If you are buying bargain houses, this is a warning. The banks have put together bundles of 200 – 500 houses and sold them for pennies on the dollar to investors. The investors have turned into seminar promoters, built fancy websites, and hit everybody with a names list to resell the houses. I have a number of my students (on the order of a dozen) who have bought the $15,000 REO bargain houses at seminars. They are in lawsuits with the folks that sold them the houses, and it is just ugly.
I was approached a year or so ago by several groups that were buying bargain houses and wanted to market bundles of houses to my students. I carefully evaluated them (both the promoters and the houses). I got a number of lists of the houses and looked at the properties. They were in Detroit, Cleveland, Cape Coral, and other places. Most were in the war zones. After evaluation, I was sure I didn’t want anything to do with the deals, and I certainly wasn’t going to get my students involved.
Most of the houses were listed in the bundles at $3,000 – $6,000. There were others in the $30,000 range and some above that. The guys who were buying bargain houses brought the deals to me wanted to “cream” the best deals off the top and then triple the prices to sell the pieces of property at their seminars. So, they got a house for $6,000 and then wanted to sell it to you at $18,000. There were about a third of the houses in the war zones of Detroit, Cleveland, etc. that just weren’t worth anything.
The plan was to “give” the real dogs to Habitat for Humanity or some other charity and then get a tax deduction. It all sounds great, but Habitat for Humanity wouldn’t take them even as a gift. All of the houses have a liability attached to them. They are “attractive nuisances” or meth houses that often need to be torn down. The “middle range” of houses weren’t really rentable. The “upper range” weren’t much better. As far as I could see buying bargain houses was no deal.
I have been to see many of the houses, and there is no way you want to touch them. Even if you pay to tear down the house, it may be decades before the land is worth anything. The promoters sell them saying they will clean them up and rent them for you. They have no idea what the cleanup will be. They haven’t seen any more than a picture of the house and taken the Google driving tour of the neighborhood. In many of the areas, the copper pipe and wire would be stolen out of the house before the contractors could install it. There is no way to clean them up.
If you haven’t already fallen for the deal, watch your step. If you have fallen and are now crashing and burning, email me and maybe I can at least get you involved in the several class action suits I am aware of.