What could possibly go wrong with long-distance purchases, sight-unseen, of "bargain" homes in Detroit?
Yes, predictably, some deals were as risky as they seem -- or should have seemed.
Federal agents are looking into "a pair of alleged scams targeting thousands of properties" since 2009, Robert Snell reports at Crain's Detroit Business.
Amid signs of possible fraud, "overseas investors have cooled on buying distressed homes in Detroit," he adds in a 2,000-word cover story with two animated maps:
The alleged scams involved homes purchased for as little as $500, in many cases through Wayne County tax auctions, according to property and federal court records. The properties then were flipped, in one case for as much as $15,000, to investors duped into buying what they believed were bank-foreclosed homes for more than fair market value, court records say.
The alleged scams left scores of abandoned homes across Detroit, devastated struggling neighborhoods and compounded blight problems, officials said.
Both alleged scams have drawn the attention of federal investigators. Crain's has learned that the FBI is investigating Dearborn-based Metro Property Group LLC, the largest single buyer of distressed homes at the county's tax auctions in recent years, according to a search warrant unsealed in federal court in late December.
Snell cites figures from Trulia, a real estate database, showing that "the percentage of overseas investors searching online for Detroit properties fell to 5.7 percent of all searches in January from 10.1 percent in February 2014. . . . The rate is the lowest in four years."
The decline comes amid a rise in property scams targeting overseas investors, particularly those from Europe, Wayne County Register of Deeds Bernard Youngblood said.
He created the nation's first property fraud task force a decade ago. The task force has resulted in several convictions and returned more than $500,000 to victims last year, he said.
"We can't stop" scams, Youngblood said. "When people hear you can make 200 percent on your dollar, I think people are motivated by that and, perhaps, a little bit of greed."
And ignorance: Many foreign investors who lost money say they regret never visiting Detroit or not conducting more research.
Two months ago, according to the in-depth Crain's examination, "FBI special agents in Detroit quietly started investigating a separate case involving the largest buyer of single-family homes in Detroit from 2010-13."
On [Dec. 8], agents executed a search warrant for the contents of email accounts belonging to four officials with Metro Property Group LLC, according to an unsealed search warrant obtained by Crain's.
On Dec. 16, the FBI received from Google a blue Toshiba hard drive containing records for email accounts belonging to Metro CEO Sameer Beydoun of Dearborn and company officials Ali Beydoun, David Makki and Kathy Messics.
The focus of the FBI investigation is unclear, but the seizure came three months after a federal judge ordered Metro and three other firms to pay $625,000 to a group of overseas investors.
The investors accused Metro and others of orchestrating a multimillion-dollar scheme that defrauded foreign investors in Detroit real estate.
Metro purchased thousands of foreclosed homes — largely uninhabitable — for $500 to $5,000. Along with others, Metro profited by duping investors into buying the homes for as much as $50,000, according to court records.
Metro and others fraudulently marketed the homes as refurbished and rented, failed to manage the properties and billed the investors for phony repairs and management expenses, according to the lawsuit.
