I’m selling a foreclosed 3.3 acre parcel in a gated community to an Investor who is planning to quickly put the lot back on the market at a significantly higher price to achieve a strong yield in a short period of time. He was concerned that his sale will establish a new comp for the area and thus drag the market down to his price in the neighborhood preventing him from reaching his investment objective. That’s a great point to consider. This is a community where lots were selling from $375,000 – $450,000 when sales stopped a couple of years ago. There are 3 or 4 lots currently available for $295,000 – $395,000 but no signs of recent activity. At the price he is purchasing his lot, he will be able to market it at $230,000 and achieve his investment goal. In a community with few if any foreclosed properties, an individual distressed sale will not have the impact on comps that one might fear. Furthermore, bringing 1 lot on the market at a significantly lower price than the others will provide a huge advantage to that lot. Especially when it’s at a price point that is showing a strong increase of interest marketwide, ie. custom lots under $250,000. In a community that is filled with foreclosures and distressed sales, his point is a valid one. In that community you must buy a really good lot at a distressed price, not just any lot to protect your future investment.

I’ve seen a huge upsurge of activity lately in end users and investors picking up tucson foreclosed lots. We must sell off this inventory before we can see a recovery of more normal sales  take place. The quicker these sales happen, the sooner recovery comes. I’m feeling fairly optimistic that the system is working and we’re moving in the right direction.

In the past 3 or 4 weeks I’ve been hearing many Realtor’s talk about how busy they have become. This is mostly agents who represent Buyers and Sellers of Single Family Homes. And I’ve been hearing it about the lower end market (below $300,000) as well as the upper end (above $800,000).  Part of this probably can be traced to the soon to end  Homeowner’s  Tax Credit Program and the inching up of interest rates but it may go beyond that. In my own business, I too have been busy representing many Investor/Buyers who have been taking advantage of the many land foreclosures currently available . However, I’ve noticed something else. I’ve spoken to 2 Builder’s in the last couple of weeks who have contracted to begin new Custom Home Projects for clients. These are the first new custom home starts I’ve heard about in quite awhile. Matter of fact many of my Custom Builder friends have taken different positions, some real estate related and some not, to pay bills during this downturn.  On top of that, this past week, I was contacted by another Builder with a request for a lot in the Foothills in a particular elementary school district to build a home for a client he had. We found a lot and are currently negotiating a contract on it; at a price I would characterize as “retail”.  The clients had recently put their current home on the market, it had sold quickly and wanted to begin a new home project immediately. Additionally, a small new Subdivision of finished lots came on the market this week. I haven’t seen any new finished lot inventory for perhaps 3 years.

My sense is that this increased activity may be the very beginning of a real estate turnaround. Believe me, I’m not yet jumping for joy and I fully expect the balance of 2010 to be a shaky, fits and starts type of market. But something positive is happening in Tucson. Let’s see if it continues.

I just completed a transaction where I represented a Buyer who wanted to  purchase a Bank Foreclosed lot in the Wildcat Pass Subdivision at Starr Pass Resort. The listing agent, an excellent , experienced agent, had done her homework and upon my first inquiry, provided my Buyer with all the Subdivision Documents, and explained how the Bank’s Asset Manager responded and handled  all offers. We knew what to expect from the onset. The agent explained that when she received offers or counter offers, she would enter them into the Bank’s computer system and generally if she did that in the morning , she would get a response back that same day; sometimes even a matter of only an hour or two.  It was clear that the Bank made quick responses and  my Buyer and I agreed that we needed to establish a quick response, phone relationship while the negotiations were taking place in case there were competing offers.

We wrote our first offer and within a day got a response back. We were still quite a distance apart and considering our counter offer  when I found out that another offer was received by the listing agent. We went into high gear and over the next day  went back and forth with the Bank three times by having immediate availability to talk to my client and quickly email responses. I could see we were and remained a step or 2 ahead of the other offer and eventually got the property because of that.

My client was highly motivated and thus made himself available to me on a moment’s notice. In this case, it proved to be the reason he successfully got a great lot at a price well below the current market.

This week I was contacted by a Lender I had done quite a bit of business with several years ago who told me about a new Lot Loan Program she now has available. Of course that got my attention as currently there is only 1 Lender in Tucson providing what I consider a viable Lot Loan. And that loan has a 20 year amortization which pushes the monthly payment much higher than many of my clients would like. So I was anxiously awaiting the details of this new program.

When I got the details I have to say I was pleasantly surprised, although we’re not back to where we were as recently as 18 months ago when land loans were still abundant and thus very competitive. On the plus side, the loan can be used for new purchases or refinances, has a choice of 15 or 30 year amortizations and can apply to finished lots or unimproved lots where utilities are close by. By the way, this is the first program I’ve heard about in a long time that is available for unimproved land. The best part is the rate as of today is 5.5%. I mention that with a little caution as I don’t  yet have all the fine points of this program, but will shortly. The loan has a maximum 70% Loan to Value, requires a minimum credit score of 680 and has a 3 year balloon. I’d like to see LTV’s a bit higher and balloon’s a bit longer. For someone planning to build their own home 3 years is more than sufficient but for an investor, it is the bare minimum.

So this loan is not perfect but may be the best we now have in Tucson. More importantly,  I hope that it is an indication that Lenders are re-thinking their participation in Land and Lot Loans and that we may be at the very early stages of a return to a more normal mortgage climate.

Here’s  a summary I just received from a Senior Loan Officer at Bank of America that I think is right on the money (so to speak). Doug Frisch has been in Tucson many years and I respect his periodic forecasts/reports.

Although he is referring to the single family home market, his remarks are exactly what I’m also experiencing in the Land Market.

” While positive reports are starting to pop up in the media, we are still in a very fragile economy. The large numbers of short sales and REO properties competing with properties that actually have real human sellers in them has created a scenario that makes it difficult for the real home sellers to compete; as these REO and short sales prices are creating a drag on home appreciation. On a positive sign, I am seeing strong sales activity in these in these REO and short sales properties with multiple offers in many instances. …The business that is most active is the lower price ranges. This is indicative of the market in all of Arizona.”

What do you think? Are you seeing positive signs or more of the same?

Lou Jewell, ALC is a reputable land broker practicing in North Carolina. Last year he wrote an article listing 93 land Disclosure issues that a buyer or seller might come across in a rural land transaction. Although most of my transactions are more urban than rural, I have run up against many of these same issues. For anyone interested in buying or selling land, here are some issues that may come into play. Are you aware of  any: encroachments, easements, endangered species, flooding, groundwater contamination, landfills, mineshafts, odors, pipelines, tunnels or wells? How about conservation easements, capped wells or burial sites? Has the land been tested for Radon or Methane gas? Is there a possibility that any type of underground storage tank has ever been present?  How about soil settlement, drainage, earth movement,erosion,  or fissures? Do you have a survey? Is it an ALTA or standard boundary survey? Is your land subject to CC&R’S and or Design Guidelines? How about local zoning, hillside, hilltop and floodplain regulations ?

Those were only 29 potential disclosure issues rather than 93. I guess the important point is understanding the critical issues involved in the transaction that you’re considering and going into it with your eyes wide open.

As I’ve said, I think EVERY LAND OWNER should file a tax appeal this year. We’re in a downward trending market that hasn’t hit bottom yet and there are plenty of sold comps out there (most likely some are similar to your parcel) that may justify a lower value than the Assessor has put on your vacant land.  On the 2011 Notice of Value you recently received you’ll see the Appeal Deadline Date. This is the drop dead, last date they will accept your appeal so note it carefully and DON’T MISS IT.

Start by going to the Assessors website at www.asr.pima.gov. Click on the button marked, ” Appeal Process” on the right of the screen. On the next screen click on ” Petition”. On the next screen click on ” Download Appeal Forms Here”. On the next screen click on ” Petition for Review of Real Property Valuation”.  That should get you to the 3 page downloadable form that you’ll need to begin.

The first line to be filled out is in the upper left hand corner. Remember you’re filing an Appeal to the 2011 tax year and that is the year to be entered.Items 1-6 are self explanatory and need no comment. In item #7 check the Market  Sales Approach box as this will be the basis for appealing the value of your land. And here is the most important part of the form; finding good comps that are close to your parcel in location, size, characteristic and most importantly have recently SOLD for a low price and/or already have been given a  low Full Cash Value by the Assessor. You can easily look up a parcel’s FCV on The Assessor’s website by entering the parcel ID in the Quick Search area at the upper right.  Active listings with low asking prices don’t mean anything to the Assessor. They will only use sold parcels in considering your appeal.The 2 best places to find these comps are at www.tarmls.com and www.zillow.com. You might also try some of the foreclosure related sites like www.realtytrac.com. or even the Assessor’s site where you can search your surrounding area by similar tax codes.  In item #9 you are asked to give your opinion of your property’s value. Be very aggressive here based on the comps you’ve found. The Assessor will never assign your property a value lower than what your estimate is.  Also, the Assessor will likely settle on a value somewhere between their value and yours.

Good luck and get started!

Most if not all owners of Property in Pima County received their Residential Notice of Value for 2011 in  this week’s mail. This shows the Full Cash Value ascribed to your land by the Assessor’s office on which your property taxes will be based. THIS BEGINS A 60 DAY PERIOD WHICH IS THE ONLY TIME YOU CAN APPEAL YOUR TAXES THIS YEAR. I’ve talked to so many land owners this past year who have complained bitterly (and in many cases rightly so) about the unfairly high value that the Assessor has placed on their land. NOW IS THE ONLY TIME YOU CAN DO SOMETHING ABOUT IT..

The first thing to do is look at your “Total FCV” for 2011 on the form. The change in value from 2010 should certainly be lower as I’m not aware of any land or lot in any part of Metropolitan Tucson that has increased in value this past year.  Secondly, look at the actual Full Cash Value amount. The Assessor sets this amount at approx. 70-80% of Fair  Market Value. For our purposes, lets use 75% as an average. For example, if your Total FCV in 2011 is  listed as 100,000, divide that by .75 to see that the Assessor is saying your property has a Fair Market Value of $133,333.  If you agree with that amount and believe that to be a fair price that you could sell your property you may not want to appeal.  If you know that comparable property has recently sold between $75,000 and $100,000, or perhaps less because of all the recent foreclosures and short sales, I strongly suggest you file an appeal. If you aren’t sure of the current Market Value of your land find out quickly so you can make an intelligent decision. You can do this in several ways. Go to the TAR/MLS site and search sold listings in your area; check values in your subdivision or part of town through the Assessor’s site and Recorder’s site or call a knowledgable Realtor to help. I  believe, however, that EVERY LAND OWNER should take the time, do the research and file an appeal if justified. You very well may have an inflated idea of what your property is worth versus actual sales.

I was recently showing land to a couple from Iowa who were put off by the idea of building a custom home on a parcel that had a regulated wash going through a portion of it. This led to a lengthy conversation about washes in Tucson and how they effect the value, desirability and buildability of a lot. Without getting too technical (I’ll leave this to the excellent staff of Hydrologists that are readily accessible to anyone by visiting the Pima County Flood Plain Dep’t), here are some brief thoughts.

Washes, also referred to by some as runoff, arroyos, riparian areas or flood plain,  are found throughout every area in Tucson. Generally, wash areas create wonderful habitat for both flora and fauna unlike other parts of the desert. We’ll see animals roaming and hunting in them, large shrubs and trees growing in them and thick, diverse vegetation, including big saguaros, growing on their banks. The more active a wash is, the more of a defined, sandy bottom you’ll see. Depending on the size and amount of water a wash carries, the County has established safe setback areas which determine how close  a home can be built to the wash. For small washes this distance is typically 50 feet but it is encumbent upon a buyer to find out the exact setback for any wash on a property they’re considering. Washes on property lines or just outside property lines are the best case as they provide shade, beauty, privacy  and a buffer from neighboring lots with no negative effect on the land. This type of wash will generally add value to a parcel and make it more desirable. When a wash traverses, or goes through a parcel, we have to be more diligent in understanding it’s impact on the value and buildability of a lot. This is when its time to make  a quick trip to the flood plain office. In general, I’m always more concerned about washes when buying unsubdivided land versus parcels in a platted subdivision as subdivision developers are required to do extensive engineering to identify any flood plain impact on the lots and disclose the results on the recorded plat map. Buyer’s of unsubdivided land must find this out on their own.

Many people prefer having a wash area on or next to their homesite and I’d put myself in that camp. I think they are a big part of what distinguishes Tucson Land from building lots in many of the places from around the country we all come from.

They let us live at close, but safe proximity to nature and help us appreciate the natural beauty of Tucson.