Real Estate

Gated communities give 'buyer beware' warning ahead of delinquent tax sale

A view of a lot for sale for $1 in Bluffton as seen June 6, 2015.
A view of a lot for sale for $1 in Bluffton as seen June 6, 2015. Staff photo

On the hunt to score lucrative real estate at deeply discounted prices, eager individuals and investment companies flock to Beaufort County's delinquent tax auction each year.

At Monday's sale in Beaufort, some unwitting bidders will buy properties within some of the county's most elite gated communities for as little as a few hundred dollars.

That sounds like a steal for a property behind the gates of Belfair in Bluffton, for example -- until Belfair chief financial officer Rick Leitman sends the bill for the community's $19,500 initiation fee and the first half its $14,000 annual member dues, he said last week.

"They're thinking, 'Hey, this is awesome. I just hit a windfall with this bid,'" Leitman said. "But the minute the deed is filed, we bill them dues and an initiation fee and all of a sudden they go, 'What? Where did this come from?'"

It's a scenario Leitman and the financial officers at dozens of the other communities see every single year, he and the officials said.

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A property lands at the delinquent tax sale after its owner does not pay taxes on it, almost always falling delinquent on community fees, too, Leitman and other officials said.

That same property is then scooped up at the sale by an investor who might not realize there are thousands of dollars in fees associated with owning the property, he continued.

When those bills arrive, the new owner often also falls delinquent on those fees and county property taxes and the property goes right back in the tax sale, he said.

It becomes a "vicious cycle" of pursuing owed fees that costs clubs, homeowners and investors thousands of dollars every time it happens, added Rebecca Weyenberg, chief financial officer at Berkeley Hall Club in Bluffton.

"You wouldn't go out and buy a car and not test drive it," Weyenberg said. "It's just sad (investors) are not doing the research and not knowing what they're getting, buying things sight unseen."

'BUYER BEWARE'

Last month administrators from more than a dozen gated golf communities broached the problem with Treasurer Maria Walls, whose office hosts the annual tax sale.

Although state law dictates that Walls cannot remove such properties from the sale, the administrators decided to launch a public information campaign to warn bidders about the fees before the sale, she said.

Belfair and Berkeley Hall have published three-quarter-page ads in each of the past four Sunday print editions of The Island Packet to warn bidders of community fees.

Leitman also will hand out a pamphlet explaining community association fees at the tax sale, he added.

"It's a 'buyer beware' warning," Walls said. "It's incumbent on the bidder to do their homework and learn what it is they're bidding on."

Walls, Leitman and Weyenberg each have cringe-worthy stories of unprepared bidders -- from investment companies with bogus corporations to an over-eager, 27-year-old bidder who wound up with initiation fees in five different local communities and had to be bailed out by his parents in a court settlement.

Many bidders who are caught off guard by the community fees never even wanted to own the property they bid on, Leitman and Weyenberg said. Those investors only intended to collect 3-percent quarterly interest on their bid over the one-year-long redemption period available to owners of auctioned delinquent properties, they said.

Bidders thought, "I'm never going to own it, I'm just going to get the 12-percent interest," said Myla Mitchell, assistant controller for Berkeley Hall. "Well, shame on them. The people didn't redeem (the property), and you have to be responsible for the fees."

'DO YOUR RESEARCH'

As many as 20 percent of more of the nearly 1,000 properties included in Monday's tax sale appear to be within the about 120 communities with owners association fees, according to the county's delinquent property map.

The Treasurer's Office does not formally track which properties that go to the sale have additional community fees and is required only to disclose which properties are contaminated superfund sites, Walls said.

Most of the properties going to the sale within gated communities are undeveloped home lots, including almost 50 in Berkeley Hall and about 20 in Belfair, Leitman and Weyenberg said.

At least some of those lots are in the tax sale because their original owners struggle to sell the properties because of the expensive community fees, Leitman said.

This summer, more than two dozen such luxury home lots were on the market for just $1, and another 43 were listed for less than $10,000, an Island Packet review of real estate data revealed.

Some property owners have said the fees -- which range from $13,000 to nearly $20,000 a year -- are unfair, and a group of Callawassie Island property owners are challenging their club's mandatory membership in federal court.

While those fights rage on, however, changes will not be coming to the delinquent tax sale, Walls said.

"I can't tell you how many people don't do their home work and show up unprepared or don't know what they're bidding on," Walls said. "As a buyer, you have to do your research. I cannot emphasize enough how important that is."

Follow reporter Zach Murdock on Twitter at twitter.com/IPBG_Zach and on Facebook at facebook.com/IPBGZach.

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