Recently, we bid on an auction house in the Jefferson Chalmers neighborhood. We were committed to a bid of $6,700 for the property, but it was a veritable feeding frenzy until the property finally sold for $67,000.
This was a total rehab that needs probably $50,000 in work, so when all is said and done, the winning bidder who won the property is not going to see a cent.
This is what is happening in Detroit’s decent neighborhoods - a feeding frenzy of rabid real estate investors who want properties at all costs. Right now, the hot spot is Jefferson Chalmers.
This can happen with auctions in general. People get caught up in auction hysteria. You see it at school fundraisers – present an auction scenario, people start bidding, and they go wild.
In the real estate world, there are daily auctions and weekly sheriff’s sales. We would have been happy to have the property at the price we set - $6,700. It’s not worth what it went for, so we’re glad we lost out this time. The last thing a smart real estate investor wants is to lose his shirt on a deal he thought was good but really was not.
It’s par for the course. Auctions tend to do that, and once in a while, you get a deal. Overbidding is common. We’re glad to see so much interest in Detroit real estate.
Except, what does it do to the value of Detroit properties when they go for more than they are worth?
Truth is, when the property flips, it creates new value comps, which does drive values higher. And that’s a great thing for our city.