A lot of buyers can get very confused when looking at the Detroit property market. There are many companies selling properties in Detroit but there seems to be huge differences in price. Prices seem to vary widely, from as little as $12,000 up to $50,000 for a three bedroom brick house. Sometimes these properties can even be on the same street, so what is going on here?
One of the main reasons for this is that the company selling the property actually purchased the house themselves, or they have an agent overseas who is acting on their behalf and taking a large chunk of the profits.
How it normally works is that they will buy the house through a US LLC and then transfer title to another company, you will often see at this stage the price doubles.
What other companies want you to believe is that they can sell the same properties for almost double the price and that the house coming fully refurbished makes it a much better investment. Is this really the case ? Have they spent over half the value of house on a refurbishment ?
Does it also mean just because a property is refurbished that a tenant will stay ? Or does it mean that if a tenant leaves you are under more strain due to the higher price of the house.
Other sweeteners they may throw in is a free LLC which costs $350 or a six month free warranty which costs $250. So with your refurbishment, free LLC and free warranty it justifies you paying $20,000 more for the property ? Right ?
One thing you might see from time to time is rent a guarantee being offered. Is this really a guarantee ? Or has this being built into the purchase price ? So really in effect you are just paying yourself.
We believe transparency is what every client needs, an exact breakdown of the costs so you know exactly what you are paying for, if you are paying thousands for a refurbishment you should at least get copies of the invoices
No smoke and mirrors.
What we do is very simple, we take you direct to the source in the US, we have exclusive agreements with Asset Management companies, Banks and property Brokers. The price we quote is the US listed price, not the inflated price, you are paying the true market value. Due to our volume of sales we are approached by many companies who want us to sell their properties exclusively. In fact our Broker won the Broker of the Year as we have sold more properties in Detroit than any other overseas company.
I am sure that most of you will do your homework and contact other companies, which of course is the right thing to do. I am also sure other companies sometimes throw mud our way, claiming our properties are in bad areas and in a bad condition.
Wrong, that is not our model, we sell in the same Zip codes and the same streets, if your property needs work we will tell you and put you in touch with local contractors, you decide how much you want to spend, you have complete control over your purchase.
We want to give you an example of what we are talking about, this event took place in September 2014 and highlights exactly what can happen.
On the 10th of September we were approached by a client who had seen a foreclosure on the internet. The client asked us if we could make an offer and try and secure the property for him. We obliged and also got a quote for the work needed, often you find foreclosed properties need work.
The house was on McKinney Street, it was a large four bedroom house on the market for $12,000, the price for the contractors was $5,000.
When we submitted the offer we advised the client to slightly increase his offer to $14,000 but unfortunately the client did not take our advice and he lost the bid. Our client was of course a bit upset but he ended up placing another offer and securing a different property.
Exactly two weeks later we were forwarded a email from the same client, he received a email from another company and could not believe his eyes, it was McKinney Street, the original house he wanted.
At first he was excited by the email but then he seen the price, it was now listed at $45,000. The email claimed that the property was tenanted and fully refurbished, it came with a six month warranty. If he had just lost the offer two weeks previously how could this be possible ? The deal was closed, all the work done and a tenant placed in two weeks ?
The main thing to take away from this is that $28,000 had been added on to the price, the average cost of a refurbishment is $8,000-$10,000 so where did the extra $20,000 come form ?
This must have been for the free LLC and six month warranty.
