The other day as I was driving southbound on West Avenue past ERA Reardon Realty and read the sign outside which read "Can't Afford to Sell? ERA Reardon Rentals Now Renting." I pulled into the Dunkin Donuts so I could read the side facing the northbound traffic and snap these pictures. The side facing the northbound traffic read "Wanted: Your Rental Properties." This simple sign really made me mad. It mad me mad because ERA Reardon employs Mayor Martin Griffin who I believe, along with City Manager Patrick Burtch and Laura Schlecte, is responsible for the continuing decline of the real estate market in Jackson. Just as the United States government cannot support countries who support and harbor terrorists, the citizens of Jackson should not support businesses like ERA Reardon Realty who support crooked and corrupt local politicians like Mayor Martin Griffin who are literally destroying our community.
For those of you who have not been following my blog or the JIM's reporting on the City's new housing policies or are an outsider considering buying a home, business or rental property in the City of Jackson, the following is a summary of how the new housing laws in Jackson are effecting the real estate market and why you should not do business with a company that employes Mayor Marty Griffin.
The New Housing Laws & Enforcement of the Building Code
In the past year the City passed several new ordinances and are enforcing the building code in a manner that cost property owners big money. The new law that is effecting property owners the most is the new Non-owner Occupied Residential Property Registry. This new law requires all owners of residential property which is not occupied the owner to register the property with the city and pay a fee. Doesn't sound so bad does it? Well, that's what a lot of people thought until the last few months when the city began employing this secret weapon to systematically inspect every single non-owner occupied residential property in the city of Jackson.
If you own residential rental property in the City of Jackson and you haven't received your inspection notice you will be receiving it soon. The notice will inform you that a city inspector will be paying coming to inspect your home on a certain date and time and that you will have to pay an inspection fee of $175 per unit which is a great deal because it includes up to TWO inspections. An additional fee of $50 per unit is assessed for any additional inspections that may be required. The notice further states that any violations of the City Housing Code that are uncovered during the inspection must be corrected and reinspected within 90 days from the initial inspection date. Still doesn't sound too bad right? One $175 fee and a simple building inspection, kind of a pain and money you'd rather have in your pocket but not big deal. Unfortunately, that is where the fun just begins. Think again. The inspection notice and the initial inspection is just the tool the city uses to get it's foot in the door so they can collect the big money.
Compliance with the New Law will be Unaffordable for Many Resulting in a New Wave of Foreclosures
For those of you who are considering buying a house in the City of Jackson you should proceed cautiously. The implementation of new housing laws in the City have a strong likelihood of forcing many Jackson families to abandon their homes causing a further drop in residential home values.
Many Jackson citizens who own nice and well-maintained homes may think that their homes are in good shape and can't possible cost that much to bring up to code. Maybe a smoke detector here, a little paint there and a fee other minor repairs that might cost you a few hundred dollars. Well, that's how it should be and probably how it is in City's that are not run be complete crooks. The situation is a bit different thanks to the devious minds of Mayor Marty and his gang of crooks. In the City of Jackson, a city where most of the homes were built by folks in my grandparents generation (the 1930-1950s), most all of the homes are not in compliance with the city's current building code. These homes were likely built to and met the building code at the time they were constructed but improvements in construction techniques and materials along with changes to the building code have rendered most all of these older homes out of compliance with the current code. Thus, for many of us who own nice older homes in the city these inspections will require us to make extremely expensive upgrades to existing electrical, plumbing and mechanical systems in properties. On top of that we'll have the privilege of paying the city additional fees for the permits we will need to make these expensive repairs. But still, it really couldn't be that bad could it? I mean seriously, the city can't really expect owners of homes built in the 40's and 50's to make their homes as fancy and new as a newly constructed home. That's what many folks thought until the city unleashed it's new army of building inspectors in their fancy new inspection vehicles on the unsuspecting property owners of Jackson
In some cases, the building inspectors are requiring home owner to make repairs and improvements that would cost 5-10 times the value of the property. Robert Moore learned this lesson the hard way. The city inspectors told him he would have to spend over $450,000 in repairs and improvements to bring his property up to code. The property had recently been valued at approximately $15,000. Dumb struck and in a state of disbelief. Mr. Moore consulted with a builder and a real estate agent so that he could decide what to do with his property. What Mr. Moore learned was that even if he made the improvements to his property that the City was requiring him to make the property could only be sold for a maximum price of $65,000. The end result was that Mr. Moore lost his fight with the City and the house was condemned and will be demolished if it hasn't already. Mr. Moore was just happy that the benevolent city agreed to not hold him liable for the estimated $30,000 in demolition costs it threatened to bill him for.
What Options Are Available for Jackson Families Who Were Forced Into Landlordship
With the exception of a handful of lucky folks who own homes that were built are significantly updated, the rest of the residential property owners in Jackson are left choosing from the following options:
1. Do Nothing. Property owners could decide to do nothing and just allow the city to condemn and demolish the property. Those who chose this option also run the risk of being stuck with an expensive demolition bill.
2. Throw Good Money After Bad. Another option is to just eat the shit sandwich, bend over and pay the costs required to comply with the City's corrupt housing policy. Property owners who do this will just have to eat the expenses as any residential rental property in Jackson knows, increasing rent is not an option and the suggestion that could make money from selling a property is a sick joke.
3. Strategic Foreclosure. The new laws don't just apply real estate investors and residential landlords—these lovely laws equally apply to families like mine who became landlords out of economic necessity. Many Jackson residents purchased their homes during the peak of the real estate market and subsequently moved away because of the poor economy in Jackson. These families (as ERA Reardon rubs in their faces every day “couldn't afford to sell” their homes at the time they had to move so they were forced to rent their houses. Although many of these homes are beautiful and in great shape, most all of them will not be in compliance with the current building code and will require expensive repairs. Facing the prospect of putting even more money into a home that isn't worth what they paid for it, many Jackson families may decide to stop paying their mortgage on the home and undergo what is now known as a strategic foreclosure.
Unfortunately, for many Jackson families even a strategic foreclosure won't solve their problems. The banks know better than anyone that residential real estate in Jackson is worthless. Banks never want to foreclose on mortgages—they are not in the real estate investment business, are not equipped to rent and manage residential properties and do not want to be stuck dealing with the extraordinary costs of complying with the City of Jackson's new unlawful house laws. In short, the banks don't want the home these Jackson families are stuck with any more than they do. A Jackson home owner who decides to default on their mortgage rather than bringing their old home into compliance with the new housing code may only end up with credit that is destroyed and a $30,000 bill for demolition costs. Furthermore, the bank's failure to exercise its right to foreclose on the property might not relieve the property owner from its liability to pay the promissory note underlying the mortgage.
Even if the bank takes the bait and forecloses on the mortgage, the property owner will still be responsible for the costs and liabilities of owning the property until the completion of the foreclosure process which could take a year or more. What makes this option even more risky is the fact that under Michigan law banks have the right to pursue the borrower for any amount of the debt, including the costs of foreclosure, if the full amount of the home loan is not satisfied from the proceeds of a foreclosure sale. For most Jackson families the chances that a foreclosure sale would satisfy the full amount of the home loan is somewhere between 0% and .000000001%. Thus, even Jackson families whose old home are foreclosed upon may be sued by the bank for any deficiency which may ultimately force many more Jackson residents into personal bankruptcy.
4. Sell the Property. Many Jackson family who are renting homes they could not afford to sell may try to avoid the unaffordable costs of the new City ordinances by selling their homes. Assuming that a Jackson family could now potentially afford to sell their piece of the City of Jackson's version of the American Dream, it's not likely to happen over night. While the real estate market in the City showed some signs of a slow rebound over the past year, any rebound that was occurring has appeared to have reversed. Many real estate professionals believe we may see some sort of improvement in the saleability of our properties as the winter weather breaks but many are blaming the lack of qualified buyers on the City's new housing policies. In effect, the City's new housing laws have stopped any small rebound in the real estate market and scared away all the prospective buyers. This is especially true because many of the prospective buyer were real estate investors. No real estate investor in their right mind would buy an investment property in the City of Jackson. An additional problem with this option for Jackson families is that the City of Jackson is taking the position that its housing code applies to residential properties even if vacant. Thus, a family cannot avoid the costs of complying with the City's new housing code simply by not renting the home and putting it on the market for sale.
New Laws Driving Real Estate Investors from Market Place
While it has been extremely difficult to sell a home in the City of Jackson since the housing bubble burst, the recession began and the banks increased the restrictions on lending, Jackson has experienced a brisk improvement in the rental market. Because many Jackson residents lost their homes after the bubble burst and do not qualify for mortgages there is significant demand in Jackson for rental properties and the demand isn't just in the low income rental segment. This increase in the rental market attracted many outside real estate investors to Jackson and helped fuel a small rebound. Investors were attracted to Jackson by its large supply of low-cost but high quality homes that had been left in the wake of the recession. This new demand was welcome relief to the economy and was paving the way to what many believed would be a full turn around in the real estate market.
Unfortunately, the City but an abrupt stop to this by implementing new housing laws that make investment properties that were previously attractive to investors extremely unattractive. The new laws scared real estate investors away and now no there is little or no interest even in homes that are habitable and cost less than $10,000.
Support Change in Jackson and Boycott ERA Reardon Realty
The economic and political situation in the City of Jackson is dire and the citizens of Jackson must stand up and tell City politicians and those who support them that their crooked, unlawful and self interested policies will not be tolerated. Don't support Marty Griffin and the policies that are destroying our city by doing business with ERA Reardon Realty.