Question about buying houses in the US

[Jeremy]

If I bought a house in the US, what costs would I have to pay apart from the cost of the house? Like stamp duty, rates etc. ?

I just read this article about $1 houses, and would probably be prepared to "invest" in a flooded house for $1, even though that's about $1.30 in Australia.

I wouldn't live there, but maybe I could rent it out for 50 cents a month, and have a yearly ROI of 500%.

http://blogs.abc.net.au/dispatches/2008 ... dream.html


edit;

http://www.detnews.com/apps/pbcs.dll/ar ... /808130360

"The company hired to manage the home and sell it, the Bearing Group, boarded up the home only to find the boards stolen and used to board up another abandoned home nearby."

owned.

[Blue_turnip]

Lol that article is hilarious.

Up until yesterday an investor had been going to buy this place for $1. But when he saw the flooding he decided not to go ahead. He was prepared to fix up the house, but the flooding could be affecting the foundations and that's just too much trouble to deal with. He can find another cheap property in Detroit.

Comeon, its ONE DOLLAR.

[Blue_turnip]

"My 14-year-old son could buy a block of Detroit property," said Ann Laciura, senior servicing specialist for the Bearing Group.

Gold.

[dp]

I didn't read those articles, but I've heard of those 1 dollar houses before. Almost always it's sold by a development company or a city or state or something and in the contract there's a provision that says you will fix the house up to a certain standard within a certain amount of time.

[Outsider]

Jeremy,

Buying a house in this country is ordinarily a pretty complicated afair, with many different costs associated. Most of the ones I understand best have to do directly with the loan that most people need to come up with the money to buy the place (the mortgage). Seeing as how a loan would surely be totally unnecessary to buy something for 1 dollar, obviously the principle and interest wouldn't apply, nor a tax on the mortgage (some states in this country charge a mortgage tax, many do not -- for instance, New York State has a special mortgage tax you must pay every time you borrower money against the value of real estate you own, but New Jersey does not.)

Some costs are less familiar to me, but many of them are at least brought up in the second article you posted. For example:

So desperate was the bank owner of 8111 Traverse Street to unload the property that it agreed to pay $2,500 in sales commission and another $1,000 bonus for closing the $1 sale; the bank also will pay $500 of the buyer's closing costs. Throw in back taxes and a water bill, and unloading the house will cost the bank about $10,000.

Sales commissions and bonuses? What are those about? I'm not sure, really, but... transactions like these in this country are highly regulated, legally. All kinds of people and institutions want their cut, and their rights to be a part of the transaction are enshrined in law. So, even when a bank or other owner wants to virtually give the house and land away, IF they've used some sort of middle-man to connect a buyer with a seller (and the necessity of using such a middle-man is probably also a legal requirement -- the National Association of Realtors [real-estate agents, representing neither the seller of the property nor the buyer nor the lender] is a significant trade group with real political power on local and national levels, so, yeah, of course there are laws saying that realtors are a requirement in probably any actual SALE of a property, and their cut is probably not based exclusively on the dollar amount of the sale, but rather, on the actual appraised value of the property, or, just as likely, on whichever is the HIGHER of the two values, but, I'm not really sure about any of that bs) then that middle-man is going to take their cut, because they're entitled to it by law. If a seller is desperate to unload a property for next to nothing, thats not the realtor's problem, and the seller may still need to pay them their due even if their role is just a formality. Just as likely, though, the buyer will have to contribute to that bill too.

Facing $4,000 in back taxes and a large unpaid water bill, the bank that owned the property lowered the price to $1.

Meanwhile, the new owner will owe $3,900 in property taxes in 2009 on her dollar purchase unless she challenges the tax assessment.

This part seems a little more straigh-forward. A famous American businessman, scientist and statesman famously said "There are only two certainties in life: Death and Taxes." (He said many other very clever things, like "Beer is proof that God loves us and wants us to be happy." I know you may not agree with the religion inherent in that statement, but surely you can still appreciate the sentiment. Benny is the coolest, and thats why he's on the C-Note! Anyway...) What I'm getting at here is that, if you own 'real estate' in this country, you're going to owe 'real estate tax' to some township, municipality, county, village, shire, hamlet, or whatever the hell they call the local goverment. Real estate tax in this country is one of the primary ways that a local government raises money to pay for everything -- local schools, cops, fire departments, libraries, road construction and maintenance, etc etc etc. Nicer places have higher tax rates, crappy places demand much less in real estate tax. How much tax a home owner owes depends in large part on the value of the property. The local government determines some sort of "fair market value" of the house and land, and assess the owner some amount of tax based on that value. As the article suggests, the new home owner can challenge the tax assesment if they think it unfairly over-estimates the value of the house and land, but that local gov't can probably make you pay the bill for the re-evaluation of the property. Thats hundreds of dollars there. They can probably tack on some "administrative" costs on top of that, and the whole affair is probably something of a tangled mess of bureaucracy and red tape, taking months to sort out. In any case, your tax bill is never going to be zero, 'cause schools and firetrucks ain't cheap, so even if purchasing the property costs next to nothing, you're putting yourself on the hook for a recurring bill from the government. There's another old saying in this country -- "You can't fight city hall." Not paying your taxes will probably result in the gov't eventually seizing the property, so, you might buy it for a song, but if you don't want to keep paying to continue to own it, you won't be owning it for long. In any case, this recurring tax bill is probably why the bank was eager to no longer own that property. An individual might abandon a property and thus skip out on the property tax, but its probably not possible for a business like that to simply abandon a property and absolve themselves of owing money to the government -- at least, not if they want to stay in business.

In the case mentioned in your second news article, the seller had agreed to pay the previous year's tax bill, as well as the outstanding utilities bills (the water bill, anyway). That might not always be the case, and once you take legal ownership of a $1 property, you could also be on the hook for those back taxes and outstanding bills.