This post originally appeared on Burt M. Polson’s Real Estate Journal and is republished with permission. Find out how to syndicate your content with theBrokerList.
I have a client who inherited a parcel at California Pines in Northern California. You probably remember the infomercials, Eric Estrada, former star of the 1970’s television show “Chips,” telling you what a great place it is to live. You can buy a one-acre parcel like him for a $995 down-payment and $269 a month.
Many bought and sold in the California Pines subdivision over the years. Still, unfortunately, it never did take off as the developer promised. Values dropped, many landowners never developed and sold their property, allowed the bank to foreclose, or the county to auction for unpaid taxes.
The homeowner’s association continues having financial problems today. I am unsure what my client decided, but I told him to sell for next to nothing to avoid the ongoing HOA (homeowners association) dues.
Drive through Nevada today, and you are presented with billboard signs selling parcels for $1,000 per acre. Search on Craigslist.org for land, and you will find hot deals for $500 for a couple of acres. Looking on eBay.com for land will give you thousands of options to bid on super cheap land for a few hundred dollars. How can you go wrong?
Is buying land for a few hundred dollars too good to be true? Sometimes, but not always. It depends on what your plan is to do with the land and what those selling are not telling you.
Performing your due diligence and using a title company is vital in purchasing any real estate. You may think it is not necessary to take the time to research a site or to pay the expense for a title report on a $500 transaction, but you could lose more. Here are a few things you need to consider.
Items of record
Opening an escrow and obtaining a title report will show you recorded tax liens, outstanding loans, assessments, easements, or inconsistency “cloud” on the title. Imagine purchasing a property later to find you are now responsible for thousands of dollars of property taxes or HOA dues in arrears.
Other determinants could be an easement of the neighboring property owner having the right to access their property through your land. Or a previous owner who is still inadvertently on the title to the property, therefore causing a cloud.
Your land may also be a part of a homeowner’s association that may impose dues for services to maintain the subdivision. It is essential to know what services are offered for the dues paid.
Ability to use
It would be best if you researched how you can use the land. If you plan to build a house, hunt, or use it as a site to hike and camp, all have different needs to consider.
As in California Pines, you may have a beautiful location, but economically the area may not have much to offer. Services such as grocery stores or gas stations may be many miles away. Suppose you plan to call the area home. In that case, you need to consider employment opportunities, medical services, and travel time to the site.
Burt M. Polson is the CEO of ACRESinfo.com, a commercial real estate brokerage company, and CEO of StoneMarkerInvestments.com, a private equity real estate fund. Call him at (707) 254-8000 or email [email protected] and [email protected].