Destiny (2)
Remember Destiny Ventures LLC? The last time I posted about them, back in September, the Tulsa company had just been fined $40,000 in absentia for code violations on one of its 104 local post-foreclosure properties.
Well, between that post and the end of the year, Destiny Ventures picked up fifty-three more foreclosed houses in the county, including 24 from their good friends at Deutsche Bank. All but five are in the city of Cleveland.
As of Friday, according to the Auditor, Destiny’s local inventory was up to 119 properties — 105 in the city and 14 in the suburbs. Since September they’ve also dealt off more than thirty properties to other companies, including a dozen to Econohomes of Austin, Texas (apparently connected to Younts Moore, Ltd., the buyer mentioned in the September PD article, also of Austin), as well as a couple to their other favorite customer, Stewardship Fund LP of Plano, Texas.
On Friday I picked five of the houses Destiny Ventures owns — all on the West Side, but otherwise a random selection — and went to take a look. Click on the address to see the house, as of Friday:
- 1363 W 73 (2 family) — bought 8/09/07 from Deutsche Bank for $750 (foreclosed Sept 2006)
- 2087 W 81 (2 family) — bought 8/17/07 from DLJ Mortgage Capital for $1,000 (foreclosed Nov 2006)
- 2588 W 41 (2 family) — bought 6/29/07 from HSBC Bank for $500 (foreclosed (Aug 2006)
- 1901 Rowley (1 family) — bought 4/20/07 from JP Morgan Chase for $750 (foreclosed April 2006)
- 4810 Carlos (1 family) — bought 10/05/07 from Deutsche Bank for $2,500 (foreclosed Oct 2006)
Yessir… that’s entrepreneurism in action.
So… think we should let “the market” take care of Cleveland’s foreclosure crisis?
January 7th, 2008 at 12:21 am
It might be a good idea, if it were an open market, but these prices seem to indicate some sort of inside track or sweetheart deal, too good for common men. Are they holding them for resale or for rental income, I wonder? Who speaks for them, so far as their intentions are concerned?
January 7th, 2008 at 4:51 am
Tim,
As far as I can see, DV and the other companies I mentioned are into pure speculative flipping — buy lots of houses for almost nothing, manage them from two thousand miles away, do little or nothing to them, and sell them off to other speculators (or would-be landlords, and/or suckers) for enough markup to make the percentages and volume work for you. See this forum post from an Econohomes agent or the Stewardship Fund homes-for-sale listing.
Could local companies with more responsible business plans do the same? I’m sure there are people trying, some of whom have honest intentions. But the economics of total full-code rehab vs. current market prices are pretty forbidding… especially when the marketplace is full of competitors who don’t give a shit.
January 7th, 2008 at 1:41 pm
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January 8th, 2008 at 8:17 am
There is another reason these properties are “sold†by the mortgage holders:
LIABILITY
I will bet that the “companies†that have “purchased†the properties are fundamentally asset-less. In this way the banks transfer liability for code violation repair, taxes, personal injury, etc, etc to an entity which is legally judgment proof.
I would also suggest that just as the banks concocted SIV’s (so called “structured investment vehicles) to move liability for high risk sub-prime mortgages in large part off the banks books and back onto the public investor, the banks are also wily and unscrupulous enough to PAY (via underpricing, or under the table or through some other scheme) the judgment proof out of state “companies†to take the worthless and liability prone houses off of the banks’ books.
The County auditor should refuse to allow any legal transfers until the out of state purchaser deposits adequate building code violation remediation funds into an escrow account. Until such money is in escrow, the banks should not be able to remove themselves from ownership status.
Many communities – Shaker Heights included – require a full building code inspection of every property when the property ownership is transferred and require all code violations be remediated within so many months of title passing. In Shaker, where there is (still today) market value in the homes, the new owner customarily deducts from the sales price an amount for the repairs – the amount being mutually agreed upon between buyer and seller.
But the Shaker arrangement needs to go one step further when banks are unloading foreclosed properties, because the community is on the hook for the demolition of the home and the taxes if the buyer fails to make the code repairs and is, or becomes, asset-less.
I have a telephone call into the Shaker law department to inquire about if/how Shaker protects the City from property buyers who are, or may become asset-less code violators.
But why doesn’t the City of Cleveland, and the County of Cuyahoga, require code inspections, and escrowed remediation funds, prior to any title transfers?