Posted by FJW on April 08, 2000 at 17:50:02:
Zee
I would look in the communities that have a lot of houses, but they have to be communities where the people who live in the area may want to live. You should be able to to find a small chalet or salt shaker that someone is dying to get rid of. Make ridiculous offers. You may find someone that will let you take it over because they want to invest elsewher. Just make sure you can find someone DECENT to rent or flip it to. Good Luck.
FJW
Did I Fail? or Succeed? - Posted by Zee
Posted by Zee on April 06, 2000 at 02:27:45:
I just pulled out of a real estate deal I had all set up (my first) and I am wondering if I did the right thing, or just got “cold feet”?
Found a 1/2 acre lot in the Poconos offerd on eBay, the on line auction service. On a whim, I bid just $25 more than the highest offer, and WON!
After a couple of days back and forth with the seller, we struck a verbal deal, where the price got negotiated downward because the lot was not current on perc testing.
I wrote up a draft of the contract for the out-of-town seller’s signature. Meanwhile, I discovered the lot might also need a survey to complete the transfer of the perc test/septic design.
While renegotiating things, the seller balked at my contingency clause (“subject to wife’s approval”)and I agreed to extinguish it at my signing of the contract.
As several days passed by the time the seller got the new agreement signed and back to me (I had not yet signed it), I completed the rest of my due diligence. Also, I let my wife see the property.
She disapproved the deal. Eventually I concurred because I saw no other lots selling, nor any new construction going on or planned.
In other words, with little market activity or potential, I was afraid I was going to just get stuck with a lot I could not resell quickly, and had no intention to build on.
So, I told the seller I was no longer interested.
I would have been buying at 60% of appraised market value, after purchase price plus closing costs.
Did I do the right thing to pull out, or do you think the
good purchase price/fees were attractive enough that I should have gone ahead with it, and then hussle to try to find a retail buyer?
I am asking this, because I still want to look for my first deal, but don’t want to back out of things just because I can’t see in every case how I’ll make my money.
Re: Did I Fail? or Succeed? - Posted by Zee
Posted by Zee on April 06, 2000 at 03:50:56:
Detail about why I stepped out, and what I managed to learn:
Purchase & closing costs would have been all MY OWN money. I didn’t know how to find OPM, nor did I want to undertake a debt where I could not pay for it with income from the property.
No exit strategy. Only thing I could think to do was throw up a hand drawn sign on the lot, and advertise on eBay, like the seller had. Also, had I signed into the contract, I had no escape from it. I didn;t feel even 30 days was enough time to find my buyer, or involve an equity investor.
I couldn’t figure out what, but something is wrong with the commmunity the lot is in. The association has to maintain its own roads, the ammenities are a ramshakle joke, the county just reassessed values, yet this commuity will see no services in exchange for higher taxes.
Many other lots still available. In past year, just ten have sold. The only ones having homes on them wereone already build – no new construction. And these sold for less than I beleived it would cost me to clear the lot, sink a well, build a septic sand mound and buy/install a modular house for resale or rental. Too much “habbing”.
On the positive side, I had gained valuable experience:
Did a great job on the “Buy” side of this almost deal.
Learned that, for me, I need also to do a great job on landing the “Sell” side (exit strategy).
Conducted good person-to-person negitiating with the seller.
Wrote every word of the contract. Now I know what in in a purchase contract.
Became better at due diligence: meeting neighbors, striving the neighborhood, researching at the courthouse, doing “comps”, etc.
while I did not earn anything this time, I didn’t tie up my cash, no lose, either. Also, I got half the job done right (buying side).
More importantly, I think I did better then before at “listening” to my alarm bells! AND heeding them…
A+ job at saving your butt. - Posted by FJW
Posted by FJW on April 06, 2000 at 17:56:13:
Zee
I am part of one of the many families that lived in the suburbs of NYC (Long Island) and purchased a piece of the suburbanite American Dream(not to mention the dreams of the pocono development dirt salesman…these guys could sell ice to eskimos). We started out camping in tents, next was a camper trailer, then my folks had a shell house built that we completely finished the interior over a long period of time. We weren’t rich, but when I think back now, it’s priceless…quite a family project. Before we finished, however, around 1976, when the bottom was still falling out of the economy, my dad lost his job at Aurthor Anderson in the city, and it was decided by the extreme minority(the rest of us were screaming NO), that we would move up to the poconos and rent the LI house. Can you say culture shock?
During the boom of the 80’s, building permits were up everywhere. If I remember, '86 or '87 was the biggest year. Then the recession hit and for some reason, that area never fully recuperated and doesn’t seem to be participating in these great economic times as it relates to real estate values. I visited last in '98. While there had been some significant changes, some of them were not good. There was an old lumber/hardware store which had been there FOREVER(way before the city folk moved in), that was GONE. Same story with a convenience store at the nearest town.
We still have ties there. Word is: the market is very, very slow even in the communities that are highly rated and maintained. Exactly why is sheer speculation, although I did talk to one realtor that said it was his best year yet. Go figure.
I can say this though; the local politicians weren’t the brightest or payed much attention to development or attracting industry. Many of the locals despised the city people moving in. The surrounding closest PA cities don’t seem to be able to let go of the old coal mining days. To put it simply, it’s not a growth area. In fact, in '98 I think I heard one news report or rumor that indicated people were leaving that area to the extent of 1000/month. It’s still a tourist attraction except now the tourists are content with keeping their money in the stock market and MAYBE renting a house in the poconos for a few weeks a year if it suits them. It’s basically just plain overbuilt and those old original dirt salesman moved on a long time ago.
Anyway, I think you did well. There may be deals there, if you have an exit plan, but I’d say steer way, way, clear of the dirt. Good luck.
FJW
The Poconos is a heavy buyer’s market! - Posted by David
Posted by David on April 06, 2000 at 05:46:54:
Many companies developed lots in Pike and Monroe Counties starting back in the late 50’s and 60’s. In Pennsylvania, prior to 1971 there were no perk rules, anything goes. Lots were developed that were swamps, wetlands, steep slopes, etc, that could not pass today’s perk testing. Many of the developments have private roads and private amenities. In these developemnts the association fees can be very high. There are literally 1000’s of lots available and you can name your price. A friend of mine bought about 50 such lots, many of which he has not been able to resell.
hth
David
Re: A+ job at saving your butt. - Posted by Zee
Posted by Zee on April 07, 2000 at 02:04:03:
Interesting story. I was able to confirm there were 85 sales in this plan during the last twelve months. (Sounded promising, at first). Most were purchases of tax liens by a couple that operates under a variety of shell companies. I hear they can’t deliver clear titles, and managed to sell just one lot.
I also discovered this lot I looked at sold for $23,000 in 1989! Last year, the next door neighbor wouldn’t buy it even for $1K so her kids could have a larger yard to play in…
No doubt the rising stock market has a big role in where people are putting their money.
Looks like I avoided a problem. Thanks for your input.
Re: The Poconos is a heavy buyer’s market! - Posted by Zee
Posted by Zee on April 07, 2000 at 02:16:12:
The new deal on the perc testing is these tests can be transferred to the buyer. Only thing is, the PA Dept of Environmental Protection changed the rules two years ago with regard to septic design. Larger pipes, two holding tanks instead of one, stuff like this.
While a buyer can ask the seller to give the local municipality a letter authorizing transfer of the perc test and septic permit, a new septic PLAN must be submitted with the application for permit transfer. Going rate is $150 for the engineering work. Transfer fees are about $135.
Yes, many of these associations have nicer amenities. But lot prices are also much higher than where I was looking. It was a real no-brainer once the realtor I called who is marketing these lots for $4995 “with a $635 rebate towards closing costs” tried steering me away from this plan over to one “that is a bit more developed and running”. Even he didn’t have confidence in it.
Lastly, the county just did a reassessment – first one since 1966! Nobody knows what there taxes will be, but EVERYBODY is unhappy with the market values they came up with!