When Bard Wickkiser first laid eyes on an empty Greenmount Avenue rowhouse on the edge of Guilford, he knew he had something special.
For months, Wickkiser searched Charles Village and the areas nearby, looking for an older home that was sound but needed some tender loving care.
"The house sat on the market for over a year and no one bought it," said Wickkiser. "I did a lot of homework and a lot of sniffing around before I found this. I thought someone had moved the decimal point on the price or maybe a '1' was missing. It seemed unfathomable that it was being offered at this price."
The asking price for the 1925 rowhouse, including the original walnut doors, brass hardware, original bath fixtures and wood-burning fireplace, was $73,900 - "as is." Wickkiser estimates he will put about $2,500 plus a lot of sweat equity into the home to fix it up.
"I was looking at houses in the $85,000 price range that were train wrecks," said Wickkiser. "I think the conception is you buy something for $50,000 to $80,000 and sink $20,000 in right away. But there are a lot of properties you can move into and not have to do anything major right away."
That's if buying a home in "as is" condition is right for you. Real estate agents say homes sold "as is" can be tempting, but it isn't for everyone.
A true "as is" home means the seller will not pay to fix any defects, either known or discovered during a home inspection. Those homes are often in estate sales, or have been rental properties, or were inherited. They are frequently called "fixer-uppers."
Sometimes the term applies to a property that is being sold in such a sought-after neighborhood that the seller doesn't feel compelled to do anything for the buyer.
But most of the time it means the buyer will not be moving into a home in pristine condition.
But if cleaning, painting and home repairs do not scare you off, then an "as is" house could be a good way to get a bargain in an otherwise very hot real estate market.
By obtaining good professional advice, you can reduce the risk of your bargain turning into a money pit.
"The homebuyer should be smart and build a team with the right real estate agent and home inspector up front before they start shopping," said Melvin Knight, an agent with the Wyndhurst at Roland Park office of Coldwell Banker Residential Brokerage.
"I have an intense construction background and can help buyers know what they are getting into. We do a mini-inspection before we do a contract and there are a lot of Realtors that can do this. But not every agent is into that. If you're just starting out, you need to shop around for a Realtor with that type of experience."
There are many loan programs available from various sources today that can make buying an "as is" home more possible financially.
One of the most popular renovation loans is the government-backed FHA 203(k) program, which allows homebuyers to purchase a house and at the same time finance 100 percent of the costs needed to improve it.
With the FHA 203(k), buyers can borrow up to 110 percent of the post-renovation value of the house and include the costs for all the repairs in the mortgage.
Repairs can include structural damage, roof repair or the updating of the plumbing, heating and electrical systems. But money can also be borrowed for extras such as renovating the kitchen, adding a deck or replacing flooring.
If the house is in a historic district, or is considered historic property, there are federal, state and local tax credit programs available as well.
James Reeves and Marc Epstein used a combination of these programs when they bought a historic rowhouse in Mount Vernon.
Just out of college, they weren't searching for a major renovation project as their first home-owning experience. But things fell into place.
"In this area it was surprising to even find a house because Mount Vernon is so hot right now," Reeves said. "The first time I saw this house I thought it really looked bad. I was overwhelmed at first, but I realized a lot of the repairs were not very serious ones. That was an advantage because it looked so bad it scared a lot of people away."
Reeves and Epstein used an FHA 203(k) loan as their mortgage product. They purchased the house for $65,000 and put in an additional $79,000 for renovations. Part of the renovation money, $11,000, was budgeted for surprises they may encounter while finishing the rowhouse.
Because the rowhouse is in Mount Vernon, a National Register Historic District, they can take advantage of the city and state historic tax credit programs. The house also happens to be historically significant, having been built in 1790 by Elisha Tyson, a Quaker abolitionist and philanthropist.
The city program, called the Property Tax Credit for Historic Restorations and Rehabilitations, keeps the assessed tax of the remodeled property at the same level it was before the renovation for the next 10 years.
The state program, called the Heritage Preservation Tax Credit Program, provides a state income tax credit equal to 20 percent of the rehab expenditures.
"I'd recommend this for anyone willing to rehab a house in a neighborhood on the revitalization path," Epstein said. "It's exciting but is pretty frustrating as well."
Six-month deadline
Under FHA guidelines, the contract must specify that the work on the house will be completed within six months.
Although Epstein and Reeves say the process involves a lot of planning, paperwork and time, the experience has been well worth it.
"We wanted the personal satisfaction of owning the walls around us and putting our heart into something we would be satisfied with," Reeves said. "I wouldn't do this just for an investment. You have to have a goal in mind. For us, that goal was to live in this beautiful house that is of our making."
Properties can be listed for sale in "as is" condition for a number of reasons. Many times the sellers can't afford the repairs or are not capable of making them.
Some sellers want to move and do not have time to do the repairs. And sometimes the property has been inherited and the seller doesn't want to invest a lot of money in repairs.
Because an "as is" home means the seller will not make any repairs, it is important to submit a contract contingent on a home inspection.
While sellers legally must disclose any known defects in the house to potential buyers, the perception with an "as is" house is that something major is wrong. Sometimes that can be the case, but not always. Hiring an experienced and reputable home inspector is a good defense for both the buyer and seller.
"It's especially important in an 'as is' home to have the home inspection because you may get a good price on the [property] but you may find the repairs are going to be too expensive," said Sam Howlett, the president of Professional Home Inspection.
"A good home inspection is worth every penny. But the most important thing is not that you should have a home inspection, but the quality of the home inspection."
Howlett said a buyer should make sure the inspector is associated with either the American Society of Home Inspectors or the National Association of Home Inspectors. He also suggests asking how long the home inspector has been in business and for a list of references.
Many inspectors have cost-estimating systems that can help buyers know how much they will have to spend on repairs.
If there are lingering concerns even with an inspection, a consultation with a lawyer might not be a bad idea, said Kenneth F. Davies, a partner with Wright, Constable & Skeen LLP. He believes a home inspection is the best protection and warns that once settlement occurs, it is very hard to go back and prove wrongdoing.
"Normally you get the disclaimer stating that the seller makes no warranties or representations as to the condition of the house," Davies said. "So basically the contract disappears after the sale goes to settlement. Absent actual fraud on the part of the sellers, you're going to have no remedy. It's a very difficult case to prove that the seller knew of a major problem with the house and actually concealed or lied about it."
Homes sold "as is" are usually put up for sale below market value to reflect the condition of the house. But is it really a bargain to take on one of these homes? Realtors say only a small percentage of buyers are interested in "as is" homes, while the majority looks for something perfect that doesn't require any work.
"Most people don't want a house they have to do a lot to. They just want to move into a house," said Donald Henn, an agent with Coldwell Banker in Catonsville. "A lot of houses sold 'as is' get a lower price because many times they sit on the market for a long time. Many of these homes are estate sales or people who just don't have the means to fix it up."
Homeowners who want to sell their house "as is" might consider obtaining a home inspection report and make it available to prospective buyers.
"Generally, the rule of thumb is if you put $20,000 into fixing it up, you might be able to get $40,000 more. But if you don't put the money into it, you might get $40,000 less," said Pat Hiban, an associate broker with Re/Max Advantage in Columbia. "We tend to get really low offers on houses we sell 'as is.' And some of those homes just need new carpet and paint."
Hiban said it is also harder to sell an "as is" house because most people buy with their eyes and can't look past the repairs.
"About 90 percent of the buyers will just say, 'No way,' " said Hiban. "But then some people are just into that. They have a lot of vision and want that before and after picture. If you have the time and you like it, you could get a good deal. Buyers should always be able to get a significantly better deal buying an 'as is' house."
One group that buys "as is" houses as their mainstay is the Chesapeake Habitat for Humanity. Concentrating on two Waverly neighborhoods and one in Pen Lucy, the group buys vacant "as is" homes and renovates them. They then sell them at cost or at fair market value, whichever is less, to lower-income families.
Regarded as partners
The families who purchase the homes are regarded as partners and are required to put 300 hours of sweat equity into the project. They are also required to make regular and timely payments to the organization so that funds are available to build more houses.
Jenny Hope, the executive director of Chesapeake Habitat for Humanity, said the organization looks for houses in the worst shape that are structurally sound and on streets that are desirable.
"We did a house just two blocks away, in another neighborhood, that we couldn't sell," she said. "Block by block can make a big difference. You just can't assume. We're offering zero percent mortgage and we still couldn't find a buyer."
In the past six years the group has renovated 46 homes, while eight homes are under construction.
Hope, who has personally bought and renovated three "as is" homes, says it can be very rewarding. But, she says, people should know what they are getting into, and she recommends a home inspection.
Spending time looking at a home's roof, the foundation and the plumbing, electrical and heating systems are more important than its floor plan, the number of bedrooms and the size of the closets, Hope said.
"Get a home inspector who can look at the house with fresh eyes and not rose-colored glasses," she said.