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Detroit homes sells for $1; costs bank $10,000

Samuel Staley
August 13, 2008, 12:21pm

Homes in the city of Detroit can sell for $1, especially if they are owned by a bank caught up in the home foreclosure crisis. An article in the Detroit News recently chronicled the unlikely sale of a home such as this.
One dollar can get you a large soda at McDonald's, a used VHS movie at 7-Eleven or a house in Detroit. The fact that a home on the city's east side was listed for $1 recently shows how depressed the real estate market has become in one of America's poorest big cities. And it still took 19 days to find a buyer.
However, while the article attempts to spotlight the impact of the home foreclosure crisis, it really emphasizes how terrible the economic environment is in cities like Detroit. Before the home foreclosure crisis, the home in this article was valued at $65,000. To put this another way, someone earning $10 an hour could afford to buy this home. The owner still couldn't hang on to it.
So desperate was the bank owner of 8111 Traverse Street to unload the property that it agreed to pay $2,500 in sales commission and another $1,000 bonus for closing the $1 sale; the bank also will pay $500 of the buyer's closing costs. Throw in back taxes and a water bill, and unloading the house will cost the bank about $10,000. "It doesn't make sense in some neighborhoods to keep paying costs and costs," Colpaert said. "It can make more financial sense to give it away."
The buyer paid cash.

Samuel Staley is Research Fellow


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