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Home Team Detroit’s plan was to transform nearly one-sixth of the city from tax foreclosed wasteland into property tax generating, owner occupied homes. That plan is now effectively dead in the water, written off by many as far too ambitious. But what is it crazy, or was there something to it? –GETTY IMAGE

OK, maybe not all of Detroit…



A little over a week ago, a company called Home Team Detroit announced their intention to make a bid to purchase nearly 4,000 foreclosed homes in the City of Detroit before they go to auction as part of a strategy to revitalize the city and ramping up homeownership. The overall reaction has been, well, let’s say underwhelming. And that’s being generous.

Detroit’s Corporation Counsel, Butch Hollowell, swiftly made the pronouncement that the City does not support the proposal, suggesting that Home Team try downsizing its ambitions to the scale of about nine properties to see how that works out. When I spoke with Anika Goss Foster from Detroit Future City, her reaction to the proposal was clearly evident in the expression on her face, which wasn’t exactly what anyone would define as supportive. Maurice Cox, head of Detroit’s Planning and Development Department, who has major developments in the works to upgrade city neighborhoods, is equally firm in his conviction that the concept being put forth by Home Team Detroit CEO Dave Prentice isn’t worth considering.

Another insider I spoke with expressed concerns that Home Team still hasn’t shown evidence that they possess the actual resources for such a huge endeavor, and said that “if they do actually possess the funds then why hasn’t anyone heard of them?” He also said that even if they did possess the funds, it wouldn’t be fair to grant one company such a huge ask, shutting out others who might wish to bid. And finally, similar to what others have raised, he has not seen evidence of a track record indicating they can do the job, nor has he seen much evidence of what Home Team claims to have already done.

One local Detroit Free Press columnist actually labeled the idea “insane”.

So now, I figured, I really needed to talk to this guy Prentice. Because, for one, it seemed like not too many others were doing much talking to him. At least not long enough for the plan to be adequately explained. And maybe the audacity of his proposal was more than enough for some to feel comfortable dismissing him without giving him an audience. I’m hardly a real estate expert, and I have no problem admitting that up front, so it’s entirely possible those with more qualifications in that area know enough at a glance to know this idea of buying what amounts to about one-sixth of the city isn’t worth their time.

But I figure anyone who is confident enough to say they have no problem purchasing hundreds of city blocks, to put those properties back on the tax rolls and back into the hands of average Detroiters who otherwise would have no other way to qualify for a home loan, is somebody who at least deserves an opportunity to tell the story.

“If a third of the whole city is in public hands, well that’s a third of the city that’s not being taxed, which makes it a strain for the other 2/3,” said Prentice.

“Detroit’s not alone in this problem; Flint, Battle Creek, Jackson, Benton Harbor, they’re all the same thing. You go out of this state and you’ve got Dayton, Cleveland, Cincinnati,  Gary, Fort Wayne … It doesn’t matter where you go. It’s the same common element. You’ve got undervalued properties and redlined finance areas. People can’t buy using traditional methods. They’re mostly renters. And it’s just perpetual decline.”

The idea originally was to purchase every single property headed to the tax foreclosure auction this fall before the actual auction, but Prentice decided to heed the wise advice of some of his employees, who counseled that perhaps that might be a bit ambitious. So instead, he settled on an area of Detroit’s northwest side that encompasses 25 square miles and 24 neighborhoods.

“[In] the area that we selected, there are a number of reasons why we selected it, but the most alarming thing is that it has the highest foreclosure rate in the entire city. By a lot. There’s about 36,000 or so flagged for foreclosure in the entire city, and about 11,000 of them were in that 25-square-mile radius. So, you’re talking about 1/3 of the foreclosures in 1/6 of the city, so you’re at double the foreclosure rate for that area. That’s astonishing, and a little bit scary,” he said.

After purchasing the properties, the idea is to rehab them and then sell them via a program Home Team has created which supposedly makes it easier for average Detroiters to qualify for a home loan using an instrument known as a land contract. Prentice acknowledges that land contracts are controversial, but he emphasizes that not all land contracts are equal, and that there may actually be a benefit if the deal is done right.

“In my view, the land contract is the least risky between a land contract, a mortgage and a rental. And I say that for a reason; if you default as a renter, you get 30 days. It’s pretty common knowledge that eviction is a quick, easy process for a landlord. When you’re defaulting on a land contract, you get four to five months [before eviction]. With a mortgage, that person gets a little more time. That person gets about nine months, but outside of that it’s about the same process … except that person gets a 7-year credit hit, and if they were underwater, they get a deficiency judgment.”

Prentice said his company also does not utilize what’s known as balloon payments, which he says is the “number one issue” with land contracts. A balloon payment is basically the balance due statement that blows up in your face after you’ve been paying a steady monthly amount for an agreed-upon period of time. The glitch is that at the end of that payment period is when the balloon payment or the entire balance comes due. So, let’s say you buy a house for $50,000 and get a 7-year balloon. You chip away with a $500 monthly payment and wind up owning $30,000 at the end of the 7 years. Now you owe that $30,000 in a lump sum. You don’t have the $30,000? You lose the house, and no refunds.

The other problem with land contracts is that too often they are not recorded with the county, meaning there is no record of the transaction. Prentice said that Home Team records all their contracts with Wayne County.

Although Hollowell has effectively said the proposal is DOA with the city, it is still currently under legal review with City Council. Prentice said he expects to receive an answer from Council by Wednesday, April 5. He also is still hoping for an audience with Mayor Mike Duggan to better explain his proposal.

“I’d like to make one thing very clear, because I think [it’s] been misconstrued that this is some kind of political play. And that’s not it at all. … I was very naïve going into it last year when we started working on this. It’s a big process. It’s not easy. They certainly vet you carefully. But we didn’t go to buy from the government, because that was our business model. We went to buy from the government for one reason, and one reason only; they have the most land. If we could buy this kind of volume, or even close to this kind of volume, from private sources, that’s what we would do. But that doesn’t exist. There’s no bank, there’s no hedge fund, there’s no private holder of property, there’s nobody that has even close to that kind of volume of assets in a concentrated area.”

In a well-researched and comprehensive article recently published in Crain’s Detroit Business, the point is made with exclamation marks, that it is next to impossible for even someone with decent credit to qualify for a standard mortgage in Detroit. Consequently, an overwhelming number of home purchases are conducted as cash only transactions. There are all sorts of problems that presents for the city, not the least of which is the hit it delivers to already suffering property values since the average mortgage is for roughly $150,000 while the average cash home sale is about $30,000, according to Crain’s.

 An earlier piece in the Detroit Free Press detailed how Detroit has become, for the first time in half a century, a place where there are more renters than homeowners. That there are now so many renters is not necessarily a bad thing, but the fact that it was the foreclosure crisis that created them is a very bad thing indeed.

Prentice’s approach may well be far too audacious for any number of reasons, and he probably should scale back his proposal and be more ‘realistic’. But there are currently close to 100,000 properties being held by the Detroit Land Bank Authority which are not generating property tax revenues, 30,000 of which are residential.

The foreclosure crisis is still a crisis, even if it appears to be a slowly diminishing crisis. So, it seems to me that something audacious needs to happen, and soon, even if Prentice isn’t the one to deliver it.

Maybe we need someone a bit crazy…

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