Wayne Co. plan targets real estate speculation

1. Wayne Co. plan targets real estate speculation Author : Christine MacDonald PP Author : Luke Stephenson http://detnews.com/article/20110208/METRO01/102080362/Wayne-Co.-plan-targets-real-estate-speculation

2. The Problem • Land speculators in Wayne County are buying up properties for the value of the back taxes owed and leaving them unattended and delinquent on taxes owed. • Many of the properties are acquired at $500 or less, far below the value of the property, however, nobody wants to buy a house in Detroit city proper, so many of the lots remain unsold. • The owners of the property never even go out to examine most of the properties, let alone maintain them. • They also refuse to pay taxes on some of the properties, allowing the county to repossess the property after 3 years, the houses produce no tax revenue in the meantime, and are usually bought very soon after off of the county real estate auction. • As of this articles print date, 10 speculators owned 5000 lots in Detroit City, many of which were delinquent on property tax payments.

3. Why? • The speculators treat the plots of land as lottery tickets in a sense. Every purchase is a low input risk that has very little chance of paying off, but will yield high profits if it does. • The general idea is that eventually property values will rise enough for the speculators to turn a profit. • The bill would attempt to limit the prospectors ability to buy properties if they were delinquent on taxes, however, the prospectors would most likely just form new companies and continue their purchases under a different company name.

4. Bad Idea? • The method that the speculators are using to attempt to turn a profit is counter productive at best. • The lots still consume services such as fire and police time, garbage trucks are still required to service them, mail is still delivered, most of which is junk mail, ect. • By not providing tax money, but using services, they’re creating a localized fiscal deficit in the communities they’re in. This lowers property values even farther than the near record lows the are at right now. • Because of this, the properties will probably NEVER get sold at a profit, which means that they will just be recycled into the county real estate auction office, and probably bought by another prospector at a later date.

5. What Can Be Done? • Until Wayne County can consolidate it’s tax-payed services enough to raise the property values, this vicious cycle will continue to propagate, resulting in a further drain on the local governments budget. • One viable solution is for the government to invoke it’s right of eminent domain. Because the houses are valued so little after being sold to the prospectors, the government could buy them up for very little money. • This would allow them to claim and either level or mothball entire neighborhoods, resulting in less area for the services to service, and elss tax money spent on nothing.

6. Economics • What does it all mean? • Demand falling? • Supply line • Reasons.