A Mystery Bidder Offers $3 Million for 6,000 of Detroit's Worst Homes

A sampling of Detroit's 6,000 "Blight Bundle" properties Photographs by Wayne County Treasurer’s Office

Three million dollars can barely buy a new townhouse in Brooklyn these days, but it could be enough to purchase a bundle of more than 6,000 foreclosures up for auction in Detroit.

The cost of dealing with the many blighted buildings included in the Detroit mega-auction means a $3.2 million bid received last week—roughly the minimum allowable bid of $500 per property—will likely prove too high to turn a profit. “I can’t imagine that you are going to make money on this,” says David Szymanski, chief deputy treasurer of Wayne County, which is selling the properties.

So it’s all the more mysterious that the auction, opened with little fanfare earlier this month, has attracted any bidder at all. Still, at least one unidentified party is willing to pay $3.2 million take control—and responsibility—for scores of dilapidated homes. In fact, winning the bid could cost the lucky winner a small fortune beyond the auction price.

Finding a way to deal with Detroit’s blight is critical for the city’s future. A task force has already called for immediately tearing down 10 percent of all structures. The group surveyed the condition of every Detroit property and identified neighborhoods at a tipping point at which stripping them of blight could keep certain areas from slipping away entirely.

“I had cancer 12 years ago, and this is exactly like cancer,” Szymanski says. “If you don’t get it all, it’s going to come back.”

Wayne County has become a major owner of blighted properties, which it can seize when owners fall behind on taxes. The scale of its distressed holdings is unprecedented. When Szymanski joined the treasurer’s office four years ago, he called the treasurer of Cuyahoga County in Ohio to compare notes. His counterpart, whose domain includes Cleveland and was a bellwether during the housing crisis, asked: “Are you sitting down? We are foreclosing on 4,500 properties.” Szymanski says he replied: “I hope you’re laying down.” At the time, Wayne County had 42,000 properties in foreclosure.

Courtesy Why Don’t We Own This?

The numbers have become only more staggering. This year alone, Wayne County has started foreclosure proceedings on 56,000 properties, with about 20,000 of them headed for auction. In 2015 county officials expect to foreclose on an additional 75,000 parcels.

In the past, these have been sold off individually or in small batches. That method didn’t always go well. More than three-quarters of the buyers soon fell behind on taxes, starting the cycle all over again. In 2011, as the Detroit News reported, some buyers were falling behind on taxes and going through foreclosures, only to repurchase their former properties—now cleansed of the back taxes. The county has since changed the rules.

Discussion among county and city officials about trying a bulk sale of Detroit’s least-desirable real estate never yielded results until after Detroit’s current mayor, Mike Duggan, was elected in 2013. But before the properties can be transferred to the city, which can offer them at lower prices, the law requires a county-level auction.

“The idea was that no one would buy it,” Szymanski explains, so they would pass on to the city to handle. A closer look at the so-called blight bundle (PDF) created for the auction makes it clear why that auction is no bargain. The parcel includes roughly 3,000 properties that need to be torn down, plus some 2,000 empty lots, plus about 1,000 homes that are believed to hold some value. Everything is sold as is: The homes may lack furnaces or wiring and they may come with mold, tenants, or both.

To top it off, a condition of the auction requires the buyer to demolish the rundown buildings within six months—something Szymanski estimates will cost about $24 million.

Yet someone actually wants to buy the whole blight bundle. A single qualified bidder—Szymanski can’t reveal any details because the auction is still open—came forward and cleared the minimum bid. “It could be—and this is all speculation—that the people who are bidding on it are altruistic in nature,” Szymanski hints. He believes he has already met representatives of the group behind the $3.2 million offer, but he can’t say for sure.

Crews starting demolition of the Packard Plant in Detroit to redevelop the property for homes, retail, offices, recreation, and light industry
Photograph by Carlos Osorio/AP Photo

Why would a philanthropist buy the properties outright from the county, instead of working with Detroit to take care of things? Szymanski has a theory here, too: “If you look at the history of the governance of Detroit, you’d see that our mayor, a few mayors ago, is currently in prison. There’s a fund of about $20 million of insurance proceeds meant to demolish homes that has sat without being spent. There are numerous efforts to demolish the properties that haven’t happened in the past.” While Szymanski expresses “tremendous” confidence in the city’s current leader—Detroit Mayor Duggan, he says, ”understands the importance of dealing with blight”—there’s good reason for do-gooders to be wary of politicians.

The county has sold some smaller bundles of blight before, including a few dozen parcels around the abandoned Packard Plant. That auction netted more than $400,000. “In my mind, if I gave it to somebody for nothing and they make something out of it, that’s a win to me,” Szymanski says. Just this month, work started on redeveloping the former automobile factory.

The bigger chunk of foreclosed Detroit would seem infinitely more daunting for a buyer. But there’s still time for a bidding war on the blight bundle. A dozen potential buyers submitted the required deposits to submit bids, and a few days remain before the auction closes on Oct. 28.

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