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Finance & Stock Groups Forum Index » Real Estate » eBay auctions become flippers' tools
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| Author |
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| Dorsey |
 Posted: Thu Sep 04, 2008 3:05 pm |
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Cleveland.com http://snipr.com/3mwsf
"NICE, CLEAN, Nicer!" shouts the eBay offer, boasting of a
century-old duplex with great hardwood floors in a quiet
Cleveland neighborhood.
At this East 72nd Street house, "nice" means windows
boarded, siding stripped, kitchen counters missing. "Quiet"
means deserted, with half the neighboring homes boarded up
and stripped, and one house just a pile of debris.
The owner, Best Buy Properties of Chillicothe, has been
selling foreclosed property on eBay for eight years. It has
never seen the house, let alone rehabbed it. And it likely
won't, since a bidder snapped it up Wednesday for $3,800.
Another foreclosure, another flip, courtesy of eBay.
"They're the next round of vultures," Cuyahoga County
Treasurer Jim Rokakis said. "They have no interest in the
neighborhood. They have no interest in revitalization. They
have no interest in Cleveland."
In the last year, entrepreneurs in and out of state began
buying vacant houses from sheriff's sales, banks and the
U.S. Department of Housing and Urban Development, then
selling them on e-Bay's Internet auction site
http://snipr.com/ClevelandResidential often to folks who
have never been to Cleveland.
The practice tricks bidders into buying wrecks they can't
imagine, and sometimes even homes that no longer exist,
officials say. It traps neighborhoods in a chain of apathy.
And it leaves the city to trace strings of owners, so it
can write building code citations and collect fines for
boarding up windows or demolishing homes.
"The layers on an issue like this are just continuously
growing, posing severe problems for the vitality of
neighborhoods," said Matt Laska, housing director for the
Detroit-Shoreway Community Organization. "We're getting a
continued cycle of blight and abandonment."
While buying houses and flipping them for profit isn't new,
eBay exacerbates the spiral, officials say. The East Side
Organizing Project, which helps prevent foreclosures, has
tracked more than 100 eBay sales since late June.
Some sellers misrepresent the condition of their
dilapidated homes, omitting tax liens or building
condemnations. Few have any intention of fixing up the
houses or even visiting the city.
Instead, they sell and resell quickly, before houses get
cited or demolished, without waiting for titles to transfer.
"I'm starting to see people who buy properties shocked to
end up in Housing Court," Judge Raymond Pianka said.
"They're saying, 'I didn't know my property needed this
amount of repairs.' Why would you buy a property sight-
unseen?'¤"
City health inspectors can send owners to Housing Court for
grass taller than 8 inches or overflowing garbage. Building
inspectors can cite houses for broken windows, stripped
siding, peeling paint and fences, floors and garages that
need repair.
Violations remain with the property when sold, so multiple
owners can be held liable. They can be fined $1,000 for
every day they fail to fix the property and sentenced to
180 days in jail.
In Cleveland, all active code violations on the property
are listed on a certificate of disclosure, which is
required for real estate sales.
But sometimes the county records deeds without the
certificates, said City Councilman Tony Brancatelli, who
represents Slavic Village, one of the most distressed
Cleveland neighborhoods. Or often, buyers flip the houses
before they receive the certificates and file the deeds.
So naive eBay bidders buy houses without knowing about the
citations, or tax liens, or condemnation notices. More than
once, officials say, folks have bought houses only to find
they have been demolished.
On eBay, Best Buy Properties promises no liens and no
violations on its East 72nd Street duplex, which according
to the county auditor, it bought from Deutsche Bank for
$2,375 on July 22. But city records show the house has two
active violations from 2005, plus a $257 city bill for
cleaning up the lot.
Scott Burton of Best Buy Properties did not return requests
for comment.
But at least the home is in the company's name. Often, the
eBay houses are still registered in the name of previous
owners, such as the Department of Housing and Urban
Development.
When a house sells, the city must track down the new owner
and issue new citations.
"That's a huge challenge," said Edward Rybka, Cleveland's
building and housing director. "We spend a huge amount of
time trying to find people and determine where they're at."
Still, the city has stepped up its code enforcement,
demolishing 2,000 structures in the past 2½ years, Rybka
said. Each demolition costs $7,000 to $9,000, which the
city can bill the owner by sending to a collections agency
or placing a tax lien on the property.
Those bills mean owners of the houses, considered a steal
at $2,000 or so, owe more than the properties are worth.
Rokakis wants the vacant and demolished houses collected in
a land bank for parks or rehabilitation or future
revitalization.
Other officials want HUD to stop selling to investors,
deeds to be filed for every property sold, out-of-town
buyers to have local agents and eBay sellers to honestly
represent their properties.
EBay's defense is simple. Unlike its auctions for purses or
comic book collectibles, its real estate auctions are not
legally binding contracts, spokesman Usher Lieberman said.
When bidding closes, sellers and buyers are expected to
contact each other to exchange paperwork and take whatever
actions are required by local laws.
As its Help section says, "EBay Real Estate is not involved
in the actual transaction between buyers and sellers and,
as a result, has no control over the quality, safety or
legality of the properties advertised."
Huh.
So sellers post pretty pictures, advertise that the house
is "as is" and require buyers to do their due diligence.
They call Cleveland "the San Francisco of the Midwest" and
"the last frontier for super-low-priced real estate in the
United States."
Buyers are in for a surprise -- the equivalent of meeting a
blind date much older and fatter than his Match.com photo.
Only with a more expensive fall-out.
Rick Davan, a Chicagoan who has never been to Cleveland,
bought eBay houses in Flint, Mich.; New Britain, Pa., and
Cleveland. He didn't know he would have to fix them up. But
when he tried to sell his East 78th Street house, where the
siding has been stripped, the gutters stolen and the garage
door removed, no one bid more than he had paid.
"I just wanted to take a chance," he said. "But even a few
thousand dollars, you're taking chances. I'm totally
stunned."
Some find it hard to feel sorry for buyers hungry for an
easy thousand bucks.
"People are so turned on to this. It's so cheap, you buy a
piece of property for $1,500, what do you have to lose?"
said Michael Mulloy, who sells vacant homes for banks
through Realty Corp. of America. "But there's still a huge
liability to owning property, especially if they're not
going to make any improvements."
And improvements generally are necessary.
A two-family house on Whitethorn Avenue sold for $4,050 on
eBay Wednesday, exactly two weeks after the seller bought
it for $2,000 from HUD. A HUD inspection showed it needed
almost $30,000 worth of work to make it livable.
Vaughn Alexander, 41, who lives down the street, wandered
past the eyesore on Wednesday and pondered buying it.
Unlike the two vacant, boarded-up eyesores across the
street, this one could be saved, he said. He would fix it
up, maybe rent it out or move in.
"That's crazy," he said. The buyer "should be from around
here. You gotta put money into it."
HUD, the federal mortgage insurer that sells foreclosed
homes on its own Web site, prefers owners to occupy its
houses, said Cleveland field office director Douglas
Shelby. But investor-buyers are free to sell their
purchases.
In Buffalo, where eBay home sales began popping up years
ago, the city slowed eBay flipping by creating an Anti-
Flipping Task Force.
Since many of the eBay houses came from the city's annual
foreclosure auctions, the city passed a law prohibiting
auction buyers to sell the property for more than 120
percent of the bid price for six months. They must also
commit to fixing all housing code violations within six
months of the purchase.
"It's not that we want to discourage people from investing
in Buffalo," said Kathleen Lynch, an attorney on the task
force. "We want to see healthy investment. We don't want to
see flipping properties without regard to the condition of
the properties."
That's what Cleveland wants, too.
Officials know the city has too many vacant homes -- 10,000
at last count, Brancatelli figures. That's what happens
when a city's population free-falls.
They just want to slow the blight. They want the frenzied
eBay sale cycle to stop. |
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