Massive Motown foreclosure auction
Nearly 700 homes will be sold during a three-day auction in Detroit.
NEW YORK (CNNMoney.com) -- Nearly 700 homes in the Detroit area will be auctioned on Sept. 21 through Sept. 23, one of the biggest home auctions ever.
Rising default rates in the economically hard-hit, auto-industry town have riddled the Detroit housing market. There's an abundance of bank-owned properties available for sale.
"Because many of these properties have been on the market for a year or more, banks are very anxious to find buyers . . . it's not unusual for the properties to sell at auction below their price list," said Dave Webb, one of the owners of Hudson & Marshall's home auction division, the property auction giant that is conducting the auction.
"Right now, it's a buyer's market and there are tons of inventory. I expect prices to come way down," he said.
The properties come with clear titles; there are no liens or encumbrances, such as back taxes on them. There's also a wide range of houses available with pre-auction prices running from about $5,000 to a bit more than $600,000.
Most of the properties can be inspected the weekend of September 15 from 1 p.m. to 3 p.m., both Saturday and Sunday. The descriptions and addresses can be accessed at Hudson & Marshall's Web site.
Michigan has been one of the leading foreclosure states in the nation the past few years with Detroit as its epicenter. In July, the number of properties in the city environs entering into some state of delinquency or foreclosure was 8,683, 1 of every 97 households. See foreclosure rates for 100 metro areas.
Many of these homes eventually are taken back by the lenders. The titles are cleared up and most are listed with real estate brokers as ordinary retail sales.
But the housing market in Detroit has been glacially slow - most of the auction homes have sat vacant on the market for a year or more. Maintenance, utilities, insurance and costs of capital mean the properties eat up money for the lenders every month.
To stop the bleeding, they turn the homes over to Hudson & Marshall for quick disposal. All sales are "as is," so buyers should try to inspect the houses before they bid. The properties can be purchased online before the date of auction.
"Buyers set the prices," said Crystal Wright, spokeswoman for Hudson & Marshall, "but it's a reserve auction [for the most part]; sellers have the right to accept or reject the bid."
In past auctions, winning bids were accepted 92 percent of the time. Some houses are listed "absolute," meaning any bid will be accepted.
"[In some cases] the sellers have indicated that any bid will be OK," said Webb. "It's costing them too much. Even if a house brings just $100, they'll still have to sell it."
According to Wright, the majority of buyers, perhaps 60 percent, are investors. They fix up the houses for rent or sale. More and more buyers, however, are young couples or single mothers seeking homes .Can't sell your home? Be a landlord
"They're getting more comfortable buying at auction," she said. Many attend an auction or two to get a feel for the process and then return for the next sale as serious buyers. Like any auction, some items can attract some frenzied bidding and the final prices can be high. But there should be far more bargains than overbids.
The cheapest of these properties is usually in sad shape and will require substantial rehab work. They're mostly located in the inner city.
One house in Highland Park, an independent town almost completely surrounded by Detroit, was marketed at $5,900 and did not sell. It's a cute, 900-square foot cottage with three bedrooms and a bath. There's an undisclosed reserve price, but it's almost sure to sell for less than the $5,900 it was listed at last. It needs considerable work.
The most expensive places are in nearby suburbs and should be in move-in condition. One property in West Bloomfield, an expensive area, was last listed for $609,000. It is nearly 4,000 square feet with four bedrooms and three baths. The agent claimed only minor cosmetic repairs are needed.
Hudson & Marshall has been in the auction business for decades, but its business has rarely been hotter. It just conducted an auction of more than 200 properties in the Carolinas and has house auctions coming up in the D.C. area and Florida. More than 700 homes are up for sale in those two areas.