I don’t like to use the word cheap when it comes to my good friend, Joe. So I’ll refer to him as frugal. It sounds less disparaging. After all, he and I have been tight for 40 years, becoming grade school classmates, then college roommates, and trucking on through to the present. So I wanted to steer him in the right direction when his moth-ridden wallet miraculously opened up to pursue real estate investing. I knew he would readily understand one of the first rules of making money in the real estate industry: Buy low. He doesn’t pay full retail for anything.
He started investigating how to buy foreclosed houses in Michigan to, hopefully, get his hands on some undervalued deals. It’s an idea that many new investors start with because it seems pretty straightforward. And, indeed, there are several local and regional options that may be good places to begin looking for foreclosed homes. But, as I told Joe, you need to know what you are getting into. Sometimes buying foreclosure houses and flipping them is not as clear-cut as it first appears.
Where to Find Foreclosed Houses in Michigan
It’s difficult to sift through any national news source on real estate investing and not hear some mention of Detroit’s market. Stories range from buyers acquiring houses for astoundingly little as $1,000 to continued shrinking inventories that are propelling the Motor City to become a hot market. Depending on your budget and niche, you can buy downtown condos through auction or scoop up properties at the lower end of the scale in neighborhoods such as North End, where agribusiness through urban farming has taken on a whole new wrinkle. With proper research and fortuitous timing, bargain basement prices on a variety of investment property types can be found across the Wolverine State through municipal, county, and state agencies.
Detroit Land Bank Authority
In Wayne County, the Detroit Land Bank Authority (DLBA) lists numerous foreclosed properties for sale. These properties generally are purchased sight-unseen but, unlike most other auctions, the DLBA does schedule open houses so some homes can be viewed prior to bidding. Auctions are held daily online from 9 a.m. through 5 p.m. with bids starting at $1,000 and raised in increments of $100. If you win, you will receive an email notification and be expected to pay the full amount of the deposit, with the remaining due in 30 days.
That doesn’t sound too complicated, especially for the starting price, right? Well, be aware that what you don’t pay for on the front end may shock you on the back end when you buy a land bank property. These houses are usually in really rough shape. The DLBA is in the business of reducing blight and so many of the properties they have available were derelict for quite some time, perhaps years, before the DLBA acquired them. If you are new at real estate investing or have never handled a full rehab, these deals are not for you.
Wayne County Tax Foreclosure Auction
The Wayne County Tax Foreclosure Auction (WCTFA) broadens the availability of properties being sold across the region. These homes go up for bid by the State of Michigan and proceeds are used to offset taxes owed by former homeowners. Bidders must deposit $2,500 with the Treasurer’s Office for a single home and $10,000 for the chance to make online offers on multiple properties.
The higher opening bid compared to the DLBA suggests better properties but ‘buyer beware’ is always at the forefront of my mind when it comes to acquiring investment houses from the WCTFA. These houses are sold “as is” and no inspection can be performed prior to purchase. In addition, the properties may have surprise liens attached and you will become the not-so-proud owner of them along with the house. You won’t be able to count on your returns, if you make any, when you don’t know how much it will cost you up front.
Michigan Department of the Treasury
In my view, a dollar earned in Wayne County is the same as a dollar earned in Branch County. Like the WCTFA, each county conducts auctions on vacant and abandoned properties within its own jurisdictions. Instead of managing those processes internally, however, eight Michigan counties use the state as the foreclosing governmental unit (FGU). Rather than go to the county in search of foreclosures, investors can bid and purchase them through the Michigan Department of the Treasury. This is the case for the following regions: Branch, Clinton, Iosco, Keweenaw, Livingston, Luce, Mecosta, and Shiawassee counties. The FGU creates a singular system for bidding on and buying foreclosed properties across much of the state.
Investors interested in bidding on FGU foreclosures can pre-register for the auction online and either attend the sale in person or proceed with the electronic process. In-person attendees merely need a valid photo ID and working phone number to register prior to the event. The Treasury requires that certified funds—cashier’s checks—be presented for payment should you be successful in a home purchase.
You can take possession of the property immediately after the auction but new owners should be cautioned to hold off on improvements until the deed arrives. One drawback of purchasing in this way is that liens from the Environmental Protection Act may still exist and there’s no way to determine that status beforehand. Unexpected costs could pile on top of the purchase price and impact any potential profits.
Buying foreclosures can be a bumpy road but certainly not without its rewards. I plowed through the process a few times and my familiarity with these purchases scored me a number of attractive deals. That’s not to say the bureaucracy became any easier to conquer. Rather, repetition in researching properties, registering for sales, and submitting bids simply saved me some time and money. I’ll always turn to foreclosures as a source of leads but in the pages between I’ve found an easier way to find off-market properties.
A Better Strategy Buying Michigan’s Foreclosed Homes
Off-market properties often become available when homeowners see no other way out of an unaffordable mortgage. If you approach a distressed homeowner facing foreclosure diplomatically, you can often get some great bargains because many folks just want to sell a house and move on. Trust me, neither the unfortunate homeowner nor the bank want to deal with all the pending burdens that the foreclosure process involves. And, you don’t want to deal with the risk of buying an auction foreclosure house. It takes some time to finesse the approach but buying homes in this way is preferable for everyone involved.
Learning how to build trust with a home seller and convert the lead into a deal can feel intimidating but it is not insurmountable if you have the right training, support, and brand reputation. When I became an independently owned and operated HomeVestors® franchisee years ago, I went through an initial week-long training that covered all the basics, including how to talk to home sellers. And, when I was ready to actually do it, I got more guidance from my Development Agent, a seasoned real estate investor with a track record of getting things done right. Although I was still a little nervous at first, I knew that I had an ace in my pocket as well: the nationally-known and trusted “We Buy Ugly Houses” marketing campaign. Distressed homeowners call HomeVestors® franchisees like me specifically because they are familiar with the brand’s solid reputation.
Don’t just rely on trying to scoop up foreclosure houses in Michigan to grow your real estate investment business. Get better deals on off-market properties—and the support you need to close them—by getting in touch with HomeVestors today.