In Southeast Baltimore, a nonprofit organization is struggling to buy vacant homes from investors Business
Kari Snyder really didn’t want to spend $62,000 on this vacant townhouse.
She was on vacation in a beach town last summer and was due to have dinner with her family when a middleman called her. The boarded up house in southeast Baltimore was about to collapse and he had a contract to sell it. Snyder couldn’t take it when another investor stormed in, bought the house, and sat on it.
So she stood on the phone outside the restaurant, haggling over a house that had been auctioned for just $7,000 two years earlier. Somehow its value had almost quadrupled since then. According to Snyder, the man offered a slight discount off his original price and claimed he wanted to help Baltimore.
Then it got hot.
“They’re extracting money from Baltimore,” she recalled telling him once. “I was so crazy.”
Snyder runs the Southeast Community Development Corp., a nonprofit organization that seeks to increase homeownership in Ellwood Park, a predominantly black neighborhood where only a quarter of residents own their homes and blocks are full of vacant homes.
Fueled by a mix of federal, state, and private funds, the Southeast CDC has bought vacant homes there, completely renovated them, and sold them to new homeowners at a loss, typically for about $150,000. But the work was slower than expected.
“We were able to raise money to close the valuation gap – the loss. It’s the takeover,” Snyder said. “It was very, very difficult just to get stuff out of investors. … They don’t want to sell.”
Baltimore, like other major metropolitan areas, saw a wave of investors buying homes during the coronavirus pandemic when interest rates were at historic lows.
With interest rates now rising, investors have pulled out of every major housing market in the country — with the exception of Baltimore, according to a report by real estate firm Redfin.
Redfin analyzed home sales data for the fourth quarter of 2022 and found that home purchases by investors across the country fell by half compared to a year earlier. But in the Baltimore metro area, they rose 1.4%.
Digging into his company’s data, Redfin economist Sheharyar Bokhari noted that investors are buying fewer single-family homes here, but that decline is more than overshadowed by a surge in townhouse purchases — particularly cheap townhomes.
The average total price for a townhouse in the Baltimore area was $268,000, Bokhari said, but the average sale price to investors was just $120,000. According to Bokhari, this suggests that investors are buying vacant or derelict townhouses.
“There might be some specific neighborhoods that they target,” Bokhari said. “I was surprised there were so many [investor purchases] and also the price point seemed really low. There must be some kind of need in these neighborhoods.”
At Ellwood Park, where Southeast CDC is renovating properties, Snyder said about 12% of the homes are vacant.
Diane Russell moved into a row house on North Ellwood Avenue, across from the park of the same name, in 1993 and has seen the area change for the worse. Russell, who is now retired, said she no longer feels safe walking around her neighborhood but has renewed hope thanks to the CDC in the Southeast.
“Since we’ve been here, no one has done anything for Ellwood Park out of thin air until Ali and you came along. That’s the truth,” Russell said, referring to Ali Morris, Southeast CDC’s senior manager of housing.
Morris and Russell met in 2021 as part of the nonprofit’s porch repair project, where the nonprofit worked with 10 homeowners to rebuild porches and front steps.
As part of its mission to increase home ownership and reduce vacancy rates, the non-profit organization takes a holistic approach that includes street cleaning, home buying courses, down payment help and help with repairs. But fully restoring the neighborhood also means buying and rehabilitating vacant homes.
When the Southeast CDC has attempted to buy investors’ vacant homes, Morris said they often ask for a “crazy amount of money.”
“These are outside investors who don’t know the market and have inflated the prices,” Morris said. “They want appreciation. So they’re holding on to these houses, waiting for the appreciation to kick in, and so they’re trying to sell them to us for a profit.”
Sometimes the Southeast CDC identifies vacant homes owned by individuals or heirs, but before the nonprofit can make an offer, Snyder said a wholesaler preempted them. That means the nonprofit often has to deal with wholesalers — “middlemen who charge the seller a fee” — which only complicate the contract and increase its costs, she said.
Typically, wholesalers contact homeowners, sign a contract to purchase their home, and then sell that contract to an investor who actually buys the property. It’s a largely unregulated industry in Maryland. Critics claim it allows investors to buy vacant and distressed homes for less than they’re really worth and later sell them for a much higher price.
Snyder, for example, said she had to deal with several middlemen when she tried to buy the North Robinson Street home, and each of them got a cut of the deal.
Del. Samuel “Sandy” Rosenberg, a Democrat from Baltimore, introduced House Bill 301 at this session of the General Assembly to require that anyone who participates in two such deals a year be given a real estate license. State regulators would then have the power to fine wholesalers or even revoke their licenses.
Abdullah Hijazi said the legislation could have unintended consequences if it becomes law. Hijazi, an attorney with Hijazi, Zaslow & Carroll PA in Bowie, represents wholesalers and other real estate professionals. The law could slow the revitalization of distressed neighborhoods, he said.
There’s little financial incentive for realtors to sell a vacant home for $10,000 or $20,000, Hijazi explained, but wholesalers can make money by identifying vacant homes and connecting the owner with an investor to repair the home.
If lawmakers wanted to protect vulnerable homeowners from dishonest actors, Hijazi said they should require more disclosure in the wholesale process — not override it.
“Are we trying to protect the little guy?” he said. “Or are we basically forcing more business through real estate agents?”
GNR Group, a Philadelphia-based company, has purchased and renovated vacant homes in Ellwood Park and converted them into rental properties.
“It’s better that it’s free,” Morris said. “They actually regulate vacancies, which is nice.”
But at Ellwood Park, GNR is the exception to the rule, she said.
According to Snyder, Southeast CDC has already renovated and sold three vacant homes and has a fourth under contract.
The nonprofit organization has enough money to renovate about 40 homes, she said. If successful, this could have a strong ripple effect. Reducing vacancy rates and rehabilitating occupied homes could increase real estate values in the neighborhood and create millions of dollars in wealth for the predominantly black homeowners here.
First, the non-profit organization must acquire these vacant properties.
Back on North Robinson Street, the vacant house Snyder negotiated for while on vacation is almost rebuilt. The interior was worse than she imagined, which meant a lot of work for contractor TCB. Tony Basta, a property manager at TCB, said the roof collapsed as renovations began.
“The guy was standing on the roof as we were preparing to gut it and took a step and the whole roof — about 10 feet back the whole way — just collapsed,” Basta said.
All told, this townhouse will cost about $285,000 to acquire and renovate, including $54,000 to purchase the home, Snyder said, making it the nonprofit’s most expensive remodel to date.
Still, Snyder knows buying the house was the right decision. Eventually, if it remained vacant, the entire house would have collapsed, she said, damaging adjacent townhouses and destabilizing the entire block.
“It hurts a bit when you think about how much it’s going to cost,” she said. “But we probably saved three houses, not one.”