RISMEDIA, July 11, 2007—(MCT)—Buyers of foreclosed properties in Dearborn can face high repair bills because of a city ordinance that requires they put up money for the fixes before occupancy.
It’s a situation that one real estate agent who specializes in bank-owned foreclosed homes says is keeping first-time home buyers from getting in on good deals for homes. Other agents agree it is an issue that flares now and again in the city.
The ordinance requires a presale inspection on all homes. If repairs are needed, the seller typically makes them. But in a sale involving a foreclosed property owned by a bank, the responsibility for repairs shifts to the buyer. The buyer must give the city a cashier’s check that is put into an escrow account to ensure the work gets done.
Real estate agents say the practice can discourage first-time home buyers, who often do not have the money to buy a home and deal with the repairs all at once. Instead, investors often buy the homes to fix and resell.
“It is an endless battle with the City of Dearborn,” said Mark Beydoun, a real estate agent for Re/Max Team 2000 in Dearborn. Beydoun said he has a buyer for a foreclosed house that was just reduced to $69,000 on Ternes Street, but she can’t afford the $16,000 in repairs the city says the home needs before it can be occupied.
The city can issue a temporary certificate of occupancy that allows a buyer to move in, if the money is in the account and the work will be finished within six months, said Dave Norwood, director of Dearborn’s building department. The buyer also can put up a performance bond, he said.
A number of Michigan cities with older housing stock — including Detroit, the Grosse Pointes, Melvindale and Wyandotte — require presale inspections and escrow accounts if repairs are not made prior to occupancy.
Beydoun, who specializes in bank-owned property, said many Dearborn homes are in foreclosure because of displaced autoworkers, mortgage fraud and people who just couldn’t keep up with the payments on their adjustable-rate mortgages or subprime loans.
Foreclosures have risen dramatically in metro Detroit. Macomb and Oakland counties were up in May by 140% and by 84% in Wayne County from May 2006. Of 936 homes now for sale in Dearborn, 82, or 8.76%, are in foreclosure, according to the Dearborn Area Board of Realtors.
Beydoun said that some cities are tougher than others in the presale inspection, particularly Dearborn. “For your typical house, they will cite the whole house … roofs, windows, driveway, change the kitchen.” Carrie Gandolfo, president of the Dearborn Area Board of Realtors and broker/owner of Prudential Select Real Estate in Dearborn, said the city generally is trying to make the homes safe. It also welcomes estimates on work from contractors the buyer or seller selects to help determine the escrow amount.
“The board has been very good with working with the City of Dearborn in overcoming some of the obstacles that we have had in the past … and escrow being one of them,” Gandolfo said. “The escrows are not really that outrageous.”
Steve Hatfield, an agent with Century 21 Curran & Christie in Dearborn Heights, said Dearborn is a nice city, but its government can be difficult to deal with.
“I’ve only had one transaction where they required a repair escrow and it was a messed-up mess,” Hatfield said. “Most buyers today don’t have any money. They are putting zero down and financing their closing costs.”
Norwood said the ordinance has been around since 1984, when residents were concerned about the condition of rental property in the city. He said it has been amended over the years to make it easier for people to buy homes in Dearborn while also protecting the neighborhoods.
“What they are struggling with is the market is depressed throughout southeast Michigan,” Norwood said. “Certainly we are concerned about the Realtors. We want them to sell property. Vacant properties are not good in neighborhoods and we want to get them occupied. We are doing the best we can to help out.”
In Wyandotte, presale repair rules have been in effect since 1988, said Kelly Roberts, the city’s development director and supervisor for the Building and Engineering Department.
She said that people were not making repairs to their homes and the city had “no recourse except to write tickets, and that was just not working.”
The ordinances are good for buyers because they know what they are getting into, Roberts said.
As for Beydoun’s buyer, Sue Alashkar, 36, said she will keep looking in Dearborn. Alashkar is a travel agent who has been renting in Dearborn for years, and has been searching for the perfect home in her price range for about four months.
She cannot afford a lot in repairs, especially all at once.
“I want to find a house before the winter starts, but it doesn’t look like it will happen,” said Alashkar, adding that she won’t give up. “I love Dearborn. All the stores are around you. Plus my friends and my sisters live here. I would like to be around them.”
Copyright © 2007, Detroit Free Press
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