Tom Kelly: The dangers of owning a long-distance retreat

If you snooze, you lose. It’s right up there behind Murphy’s Law as one of the surest things in life.

When some folks move away, they often employ management firms to look after their holdings. Such services are more common for in-city apartment houses and commercial buildings, but they also can extend to remote second homes and vacant land. While competent managers can usually solve most problems regarding improved property, keeping current with the potential of vacant land can be another story.

In many areas of the country, growth management regulations have flip-flopped over the past two decades. Building restrictions that were absolutely taboo ten years ago may now be acceptable and vice versa. To compound the problem, some jurisdictions have not been very communicative regarding current building codes.

Most of the time, it’s up to the consumer to ascertain when and how a specific site can be developed. For example, there are forested areas in many states that cannot be developed during certain months of the year because of bird migrations and nesting patterns. Eagle, falcon, owl, heron and other habitats are common, curtailing and sometimes even eliminating the possibility of building during specific seasons – if at all. Attempts to protect other animals from development in a variety of environments have been well documented.

When it comes to personal residences, which represent the primary assets of most people in this country, part-time occupancy can have positive as well as negative aspects. Perhaps you welcome the break from your neighbors, yet you often miss out on important local assessment votes and explanations, personnel changes in local businesses and restaurants, and critical gossip when you are away.

Like new federal income tax guidelines, property laws change all the time. Local zoning, land use and restrictive covenants need to be checked periodically so that property owners can determine what effect those conditions might have on their real estate.

While landowners often bemoan a seemingly unfair change in property use, they sometimes blow a golden opportunity in situations they clearly can control.

For example, a retired couple who lived in a large city wanted to sell their 76 acres of forested land in Wyoming that they’ve owned for 27 years. The property had appreciated little in recent times and the couple assumed any subdivision was still limited to parcels of 20 acres or more. The couple considered an agreement to sell the 76 acres, but then discovered that 5-acre lots were now permitted in the area and that doubled the value of the 76 acres, once thought to be worth $200,000 before the zoning change.

According to the couple, an out-of-area agent representing three investors had put the deal together. The investors planned to divide the property and sell parcels. The agent already had several potential customers interested in purchasing the smaller parcels and stood to make sizable commissions on the sale and resale of the same property.

Under the terms of the purchase and sale agreement, the purchase price would be $200,000, with a down payment of $50,000 paid at closing. The balance of $150,000 would be paid in annual installments of $50,000 together with interest of 4.5 percent per annum. All this looked acceptable to the couple until they learned of the zoning change from a Wyoming neighbor. In addition, there were some questionable requirements deeper in the agreement that would have been contested by an objective agent or real estate attorney, such as:

There was no cash offered for earnest money. The purchasers “tendered a note” for $5,000 to be paid at closing. This means the purchasers signed a document stating they would pay $5,000 when the deal closed but no money was going to change hands until the deal was done. When so many unknowns are involved, it’s usually best to require cash as the earnest-money deposit.

The date of closing was 120 days after acceptance of the purchase and sale agreement. The purchasers asked for this time period so that they could start, and hopefully complete, the division of the land. The purchasers have now tied up the property for 120 days with no cash.

The transaction was to close in the offices of a closing officer selected by the real-estate agent. The closing agent (typically a title company, attorney, lender or credit union) should be familiar to the seller or at least have a recognized name.

The couple did not sign the deal yet wanted to pass along a long-distance lesson: If you are approached to sell property you have not visited in some time, be sure to check with local agents about zoning and comparable sales, even though you are eager to sell the property and move on. If the deal appears too creative, show the agreement to a real-estate attorney.

Be particularly careful when you live a distance from the property and are unable to monitor what is going on around it. The value may have risen or fallen significantly since your last visit, and it’s best to seek several opinions before making any major decisions.