A Chicago woman, Joanne Smith, recently won an abandoned home in Saginaw, Michigan, on eBay with a whopping bid of $1.75. Here are the details:
Her bid was one of eight for the home.
She plans on reselling the home for a profit.
She said she hasn’t seen the property or visited Saginaw, which has been hard-hit by economic troubles in recent years.
She must pay about $850 in back taxes and yard cleanup costs.
I had two immediate reactions to this story. One was obvious and probably the same reaction most people had, but the other was one of those “THAT is the thing you noticed, Kevin?” things:
There were seven OTHER bids on the home?
Whether or not this was a good investment for Joanne Smith is up for debate (and something I will ponder in a moment). But the fact there were eight total bids means there was at least one other person who was bidding on this house.
So, imagine if you will, you’re on eBay looking at homes for sale. You see one in Saginaw, Michigan, with no minimum bid requirements.
“If I could buy that home at a certain price, it would be a steal of a deal,” you think to yourself.
But at what price?
The fact Joanne Smith was able to win the auction for $1.75 (plus the $850 in back taxes and cleanup costs) means this other bidder set a ceiling on the auction for LESS than $1.75.
“I might go up to $1.65 — $1.70 tops,” this individual thought to themselves. “But no way am I going higher.”
When Joanne Smith’s bid of $1.75 was made, I imagine this other person sighed audibly and thought, “too rich for my blood.”
“Maybe someday I will be able to find a home for $1.70 or less.”
The other initial thought I had when I read this story was really two thoughts in one:
“Boy, that’s a good deal” and “Boy, that house is a piece of crap.”
After giving it some thought, I do not believe this was a good deal AT ALL for Joanne Smith. In fact, I thing it was a particularly craptacular purchase.
Property records for the home show that is has been sold seven times (counting Smith’s purchase) since 1999. The pasts two Januarys, it has sold for $26 and $10, respectively. In 1999, it was sold for $2,000, which is the HIGHEST sales price on record.
In other words, Joanne Smith isn’t the first person to have purchased this property at an insanely low price. She’s merely the latest to have done so. Every party before her eventually cut bait and ran for the hills.
If you add the $850 she will pay in back taxes and cleanup costs, Joanne Smith has $851.75 invested in the property without even addressing the home itself. It stands to reason, based on its photos, the house is in the worst condition of its life. Seriously, look at those photos. A hobo living in a cardboard box would see this house as a lateral move.
Considering it has only once, in 1999, sold for more than the $851.75 price tag Joanne Smith has into it, it stands to reason she cannot simply turn around and sell it for a profit. She’s going to have to put some additional money into the property.
And there’s the catch.
Joanne Smith owns a home in a different state. To sell it for a profit, even at the ridiculously low price she paid for it, she’s going to have to fix it up. If the house isn’t worth fixing, she has to pay someone to bulldoze it down and remove its remains. This will cost her several thousand dollars.
So, there Joanne Smith will be.
She’ll be living in Chicago. She’ll own a small lot of residential property in another state. She will have several thousand of dollars invested into this lot, which is located in a city going through very hard economic times. And she’ll be wanting to sell it — for a profit.
I guess it’s true what they say:
There’s no such thing as a free lunch.
There’s no such thing as a free puppy.
There’s no such thing as a (practically) free home on eBay.
Okay, so I made that last one up. But I think it might catch on now.