The Search Continues – Vacation Home part 2

If you followed my first couple vacation home posts, you may have got the idea that I was cooling off on the first choice. On the last week of June, I bailed out of the first Lake Almanor home. Too many issues for me. Dry rot, water leaks, bats, ants, wood pecker holes, septic problems….you name it.

Amazingly, a second home came on the market at the right time. I immediately contacted my agent and viewed the home. Although Linda had not seen the home, we agreed to make an offer. We are now two weeks into the purchase and things are looking pretty good.

It’s in much better shape than the first home, has a much better exposure and a much water beach/water access.

Yes it also cost more, but we’re moving forward. I’m glad we decided to reverse course on the first home and I’m hoping that this next contract will work out. Sometimes you have to fail in order to succeed.

Addition by subtraction.

 

Vacation Home Purchase, Septic Tank

During 37 years of selling homes, I don’t recall selling a home with a septic system. I did sell some rural property – the septic system was never a big issue.

Why not? I think it was not a major consideration in the purchase. The property itself was always a much larger concern related to the size of the investment.

That’s not so true on a vacation home, where the parcel size is relatively small and the septic is a major capital expense. It’s also a big project if it needs to be replaced.

In most rural property purchases, the agencies are not watching closely. That’s not true if you purchase a lake-front home where county agencies are very concerned about pollution of the lake.

That’s why I’m being fussy about the septic tank at my prospective vacation home at Lake Almanor in Plumas County.

The seller’s agent suggested that the seller pay for the septic inspection. That surprised me. Then the inspector checked a box saying it was “unknown” if there are any records about the tank on file with Plumas County. This is a big red flag. Unknown ?@#%&*

Looks like there will be more than one inspector.

The Search – Vacation Home

For years I’ve wanted to own a second home at Lake Almanor in Northern California. As a kid, my brother and I experienced the outdoors while staying with my grandparents during summers.

After they passed away, my folks decided it was too difficult to manage a home several hours away and sold my the home they inherited, which was located on the East Shore of Lake Almanor. At the time I didn’t think about it much.

Still young and able to camp and fish in the Almanor area, I didn’t need a house to slow me down. Later on marriage came along and the needs of my wife entered into the picture. She was and is not a camper and needed a house when we visited Almanor – we rented.

Renting is OK, but it’s different from owning and I’ve always preferred to be an owner. The problem? Owning a second home doesn’t create the same return as other real estate investments. Hence, we put off purchasing while investing in other real estate.

On the other hand, a good real estate investment is a good way to retain capital. That conclusion can reasonably be reached with the assumption that you are not forced to sell.

About five years ago Linda and I began to seriously search for a solution. We looked at many homes, but nothing really seemed to fit – until we checked out a house on the Lake Almanor West golf course.

It was a nice home with a good exposure, big trees and a nice view of the open space of the golf course. We made an offer. The asking price was $560,000. We thought the right price was $425,000 based upon our understanding of the market. The offer didn’t fly so we raised our offer to $450,000. Still no interest from the seller.

We let go of it and moved on. We began to remodel our home in Livermore and that ate up our money and energy. We didn’t get serious again until this spring. Ironically the same house came on the market. It had not sold.

We tried again, this time offering $475,000. The seller was still stuck on $560,000, but indications were that $535,000 might work. We passed.

We recently took a week’s vacation and revisited the entire program. This time we had saved up additional funds and had more options. After a few days we found a home I really liked and Linda could live with. It’s in escrow.

We concluded that nothing short of a lake-front home would motivate us to purchase. I had money in the bank that I’d been planning to invest in stocks, but I was having a hard time making that decision. As a real estate guy, stocks were not working for me.

So, our money market funds will be used to purchase a home at Lake Almanor West. It will cost just under a million dollars. The property will rent out for about $3,500 per week during the height of the summer season. Taxes will be about $11,000 per year. Insurance and HOA dues will be about $3,000 per year. Looks like we’ll need to rent it out for about five or six weeks each summer to break even.

We’ll come up with a management plan that, at least in theory, allows us to pay the major expenses and still have use of the property. The home will not require major work and it will probably meet our needs as is.

I’m fired up. Here’s a photo from the street. Not very good, but all I have for now.

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View from the street. The house is about 200 feet from the front property line. Nice setback.

There will be more later. I’ll also post some info  related to escrow. We’re lining up septic, home and termite inspections. Most of the deferred maintenance is related to sun damage. At Almanor’s  4,500 foot elevation, the sun really beats wood up. There will be more later.

I’ll also post some info  related to escrow as things move along. It may be helpful.

 

Today – Buyer’s Remorse

Yesterday’s win is today’s remorse. I awoke at 3:30 AM with a serious case of buyer’s remorse as I began re-thinking everything bad about purchasing a lot in Modoc County.

The biggest issue is the $195 per year payment to the county on behalf of the Last Frontier Healthcare District (LFHD). I’ve read all about it and there is nothing one can do to escape this annual “Special Tax.”

On the other hand, I’m bound and determined to figure out Modoc County Real Estate and there’s only one way to do it – join in. The LFHD may single-handedly be the demise of the current recreational property fiasco in Modoc County. And, that would be a good thing. I think it’s a clear case of unintended consequences.

While laying in bed, I couldn’t stop wondering if there were a reasonable way out of this financial conundrum. The more I thought about it the more I realized my sleep was over.

Out of bed by 5:00 AM, I felt a knot in my stomach. I hate being stupid, but that’s how I felt – and still feel as I write this. However, this is an educational experience and that includes a full understanding of buyer’s remorse.

At least I didn’t pay more. The value of Modoc real estate is taking it in the shorts, not that it was ever a good deal.

 

Yesterday – Modoc Tax Sale

The Modoc tax collector closed the Modoc tax sale yesterday. Over 200 parcels were offered to the public at auction via a web-based auction on bid4assets.com.

I watched the last couple of hours of the bidding as blocks of offerings closed at a rate of 20 or so parcels every fifteen minutes. I noted that, on the last day of the sale, the tax collector lowered the minimum bid on some of the parcels..

When the minimum bid on two of the lots dropped to $500, I decided to make a bid. Immediately an auto bid offered $600. That was enough for me on that one. The two lots offered for $500 ended up selling for $700 each. Both were in Modoc Recreational Estates.

The minimum bid on a few lots was lowered to $800 each. The highest bid price I noted was $1,500 and another sold for $1,300. Both were in Modoc Recreational Estates.

The minimum bid on about five lots in Pit River Recreational Estates, out of about fifteen,  was dropped to $800 and two of them sold. I couldn’t quite pull the trigger.

Eventually it was down to one lot and I planned to buy one, so I pulled the trigger on item 188 – after the minimum bid was lowered to $800. But, somebody had already bid $800. I figured there might be an auto bid. Sure enough the price jumped to $1,000 after I bid $900. Now I would be forced to bid $1,100 – which I did.

That ended the auction for me. I put my blinders on and went to the bank. When my $535 credit was applied (deposit and admin fee), I owned $601.65 for a total acquisition cost of $1,136.65.

The bank teller asked me if I was certain I wanted to send the money by wire transfer as it would be final and irrevocable. I said yes, and gulped.

For better or worse, Lot 29, block 80 of California Pines Unit 3 will soon be in my name. I laughed when the email from bid4assets.com congratulated me for my “win.”

From where I sat, it appeared that about ten percent of the 200+ lots offered were either sold or withdrawn.

 

 

Tangled Web

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For about two years I’ve been evaluating real estate in Northeastern California. But before I get into that, I need to preface the conversation by saying that I was a real estate agent/broker for 37 years.

During that time I thought I learned a lot about real estate sales. In fact, I did. However, there is an entirely different world of real estate out there. The real estate world in which I operated was legal, ethical and conscientious.

Real estate transactions in Northeastern California are mostly different. The genetic makeup of real estate in Northeastern California, and particularly Modoc County, is infected with corrupt motives. Much of the county is owned by Southern California corporations that operate on a basis not normally seen in California’s real estate industry. And, one of the most prominent owners and sellers of real estate in Modoc County is the county itself.

It appears to me that Modoc County is in the middle of a major conflict of interest.

The properties of which I speak are generally “recreational properties.” Lots range from an acre to a few acres. They were created in mass at a time when land was cheap, laws were lax and oversite was non-existent.

The worst offenders were and still are sub-dividers whose corporations exist only by a continuous chain of “fishing” activities. Lots are mostly void of value because Modoc County has a very limited economic base. The corporations “fish” for inexperienced buyers, who think big brother is watching out for them.

The very worst case scenario is one where the landowner (often Modoc County) offers lots, but not title. This is very common.

The ongoing tax sale in Modoc County is a testimony to the case I am making. Hundreds of lots are for sale and the Modoc County tax collector is offering them at prices three or four times their economic value.

Notice to bidders. If you purchase one of these lots, you may be contributing to the tax sale of 2025.

The lots of which I’m speaking would be more valuable to society if they were all recombined and resold in economically viable units.

What’s going on here? I’m watching.

And, I’m going to purchase a lot. Call it education.

 

 

Tax Sales – Buyer Be Ware

Looking at the possibility of purchasing property at a tax auction. Pretty scary as it doesn’t have the safety net of most real estate purchases. But I’ll probably purchase something at a tax auction this year, just so I can say I’ve done it.

So far I’ve learned a few things. It appears to me that some counties rely heavily on tax auctions to generate revenue and that county administrators take advantage of people who own vacant land in their county and reside elsewhere.

For example, we own a parcel in the boondocks of Alameda county. It’s an almost useless 20-acre parcel with access issues. The Livermore school district passed a parcel tax and now we pay more money to the Livermore schools than we pay in property tax on the parcel. There is no way to avoid the school bond assessment and this parcel will never contribute to any school use.

I have discovered hospital bonds in one county where parcel owners are charged an assessment of about $100 each year. This is an assessment for services from which out of area owners receive no benefit. Parcels I’ve checked out have little or no value. It appears that some people will purchase these lots on pure speculation for about $1,000 on the open market.

In these cases, since the land is vacant and many of the owners live outside the county, the practice of allowing a government agency to recirculate these lots at auction is at  least unethical and designed to trap unwitting buyers. If it’s not illegal, it should be.

Many of the parcels similar to the one above, were created by massive subdivisions that took place during the middle of the 20th Century when speculators divided up large ranches in a real estate frenzy. This took place when subdivision laws like the California Subdivision Map Act were being implemented.

Many of the resulting parcels are useless, but unknowing people continue to purchase them speculating that a market will some day develop.

I’ve found other things going on that I’ve never seen before and so far I’ve not figured them out, but I probably will.

Title insurance is not available to buyers in tax auctions, but one can obtain helpful information from a title insurance company. Or, one can search the records at the county recorders office. Neither of these options is fool proof.

It is amazing to me that county governments are tolerating or facilitating this behavior in the modern world. Buyer be ware.