A story in the New Republic pronounces “a new era of real estate speculation” in the US, one that’s taking a depressing toll on poor neighborhoods across the country. Two factors are at play: the housing bust of 2008, which left a glut of abandoned properties on the market, and the simplicity of buying property online these days. The result? Investors scoop up dilapidated houses through online tax sales, often in the $5,000 range, do nothing in terms of renovations, then try to sell them to unsophisticated buyers for a tidy profit.
“In theory, tax sales are supposed to replenish city coffers and transfer vacant homes from delinquent owners to people who will actually improve the properties,” writes Rachel Monroe. “But the mass purchasing of distressed homes by faraway investors is having the opposite effect.”
Part of the problem can be blamed on unaccredited “schools” that crop up and spread the gospel that students can get rich by buying large numbers of rundown properties in depressed cities. “Such schemes have inspired investors in England to purchase vacant properties in Cleveland over eBay, and a Colorado pawnbroker to close on homes in Buffalo via PayPal,” writes Monroe.
More sophisticated investors use an array of shell companies to make purchases. The story zeros in on one Baltimore row house in particular, bought at a city tax sale for $5,452 by the Baltimore Return Fund LLC. Call the number on the “FOR SALE—NO CREDIT CHECK!” sign, and a company in Texas will offer to sell you the falling-down house for $30,000. Monroe traces it back to a Houston millionaire who seems to have mastered the formula.