Making a House a Home
THE PROBLEM:
The country has seen a rapid appreciation in the value of real estate and many Black homeowners are at a disadvantage in the sale of a house for lack of information.
The disturbing result is the failure to realize a fair value for a family home, which often has been owned for generations.
What typically happens is that a neighborhood may not see much increase in values until suddenly there is an explosive rise. Only the real estate speculators fully appreciate the implications of this for the benefit of property owners, and they swoop in, buying properties for much less than they are worth.
In this situation comparables, which are typically snapshots of a year or more in the past are obsolete.
The Initiative offers Black owners in this situation the current, accurate value of a family’s home and advice and help with a sale at a fair price.
The result could well be an additional $100,000 or $200,000 received by the family, depending on the velocity of the feeding frenzy. The family might want to fix up the place and sell it, again capturing tens of thousands if not more than they would otherwise have received.
We can also help African American renters in a property that has been sold to receive fair compensation from the new owner who wants to flip the property as fast as possible.
Here are two recent real-world examples from Anacostia, a predominantly Black neighborhood in Washington, D.C. that is being “gentrified” at a furious pace.
A family sold a large, 6,000-square foot, house to a developer for $300,000 thinking they had gotten a good price, without getting a forward-looking market analysis, showing what the house could be worth in six months.
Six months later, after a loving restoration and extensive repairs, the house sold for $720,000.
Thus. assuming $100,000 in renovation costs, the real estate speculator realized a profit of $320,000, or 80 % in six months.
The family, if they had been better educated and informed, could have either received more than the original purchase price or could have fixed up the house themselves and sold it for $720,000.
Consider also the actual experience of a renter at the same house.
The real estate broker approached the Black tenant and offered to pay her $4,000 in cash to vacate in a reasonably short period of time.
For the renter, who was paying $500 a month for a room in the house, it seemed like a good deal.
But she could have received much more.
Since the Civil War, the US stock market has yielded an average annual return of 10%.
That means that a $720,000 sale invested in a standard mutual fund, ought to generate, on average, $72,000 in a year’s time, or over $6,000 a month. So it is worth that much money, in theory, to empty a house that is being renovated and put on the market sooner rather than later.
The tenant could have legally insisted on staying in the property for a considerable time and thus costing the developer an additional $6,000 a month in lost investment income. Had she been properly informed and advised, she could and should have received much more than $4,000.
The Initiative can arm Black homeowners and renters with critical, strategic real estate information and help reduce the effects of the predatory market dynamics and pervasive institutional racism that they currently face.