Homes in Maryland and Baltimore for $5,000

Are there really $5,000 homes in Baltimore?

For a prospective homebuyer, $5,000 may not buy much — but in 2011, hundreds of homes in Baltimore, Maryland, were listed between $5,000 and $10,000 on listing sites, some with three bedrooms and multiple bathrooms. The headlines wrote themselves: the cheapest homes in America.

What's the catch?

The catch was everything the price tag didn't say. Nearly 40 percent of Baltimore city home sales in the first seven months of 2011 were foreclosures, according to the Greater Baltimore Board of Realtors. These were bank-owned or distressed properties, often in poor condition, in neighborhoods hollowed out by the foreclosure crisis. The cheapest recorded sale that year — a home on Payson Street in Southwest Baltimore — changed hands between investors for $10, with the attorney drafting the land record noting that the amount "is the actual consideration, the property being in bad condition." Its annual ground rent was nearly eight times the purchase price.

A $5,000 house typically needed tens of thousands in repairs, sat on a block with vacant neighbors, and carried tax liens, back water bills, and Maryland's quirks like ground rent. The purchase price was the smallest part of the cost.

What did it signify?

Baltimore's $5,000 houses were a symptom of the post-2008 housing bust at its most extreme: a market where the gap between the asking price and the true cost of a livable home had become a chasm, and where banks and owners alike just wanted out. For every sensational listing, there was a neighborhood absorbing the fallout — overgrown lots, broken windows, and neighbors whose own home values sank with each distressed sale.

The lesson for bargain hunters then, as now: in real estate, the price is never the price. The question is always what the building, the block, and the back taxes will cost you after the deed is signed.