prosecutor said he had no opening statement, Pianka prodded him. “You’re going to waive opening statement?” he asked. “Don’t you want to give the court a little road map about the strategy?” A housing inspector testified that Destiny Ventures had done nothing to correct the code violations on the vacant two-story clapboard house in question. The windows were punched out, the front door was wide open and roof shingles were missing. Pianka fined Destiny Ventures $40,000, and then had a collection agency sweep the company’s bank accounts for the money.
It makes sense that you have to keep your housing stock up to par, we guess, but when you’re screwing over the only people that’ll buy some of these houses, we’re not sure how productive this is over the long term. If you’re going to make buying them for investment purposes impossible, the only real solution is to raze ’em — which, incidentally, would at least get you some added employment.