What Are the Facts: #1 "18 Inches of Dirt"

Christmas Pumpkins

Last night's HOA meeting was, overall, a gentler meeting than we've experienced in the past. Questions and strong opinions were exchanged and a few new voices were heard.  If we could continue to meet in this manner, we might eventually establish a bedrock of facts that we could all stand on confidently. 

In the meantime though, we still seem to be focused primarily on opinion, fear and speculation. Large, public meetings do not give us enough time to explore thoroughly the facts that these complex questions require. 

I believe we all want the same thing … reliable information that will help us make our own decisions, an understanding of our rights and protections and a sense that we are being treated fairly.  We want to know that none of our neighbors are going to be hurt by the conversion and that we will not lose value in our homes or have our space rents go up beyond the annual increases called for in our leases.

With the hope that we can all begin to separate fact from fallacy, I'm starting a series focused on some of the issues we seem to talk about most and each issue will be a separate post for easy reading.  Please feel free to comment … together we're smarter than any one of us.

FALLACY:  "We're buying 18 inches of dirt."

Words can sometimes lead us astray … this molehill of fact is used to distract us from a mountain of truth.  

Mesa Dunes is a 50-acre mobile home park where almost 40% of the park is devoted to common space, including 2 clubhouses, 2 pools, a BBQ picnic area (with a fabulous view), a playground, green space, walking trails, guest and RV parking space, a laundromat, roads, water system, sewer system and all those "substandard" lights Jeff mentioned last night.

FACT:  Details of the 19.01 acres of common space is spelled out in The Department of Planning and Building New Project Referral document which was posted some time ago on the blog for your review.  Click here to view - page 4.   

FACT:  The "18 inches of dirt" is actually the depth marker of our individual lots … under that 18" lies not only more dirt but also the underground utilities that we all own in common.

Rumor has it that Jeff thinks the price for our "18 inches of dirt" should be in the $60-65K range.  He didn't mention that number last night but did allude to "much lower prices."  Just to be clear, I would gladly vote for him for King if he could pull that price off.  

So far, I have not been able to find even one data point that would let me believe that the reality of lot prices could be anywhere near $60,000.  While fantasy is a wonderful thing, when it comes to financial dealings, I prefer reality.  And, here's the reality I've found:

• Sunrise Terrace … shares (roughly equivalent to lots) $200,000 … years ago the shares started at  about $30,000 … land, or a share in land, tends to go up in value, especially when it's California Coastal real estate.

•  Bolsa Chica (on 227) … land values average $150,000.

•  Rancho Colinga (Morro Bay) … recent corner lot for sale $185,000.

•   Knollwood (Santa Maria) … lots are in the $120,000 - $140,000 range.

•   Pismo Beach (across from beach) … $250,000 for share price, again equivalent to a lot.

Let's negotiate the best prices we can get … but expecting the owners to sell lots for 1/3 of their actual market value just doesn't make sense. 

Where We All Agree

Sticker on a car in SLO seen this morning.

My momma always told me that you would catch more flies with honey than vinegar.  I was never sure why we wanted to catch flies … but you get the idea.

Last night the HOA Board held a meeting about the conversion.  Each board member repeatedly said he or she was not against the conversion, however, their actions seemed pretty vinegary.

It seems like we're all in agreement that the conversion MIGHT be a good thing … IF …

     IF … the lot prices are right. 

     IF … there is financing available. (See News Flash!!! for update on financing. - Right Column-)

     IF … rents for those who don't buy are protected.

The HOA Board seems to be taking the position that they want to "slow things down" … or stop the conversion until the owner can guarantee answers to the above. 

Rent Protections:  Susy Forbath has repeatedly explained the rent protections that will cover all but about 20 residents in the rent-controlled section of the park who do not qualify as lower income.  These residents are currently paying about $300 a month in space rent and could see their rents increase to market rate (about $800 a month) over five years.  The rest of us are on space leases that will continue as before the conversion.  If you're in doubt about whether or not you're on a lease, contact Joanne Mancarella in the office.

This is hissing!
Baby possum on my deck a few nights ago

Financing:  Murphy Bank has said they will offer "normal" mortgages … 20 year, current interest rate (currently about 5%), 80% of total value including your lot and your unit, no mortgage insurance.  Existing equity in your unit will count as your down payment.  The question came up at the meeting as to whether or not Murphy Bank is big enough to handle this conversion so I have an email into Richard Laxton asking him to respond to that question.  Remember though, not everyone will want to buy their lots and not everyone who wants to buy will do so on day one.

Murphy Bank has said they will be happy to come out and talk to all of us about the financing process.  For more about financing see the post Financing Highlights.

(UPDATE:  When asked if they could handle 50 sales in the first three months, Richard Laxton at Murphy Bank said: "50 lots is fine." After that, Community West Bank and others will probably be comfortable with lending in this park.)

Lot Prices: In spite of the fact that Susy Forbath spent two days in small group meetings explaining that the "residual" method of appraisal will NOT be used, Jeff McAlister still continued to regale us with the horrors of this method last night.  The official appraisal will not be available for months … slowing the process down or stopping it will not make this appraisal available any sooner.

Two Approaches:  Obstruction and Negotiation

We all seem to want the same thing … reliable information and enough understanding to make a smart decision based on our own specific situations.

There are two ways to get there … doing whatever possible to obstruct the process … demanding information that doesn't currently exist, claiming a lack of information when we each have a growing stack of questions, answers, legal citations and what ifs, describing information as misleading or deceitful, gearing up for a strong oppositional showing at public meetings through letters, petitions and so on.

Or … negotiation.  The owner has offered incentives over and above the legal requirements. If we get smart enough to thoroughly understand the process and how to get what we need … lot prices that are fair and affordable … rent protection for all non-buyers … financing for those who want and need it … then maybe we can negotiate a deal that works for everyone.

However, the more vinegar we pour on the owner, the less he's likely to be willing to negotiate.  I'd like to start a new conversation focused on negotiation. How could we structure this conversion to be a win-win for everyone?

I've had some people say that the lawyers … or the owner … or someone would "never do that."  But, until we ask, we'll never know.  

IF you think you'd like to buy your lot if all those above "ifs" can fall into the right places, and if you'd like to be part of the process of negotiating a win-win, please email me at jwycoff@me.com

"It's the best thing possible."

Shadow on Grover Beach

This morning I stopped in Bolsa Chica Mobile Estates since I had seen three of their listings in homes for sale.  (See How Much Are Our Units Worth for more about listing prices.)

Bolsa Chica is a nice, over-55 park with 65 units, a pool and a clubhouse.  The residents bought the park 18 years ago for about $1.5 million so each resident owns a share of the park. They do not have land deeds as is proposed for Mesa Dunes.  The HOA fee is $148 per month.

There are four units for sale in the park and most are in the mid-$250K range. I asked Gloria, the manager, whether the inability to get mortgages was causing any sales difficulty and she said no … that most buyers were paying cash from previous home sales.  We were parked in front of a unit with an "in escrow" sign on it and she told me it sold for $200,500 and was a 1977 unit that was basically a pull out that would be replaced with a new unit.  

While Gloria and I were talking, a guy drove up to talk to her and, when I found out that he was a manufactured home professional, I asked him if he were familiar with Mesa Dunes and he was.  I asked him what he thought about the conversion and he said he thought it was the best possible thing that could happen to the park because the space rents are so high here. He said that the rents are so high here that a lot of people could get mortgages for about the same rate as their space rents.

This confirmed my findings, so I decided to use an online mortgage calculator to see what the mortgage would be for a range of lot prices … keep in mind that you would need to add tax on the land and the HOA fee (estimated at $150 - $200/per month) to this amount.

I asked the manufactured home professional what he thought the lot prices would be and, on the agreement that I wouldn't use his name (for legal reasons since he's also a broker), he said between $200K - $225K.  This is not an official appraisal, of course, but it is another marker for guessing that the lot price will be somewhere around $200K.

I recently ran a future value calculation based on my space rent to see what it would be in 20 years, assuming that it might increase by 3% a year.  I was horrified, so I thought you might be interested in looking at your own rent.  Here's a table with a link below it if your rent isn't shown.

http://investopedia.com/calculator/fvcal.aspx

OPINION:  I love this park.  However, the broker I talked to this morning reminded me that there are other parks in the area with cheaper space rents.  He told me about a newer one in Nipomo with really cheap rents.  

I don't want to move.  However, if I thought for a minute that this conversion would NOT happen ... or that lot prices would be more than $200K, I'd start looking for a more affordable place to live.  I do think the conversion will happen and I think the lot prices will be less than $200K ... at least for those of us who opt to purchase within the first 90 days to get the 10% discount offered by the owner.

ALSO, I think there are possibilities for negotiating better options for those who cannot purchase their units or for those residents who want to just keep renting.  Negotiation is much more powerful and satisfactory than litigation.