Monday, October 24, 2016

Detroit-Area Real Estate Operator Who Made Career Using Land Contracts To Peddle Dilapidated Money Pits Bought On The Cheap At Tax Auctions To Naive Homebuyers Continues Being Thorn In Local Officials' Side

In Detroit, Michigan, Crain's Detroit Business reports:
  • Ernest Karr is the king of Detroit blight.

    Companies tied to Karr have racked up an unpaid ticket for missing inspection certificates, unmowed lawns, trash in the yard or other violations on houses in Detroit an average of every 50 hours over more than a decade.

    And even though the 78-year-old Karr has this mountain of blight judgments and unpaid property taxes, you'd be hard-pressed to find someone who knows him by name.

    They know his companies, though, with $1.11 million in blight judgments — more than double the $496,000 the city says it's owed by its second-highest blight judgment debtor, Deutsche Bank National Trust Co., a subsidiary of Deutsche Bank Holdings Inc.

    More than 30 business entities have ties to Karr, a Bloomfield Township resident who has been making money in the city for more than three decades, buying houses at government auctions on the cheap and renting or selling them via land contract. His companies have been able to amass such a large blight-violation debt for a number of reasons, including bare-bones collection efforts and city and county staff that have been spread thin as their ranks have been slashed amid financial crises.

    Even a new state law aimed at preventing problem landlords from getting more property doesn't appear to be working as well as its proponents had hoped in his case.

    A company operating out of Karr's office on Grand River Avenue near Hubbell Street bought 44 properties at Wayne County's tax-foreclosure auction last year, more than 10 months after the law took effect, according to land records.

    In addition to Karr's blight debt, the city of Detroit, still bearing the scars from the nation's largest Chapter 9 municipal bankruptcy, says Karr owes $369,000 in property taxes stemming from just the 2013 Wayne County tax-foreclosure auction of 61 homes his companies owned. That's according to lawsuits filed in August.

    Karr — who didn't return repeated requests for comment at his office, home and through his attorneys over the past six weeks — is not the only person the city and others consider a problem landlord.

    "We have a long tradition of people getting very wealthy exploiting the housing stock and residents of the city," said Sheila Cockrel, a former longtime Detroit City Council member who is now president of Detroit-based Crossroads Consulting & Communications Group. "Slum landlords have been exploiting residents and neighborhoods since the 1950s and 1960s."
    ***
    [A]though Karr owns substantially fewer properties than he has in years past — perhaps fewer than 50 these days — he still keeps buying.

    Theoretically, Karr should not be able to purchase properties at the tax-foreclosure auction at all under a state law passed in the 2014 lame-duck legislative session and made effective Jan. 14, 2015, after receiving Gov. Rick Snyder's signature.

    The intent was to prevent landlords like Karr and others from erasing tax debts by letting their properties slip into foreclosure and then buying them back at auction for far less than what was owed on them. [...] But Ted Phillips says otherwise. He and others say the law boots home occupants to the streets while failing to prevent buyers like Karr from purchasing more properties. The entire regulatory framework needs to be scrapped and rewritten, said the longtime executive director of the nonprofit United Community Housing Coalition.
    ***
    A building at 14815 Grand River advertises home ownership for as little as $1,500. A welcome sight, perhaps, for some in a city of 700,000 where the poverty rate is 39.8 percent, according to the latest American Community Survey data from the U.S. Census Bureau. [...] But the advertised price of $1,500 only tells part of the story for homes purchased on land contract. The $1,500 is essentially the down payment, and then it is more akin to a rent-to-own situation, where the buyer pays monthly and that is put toward the principal amount owed.
For more, see State law can't stop king of Detroit blight (Ernest Karr has racked up more judgments for unpaid blight tickets than anybody in Detroit). land contract for deed rent-to-own

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