Cohousing-L Mailing List: RE: Negotiating land deals: a sad story

[Rob Sandelin (floriferous]

This is a true account of a person whom I will not name (he used to read the
list so he can flame me, or send corrections if I get parts of this
incorrect)

There was once a well meaning person, who had some inheritence money. He
heard about cohousing and joined a group, then got bored with the details so
went out looking for land instead. Found what looked like a perfect piece,
12 acres, already in 18 tax lots. However, he did not know the first thing
about land development and did not ask the most important, first question.
(How long has this been on the market).

He contacted the owner, told the owner what he wanted to do, expounding
gloriously on the cohousing ideals. The owner quietly smiled and said sure,
here is the contract. The buyer was overjoyed to find the land price was
only $250,000 and the contract terms were only 20%. He put $50,000 down that
day and signed a one year contract, with the ability to extend the contract
for another year for another 10% payment.

The group of course was less enthusiastic, but went along to look at the
land. They got excited once onsite and began dreaming and scheming. Three
members put in their membership on the spot.

Then the troubles began. Turns out that the "meadow" area close to the road,
which is where the group thought the buildings would go, in order to
preserve the trees on the hill, was a wetland. Ok, we'll put the buildings
in the trees. Oops, because its a slope above a wetland there is some
engineering requirements. While at the Engineers office they got more bad
news, the water district would only provide one residential water hookup.
They could buy hookups from other property owners (if they could find
sellers) but the going rate was $20,000 per hookup!  Regrouping from this,
they thought hey, arn't there wells around? Yes!. To do a single residential
well is one set of requirements, to do a water system for 18 homes is a
whole different, and much more involved process involving creating a Public
Utility District, registering and getting an election held, posting a
municipal bond, etc. etc. The cost of all this was greater than the cost of
the property itself! They never even found out that they couldn't do
multi-family housing designs on that land, nor did they ever do a
development budget to figure out the projected cost of the land per homesite
to see if it was feasable.

By now, thoroughly discouraged, the group fell apart, squabbling over who
would pay for this fiasco. Since there was no incorporation agreement, nor
membership agreements, the well intending gentleman who signed the contract
of course was liable. It turned out that two other buyers had defaulted on a
contract in three years. So he had to face buying the property himself and
reselling it, or letting his contract money go. After evaluating his
prospects he bought the land outright himself. The rest of the group was out
the preliminary engineering costs.

By the way, I just checked, that property is still for sale, three years
later. It's now priced at $450,000. And yes, there is still only one
residental water hookup available. The cohousing buyer did sell it, and
recooped his costs, only losing the investment income on $250,000 for two
years. The reason I know this is that a local communities group contacted me
and in a random discussion about land, they were looking at that same piece!

The point of this story is that developing land requires a great deal of
savvy and experience. For example, the first question a savvy developer asks
when a property comes to their attention is: How long has this been on the
market?  Why is that the first question? Because, they know they compete for
property with other developers and if its been on the market for a year,
several other developers have looked at it, and passed. That's just the
first question, there are dozens and dozens more. If you don't know what
those questions are, you should be hiring people who do before you sign
contracts to buy land.

Rob Sandelin
Northwest Intentional Communties Association
Building a better society, one neighborhood at a time