The real estate market in the United States is not cheap. The average price of a house in the United States is $226,800, which means potential homeowners will have to either save for many years or take out loans that will take decades for the average American to pay.
Sometimes, though, some people can get lucky and find more affordable houses in the market – thought with a caveat. For example, if you can sleep soundly knowing you live in a home where a murder-suicide took place, you can buy a house for 25% less.
In Detroit, however, there’s a different kind of deal that may seem too good to be true. In several neighborhoods, the houses are so cheap that you can get them for a thousand dollars or less. There are even some houses that sell for one dollar. That’s right: just hand the owner a dollar and they’ll turn ownership to you.
But here’s why you’re better off not taking these $1 Detroit homes.
The Real Cost of Detroit Houses
These $1 Detroit Homes are actually real. Many real estate agents won’t put listings of these places online, so you’ll have to call the owner directly. All you have to do is give them a dollar and they’ll transfer ownership of the property to you.
While it does cost a dollar to own the property, there are a lot of hidden costs that are a thousand times more expensive than what you paid to own it. The city governments where $1 homes are located allow these kinds of sales because it drives tax revenue. Even if you do purchase your home for a dollar, property taxes are based on the house’s real value. So, for the average $1 home, you’ll still have to pay up to $3,000 a year in taxes.
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The house you buy is also in very poor condition. Its low price is due to the fact that it’s practically gutted and in no livable condition. Thieves have most likely already broken into the house to steal any metal (e.g. plumbing, water tanks, window fixtures, furnaces) to sell for scrap metal. Some may still be protected and have some fixtures, but these will sell for $800 to $1000.
So, expect that a $1 is extremely far gone and gutted beyond repair that it may be impractical to renovate and it might be easier to just tear down the entire house and build a new one. Unfortunately, that might not be possible in neighborhoods with $1 homes.
The Neighborhood Is Too Far Gone
The current economical state of Detroit has gotten so bad that there are entire neighborhoods were abandoned. More often than not, these are the types of neighborhoods you’ll find $1 homes in. And even if you do buy property there, you may not be allowed to repair or renovate your newly purchased home because the entire neighborhood is unlivable.
According to Max Brook Realtors’ real estate consultant John Lewis, the only hope for this area is not that all $1 homes are purchased, but the hope that a developer will come along and buy the entire neighborhood to make livable homes and commercial centers around it.
This means even if you do purchase land there, it’s not livable. A giant developer will have to buy the neighborhood and build a new community before people can live there.
What’s Going on in Detroit?
While Lewis clarifies that these neighborhoods do not reflect the entirety of the city, the reason for $1 homes and its neighborhoods trace back to Detroit’s economy. Around 1/3 of Detroit’s residential properties are abandoned and either vacant or occupied by squatters. Despite the fact that the city has exited bankruptcy in 2014, median household income rising, and criminal activity decreasing by 5%, the effects of bankruptcy are hard to shake off.
One Reason to Buy $1 Detroit Homes
Despite all this, there’s only one reason to buy these Detroit homes. And if you’re willing on betting that Detroit’s economy will ever improve within the next few years, you’ll find that the investment on these houses can be worth it.
If you’re hoping that Detroit will ever get on its feet, buying a house for a dollar and paying for the property task will pay off when the real estate market improves and you either sell your property or put it on auction.
Of course, this is a huge risk to take considering all the costs of a Detroit home and how you’re unlikely to do anything else with the property given the state of its neighborhood. But if you want to bet on the city’s ability to bounce back from bankruptcy, then it may be worth the additional costs of a $1 home.
