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Message # 927 Buying land: Safeguarding against fraud

mp3 #927 How To Safeguard Against Fraud When You Buy Land (mp3 file)

The State Department Of Real Estate advises anyone considering buying land to investigate the property carefully. This advice applies to the purchase of a "home away from home," a recreational retreat or retirement home -- or, for that matter, the very first investment in a home.

The department has warned all prospective buyers not to buy a lot or interest in any subdivision unless they see and read a public report made by the State. This report known as The Subdivision Public Report, is basically a disclosure document for you. In a sense, it refers to the developer's permit to sell the land. The report is not, however, a recommendation for or against the property. What the report does tell you is what arrangements, if any, the subdivider has made for the buyer to get what he or she bargained for, and what the physical characteristics of the land are. This pertains to such matters as size, location or an arrangement for off-site recreational facilities. If it is not in the official subdivision report, don't rely on a salesperson's verbal promises.

The subdivider or the agent must give the interested buyer a true copy of the public report. The buyer must be given an opportunity to read it before making a commitment to a purchase. It is important that you, the investor, know not to buy unless you are given this report. You ought to read it carefully, and check out any questions you may have about it.

General advice to the buyer is that you should base your decision on facts, not on get-rich-quick promises. It must be remembered that the value of an improved lot depends on the developer fulfilling his or her promises.

When investing, you should determine what utilities are available, when they will be available, and who will pay for their installation. You should find out the cost of any "special districts" that may have been formed to install roads or provide water, for example.

If your plan is to build a home, then financing and insurance costs must be explored. Fire insurance, for example, may be expensive. Does the area have a good pattern of growth? Will your house be built on filled ground?

The buyer must examine the possible additional costs such as property taxes, or assessments for the maintenance of common areas. These costs should be thoroughly understood.

If the investment is to be in a mountainous area, who will remove the snow and at what expense? Are routes kept open by the state or county? Failure to consider details such as these might eventually cost you a lot of money you had not expected to spend.

An inquiry should be made to determine whether the property is located on a flood plain. If so, what safeguards exist? Are there drainage, water supply and sewage facilities?

In addition to this general advice about the land itself, there is something to be said about sales techniques. The Department of Real Estate advises buyers not to let salespeople pressure them into making hasty decisions, no matter how intense and skillful the sales pitch. If possible, comparative shopping should be done. A reputable sales agent would not pressure a customer or client with hard sell tactics. There are millions of acres of undeveloped land to choose from in California. In unimproved land sales, some sales agents operate on the theory that if you, the prospect, have time to think things over, chances are you won't be back.

In some cases, the buyer is transported to a subdivision at the expense of the subdivider. You are then assigned to a sales agent, both during the trip and during the time you are at the subdivision. Some sales agents attempt to create an atmosphere of buyer hysteria by the use of gimmicks. For instance, on a tour of the site, the two-way radio in the sales agent's car may announce loudly the lot numbers which are sold or deposits taken on certain lots. The sales agent may point out to you that these persons realize that this is a surefire investment, and so are buying several lots before prices go up or before the choice lots are gone. Buyers are warned against such sales patter. High-pressure, hard sell tactics should not influence you as the investor.

As a prospective buyer, if you are not given a copy of the subdivision public report, or feel you are a victim of fraud, misrepresentation or deceit in the purchase of any lot in any subdivision, you should report this. You ought to send copies of your papers, and a written report of the conversation you had with the salesperson, subdivider, or the agent about the transaction to the nearest office of the State Department of Real Estate.

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