Empty homes slowly decaying

Neglected foreclosures dragging down value of neighborhoods

Catherine Jun / The Detroit News

DETROIT -- That empty home sitting idly next door may look fine on the outside but could hide a host of problems on the inside.

Many foreclosures, even those that have retained their curb appeal, are concealing the effects of prolonged vacancy and neglect: peeling plaster, leaky roofs, flood-damaged basements, septic leaks and even black mold. Afflicting the heart of the home, the damage dramatically discounts its selling price -- in some cases going for as little as 10 percent its one-time value. And that can have the unfortunate effect of pulling down market prices in the neighborhoods where they fester.

"It would affect them very badly if they had a home to sell, were trying to sell or were getting their home valued," said Leslie M. Perlman, a real estate appraiser in Birmingham.

These homes dot streets in both the city and suburbs. Not only do they test the will of owner-occupied sellers -- forcing them to drop their prices to compete -- they are in some places changing the face of the communities, leaving once-bustling neighborhoods with vacancy after vacancy. And many cities are choosing to raze or renovate them before they deteriorate further.

Between 2000 and 2008, the proportion of vacant housing units in southeastern Michigan grew from 5.5 percent to 7.5 percent, according to the Southeast Michigan Council of Governments. In Wayne County, the rate grew from 7 percent to 10.3 percent; in Oakland, that figure went from 4.2 percent to 6.2 percent.

Costly interior problems

A deteriorating interior can erode a home's value -- and possibly that of its neighbor's -- more dramatically than a dilapidated exterior, Realtors say. That's because internal problems often have a steeper "cost to cure," requiring heftier work than simply cosmetic repairs.

"It all comes down to buyers," said Melanie Lovati, Realtor with Re/Max Associates in St. Clair Shores. "In any market it's about what the buyer is willing to pay."

And for homes rotting inside, they're not willing to pay much. And many buyers don't want to live near them, either.

"If the inside is bad, eventually they'll show signs on the outside," said Perlman.

In St. Clair Shores, a two-story, Tudor-style home on Alexander Street is selling for half its appraisal value three years ago. Inside, a section of the ceiling has caved and paint on the walls is bubbling, the result of a leaking roof from a recent snowmelt. It's one of at least five that have gone into foreclosure on the street in the last year.

"I don't think my house will ever be what it was worth at one point in time," said Kristie Post, 39. Since last year, Post has tried to sell her own home on the same street but didn't attract a single prospective buyer to her open house. Her best and only offer was $145,000, a whopping $30,000 less than her mortgage value. She eventually took her house off the market and has no plans to move.

Damaging winter effects

The decay inside homes is caused by neglect by previous owners, vandals and made worse by Michigan winters.

In the colder months, pipes have burst or sump pumps have stopped working, and that has flooded basements and formed mold spores when the temperatures warm. But even tiny signs of disrepair in an unwatched home can grow into a larger problem if left unchecked, Lovati said.

And the damage is often done before a Realtor finds it.

In the prominent Boston Edison district on Detroit's west side, once-regal, turn-of-the-century homes sit alongside buildings that are crumbling inside.

At least 14 homes in the neighborhood, once home to Motown founder Berry Gordy Jr., are priced below $50,000 -- compared to a previous value of at least $300,000 -- reflecting damage that includes peeling plaster, warped floor panels and broken staircases.

"Things like this drive people out of neighborhoods," said Ian Mason, sales director at Bearing Group Real Estate.

With a cluster of such homes near hers, Michele Dupree-Murrain is wondering if it's now time to go, too.

"I'm paying money for a value that I don't have," said the 44-year-old mother of four. She still owes nearly half the balance on her mortgage, based on a $475,000 valuation five years ago, and her interest rate and taxes continue to go up.

She's now seeking a loan modification based on what her home is currently worth -- much less. "All my neighbors left. I have a house that I can't afford to sell or afford to live in it," she said.

"If modification doesn't work I may just have to pack up and leave."

Building new homes

Several local governments are working to banish the worst offenders from their midst.

Waterford Township is one of the latest to be promised federal dollars from the Neighborhood Stabilization Program, distributed by the U.S. Department of Housing and Urban Development.

Over the next year, it plans to use $2 million to tear down as many as 15 vacant, foreclosed homes that are unlikely to entice even bargain hunters.

The township will enlist Habitat for Humanity, the nonprofit home builder, to construct new ones in their place, said Bob Vilina, director of Waterford Township's community planning and development department.

"If you don't do that, they're going to just sit there, because there's such a large inventory of properties," Vilina said.

You can reach Catherine Jun at (248) 647-7429 or cjun@detnews.com.