New Bargain Block season, same appraisal problems

The third season of HGTV’s Detroit-focused Bargain Block is set to air this summer.

The show follows Keith Bynum and Evan Thomas as they design and renovate custom homes in the city. The home renovation experts aim to increase property values and make Detroit neighborhoods more desirable while promoting homeownership by selling  residents affordable housing, which many say is essential to the city’s success after years of financial loss. But even the bright lights and national airtime don’t guarantee a simple home buying experience in Detroit.

“We try to make sure that we’re focusing on those (individuals) that haven’t been treated as well by the financial industry and others,” said Tansley Stearns, president and CEO of Community Financial Credit Union, a partner institution for the show that works with potential homebuyers. “This isn’t for someone who can afford to get a normal mortgage easily.”

Bynum and Thomas often purchase multiple dilapidated homes on the same block in Detroit and they sometimes stay in the residences as they make major repairs and create custom designs. Beyond CFCU, the hosts partner with metro Detroit real estate agent Shea Hicks-Whitfield who works on their behalf to sell the homes once the flips are complete.

Hicks-Whitfield said Bynum and Thomas have completed 40 homes. The properties sold on the show are for the “entry-level” buyer who may be paying more in rent than expected for a monthly mortgage, she said. It’s unclear how many of the homes are owned by Detroiters. Thomas and Bynum did not respond to interview requests. 

“They (Thomas and Bynum) sold many homes prior to the notoriety of HGTV,” she wrote in an email to BridgeDetroit.

In 2012, Detroit’s housing market tanked with just 220 home loans. In 2020, there were over 4,000 home loan applications, but just 2,111 were accepted by lenders. Detroit Future City, a local think tank, reported that white applicants were much more likely to have their home loans approved than Black applicants. Nearly 30% of the 1,717 African American home loan applicants were denied compared to less than 15% of the 913 white applicants.

While home applications and approvals have increased in the city, no one applied for a home loan in 15% of Detroit’s census tracts in 2020. DFC reported that the leading causes of denied home loans were: collateral or appraisals, credit history, and the borrower’s debt-to-income ratio.

Homes featured on the third season are expected to be in the Fitzgerald neighborhood, just off the Liv6 corridor, which has seen significant investment through public and private partnerships.

“Detroit is unique,” said Hicks-Whitfield. “You can have a home that is $100,000 but across the alley there’s a home that went for half a million dollars.” 

Hicks-Whitfield said many potential buyers on the show have a connection to the city and are willing to consider the city’s neighborhoods, unlike newer residents who tend to flock elsewhere. 

“If your grandma lived in the neighborhood or you’re familiar with the neighborhood all of your life, and now you have an opportunity to own a home…you’re very comfortable with the idea of buying a home in the neighborhoods,” she said.

However, Hicks-Whitfield told BridgeDetroit in an email that since she represents the sellers, she does not know the number of homebuyers who are Detroiters. 

According to census data, the median home value of owner-occupied homes in Detroit is one-third the value of owner-occupied homes in Michigan. Locally, Detroit’s median sale price is $80,002, compared to $315,000 in Royal Oak; $160,500 in Hamtramck; and $234,700 in Ferndale, according to a Rocket Homes April 2023 report. 

Detroit’s potential homebuyers may also see exaggerated closing timelines due to ongoing appraisal gaps. For years, Detroit homes have received low appraisals and home buyers have said they have been asked to bring additional cash to the closing table to make up the difference. 

Hicks-Whitfield called the appraisal gap issue a “challenge,” in Detroit whether they are Bargain Block homes or traditional sales. Some sales have closed in less than 30 days, while others have taken months.

“I would love to believe that it’s not racism,” she said. “But I mean, I would be silly to believe otherwise.”

That’s where CFCU is trying to make a difference. The lending company, which is insured by the National Credit Union Agency instead of the Federal Deposit Insurance Corp., started a new partnership with Bynum and Thomas in 2022. FDIC insured banks will support consumers in the event of a loss of up to $250,000, while credit unions rely on the National Credit Union Association for the same support. 

Stearns, of CFCU, said the show’s stars saw the issues potential homebuyers were having in securing property. After a few calls, the credit union created the Path to Homeownership program. Stearns shared that first-time homebuyers who rely on state-funded programs are often working at a disadvantage because it takes longer to secure financing than those who can pay cash–and there’s low inventory for homes. 

“We do believe affordable housing is one of the largest issues facing the state,” Stearns said. “And we believe as a corporate financial institution we have a role to play there.”

The CFCU program allows low-to-no down payment options, no minimum credit score requirement, and accepts flexible documentation. There are income limitations and credit union employees say they look for homebuyers who are trying to secure property for under $200,000.

“We believe that if people can pay their rent, they can pay for a home,” said Jill Johnson, the credit union’s chief revenue and lending officer. “And many people are paying more in rent than a house payment would be, so the great thing about this program is how it’s able to help people get into homes that are trying and maybe not succeeding because we truly approve loans that other lenders wouldn’t.”

In 2021, DFC reported five major lenders monopolized the Detroit housing market from 2016 to 2020: Quicken Loans, Flagstar Bank, The Huntington National Bank, United Wholesale Mortgage, and TCF National Bank. They had the highest and lowest mortgage approval and denial rates.

The lending officer said appraisal gaps are an industry concern and she talks to buyers about their choices of whether to pay the difference in the gap. She wants them to succeed in purchasing, maintaining and keeping the home. Johnson said that each scenario is different, but she will consider no down payment if a buyer needs to make repairs to the home—a common expense for Detroit’s older homes.

“We need to be careful about not judging the choices our members are making,” she said. “And also have an understanding where there’s communities where appraisals seem to come in low and we’re concerned about whether that’s a fair indication of what the home is really worth.”

Detroit has seen several homebuying programs throughout the years. The Detroit Home Mortgage, which ended in 2021 and did not meet its housing goals, was backed through public-private partnerships and split mortgages based on the appraisal value. The state continues to offer down payment assistance programs for residents under certain income limits within targeted areas who are buying property for less than $224,500. Both programs required participants to complete homebuyer education classes.

Hicks-Whitfield said homebuyer education is useful for first-time buyers. Though she represents sellers, the agent said she’s seen buyers who come to the table with no representation and others who move without precaution and are willing to spend large sums while in the closing process. While she admitted that homeownership is not for everyone, Hicks-Whitfield said she encourages Detroiters to explore the option; they may be pleasantly surprised.

“Homeownership is virtually how the middle-class was created,” she said. “Real estate is the fastest way to wealth in America.”