Qualified buyers and accepted purchase offers often aren't enough to seal the deal for Detroit home sales. Jeff Green tells why in a Bloomberg article:
Flawed appraisals and a dearth of normal, non-foreclosure sales to serve as comparisons have put mortgages out of reach for most potential buyers, even in the best neighborhoods like Grandmont Rosedale. . . .
A broken mortgage system means that residents are missing out on some of the lowest borowing costs on record. . . . Of the 578 mortgages for purchases last year in Detroit, they had an average sales price of $53,285 and an average loan amount of $49,176, according to RealtyTrac.
Green describes a four-bedroom, Tudor-style home in Grandmont with a large front turret and paneled library that drew a $150,000 purchase offer. But no bank would issue a mortgage because the property was appraised for $85,000, dragged down by comparisons with sales of foreclosed homes in nearby rundown areas.
The reporter talks to David LeClerc of Michigan Lending Solutions, a coalition of eight nonprofits trying to create an alternative mortgage lender funded partly by investors.
The Detroit non-profits propose a fund of about $40 million backed by investors and the state that would provide mortgage loans, relying on local appraisers with better knowledge of Detroit’s neighborhoods. The aim would be to finance enough purchases at realistic values in a given neighborhood that could serve as comparisons for bank loans in the future, LeClerc said.
The Michigan Neighborhood Recovery Loan would apply revised underwriting criteria that would make it easier to get appraisals more accurately reflecting a home’s market value in Detroit and other stressed urban areas, LeClerc said.
In addition to Detroit, the proposed fund would focus on Pontiac, Grand Rapids, Kalamazoo, Flint and Battle Creek.
Local coalition participants include Midtown Detroit, Inc. and Grandmont Rosedale Development Corp. Green speaks to representatives from those nonprofits.
In a Facebook discussion about his article, Detroit registered nurse Brittany Fillmore comments:
The house described in the intro is almost identical to mine. . . . It took us forever to close because of ridiculous appraisals. Not sure what the answer to this problem would be, but it's deterring a lot of sales!
