Land company gone from Ocean Shores, along with many buyers savings


OCEAN SHORES — Like hundreds of others who bought undeveloped lots at widely publicized auctions, Brad Skramstad and Mary Ann Byrne were hooked by the infomericals, the promises and the desire to own vacation property for the future.

There was the video they watched narrated by the always smiling former “CHIPs” TV series actor Erik Estrada enjoying the sunny beach life at Ocean Shores, touting the value of beach town property as the pitch man for a company then known as National Recreational Properties Inc. (NRPI).

“Bringing home the American dream, Washington’s best kept secret,” one NRPI ad proclaimed about buying in Ocean Shores. “Endless possibilities.”

A week after seeing the commercial on TV in 2008, the couple decided to check out one of the auctions the company was holding at the Sheraton Hotel in Seattle, where recreational lots from Ocean Shores to Lake Scott in Thurston County to Anderson Island in Pierce County were up for bid. The ad claimed many bids started as low as $100.

At the auction, men in tuxedos ushered them into the bidding area and there were financing arrangements already in place to make any deal happen within minutes after a bid was won. The atmosphere was like a TV game show.

“If for any reason you are not happy with the property or community, then pay nothing, no questions asked. That is how confident we feel that when you see this place you will never want to leave,” a promotional flier said.

The couple left the Sheraton after bidding on three properties — two in Thurston County and one in Ocean Shores — but say they never signed final papers completing the transactions and then tried to stop the purchases within hours after finding the sales had gone through any way. On Monday morning, a day later, Byrne found her credit card account already had been billed for payments on each one of the properties. The couple, who run an antique mall in Tenino, then sent the company a notice by certified mail that they did not intend to buy the properties.

“The conditions at the auction were very high pressure and confusing,” the letter said. Byrne also stated she never was given signed copies and wanted to rescind both Thurston County properties.

“We could financially afford one of the pieces to make it our home, but, if we somehow are forced into financing all three pieces, it would put us into financial ruin and bankruptcy,” their letter stated.

Skramstad believes they and many other people were “sucked into” a high-pressure buying frenzy that has caused them only financial grief since.

They are not alone. The city of Ocean Shores could soon wind up with nearly 100 vacant properties in foreclosure — many of those due to unpaid local utility district levy assessments on lots that appear to have been sold by National Recreational Properties Inc. In many cases, city and county officials say, the buyers were never aware they were obligated to pay assessments, community club fees and other levies. All Ocean Shores property owners are required to pay community club dues every year.

“We never knew about any of the assessments, and then we get these community club fees on top of that,” said the husband of a Sunnyvale, Calif., couple who recently let their two Ocean Shores properties lapse into foreclosure rather than make the payments on the lots they bought for $28,000 each. Originally from India, they say they are embarrassed about losing the property they were never able to use since the day they bought it in 2008 at a high-pressure auction in the San Francisco Bay Area.

“There was a club fee you had to pay, then there were some sewer assessments that came in later,” the husband said. “We couldn’t hold the property because you are paying so much money on it, and now there is no way I can ever recover any of the money.”

COURT JUDGMENT

Skramstad contends the company’s auction tactics amount to fraud, but the company now is out of business and none of the former officials contacted for this story returned phone calls or emails.

“The company buys these pieces of junk properties that they know have problems, then they list them as the best piece of property in the world,” Skramstad said. “They suck these people in. Half the people are there without doing any research at all and then they get sucked into buying this stuff. And then when the buyers find out what kind of garbage they got and try to relinquish it, the company won’t take them back.”

After Skramstad and Byrne tried to back out of their June 2008 bids, National Recreational Properties first offered to swap properties, promising them different lots, then taking that deal off the table, according to documents the couple have detailing the proposals. When they could not find alternative parcels suitable for building, Byrne and Skramstad then filed suit in Thurston County Superior Court.

“My clients have found that the properties in Thurston County they bought are unbuildable pieces of land and are useless to them,” said a follow-up letter from their attorney, Allen Miller of Olympia. “You and your company misrepresented yourselves and the property you sold to my clients.”

A followup letter from the couple to the state Attorney General’s office states that “all three properties we signed for had major problems and were unable to be built on. One was a wetland, another was a reserve septic system for surrounding properties and the last one required a special, very expensive septic system.”

When the couple tried to halt payments, they say the company damaged their personal credit and they began to receive harassing calls for collection.

Ultimately, they won a $28,000 judgment against the company, which then changed names several times before apparently going out of business. Now, they have been unable to collect and still are obligated to pay for the Ocean Shores property. They have been paying taxes and assessments on it, too, to avoid foreclosure, yet they don’t have full title to sell it.

“It was deemed that they had committed fraud,” Byrne said of his Thurston County court judgment. “But they never paid on the judgment, and it cost us tens of thousands of dollars to fight this. They just walked away.”

Attempts to reach the company at its former address and phone number in Irvine, Calif., were unsuccessful. The company’s phone number is now answered by a receptionist for auction.com “the world’s largest real estate auctioneer,” but questions about National Recreational Properties are referred to a 1-800-number that is answered by an auction.com recorded message.

MARKETING TACTICS

Most of the properties that were bought and sold by NRPI were acquired starting in 2003, when the city was told by the company that it had intentions of purchasing and then re-selling 2,000 lots.

At that time, an off-lake Ocean Shores lot was going for between $7,000 and $8,000, while a lakefront lot would go for between $40,000 and $70,000. The company ultimately scooped up about 500 properties in the area, often going through the tax rolls and approaching owners individually, as well as local real estate companies.

“Then they turned around and resold them, many to people in the (San Francisco) Bay Area and in Southern California.,” said Al Lizakowski, a part-time Ocean Shores resident who has monitored the rise and fall of NRPI and the impact it has had on the city. “And what they did was triple the prices on them once they bought them.”

Lizakowski bought one of the three former NRPI properties that sold off last year’s Ocean Shores foreclosure list. He has been watching the properties pile up for the past several years and believes the city is trying to downplay the problems caused by the foreclosures, such as how it affects the collection of fees.

In all, he’s purchased nine lots through foreclosure over the past several years.

“I paid off all the road LIDs on them, and so I’m just holding on to them hoping some day they’ll go up,” Lizakowski.

One of the lots was on the golf course and Lizakowski got it for $2,100.

At one time, National Recreational Properties drove the prices for such lots up to triple what they were worth.

“The whole problem came from NRPI,” Lizakowski said. “They promised all these people that when you buy these lots in a couple years they are going to multiply three times in appreciation. They suckered them in.”

NRPI also used its own finance company to process the paperwork, but there was no escrow agent to make sure the taxes, levy assessments and other fees were being paid or kept up to date, Lizakowski said.

“They might have been making payments to the development company, but all the LIDs and taxes were going in arrears,” he explained.

Grays Harbor County Treasurer Ron Strabbing recalled that agents for National Recreational Properties originally acquired many lots in Ocean Shores the same way — at the county’s foreclosure auction for properties that have delinquent property taxes.

Now, the county also potentially could be foreclosing on some of those same lots if the property taxes aren’t paid, a dilemma that Ocean Shores officials are well aware of and trying to avoid.

“If they don’t pay property taxes on the property for three years, then we foreclose and sell it,” Strabbing said.

The treasurer said he knows the county already has foreclosed on a few of the NRPI properties, but it’s hard to tell which ones are connected to the company since most of the lots had been sold. A few, however, still were owned by the company and have gone through foreclosure.

“There are some where they quit paying taxes, and they were still the owners of the property,” Strabbing said. “But when they sell it to somebody and the property changes hands, when we foreclose we don’t go back to see where they got it from.”

NATIONAL ATTENTION

Problems with National Recreation Properties customers now surface virtually everywhere the company has done business in much the same way across the county.

Bill Sanders of Lebanon, Ind., started an online site for disgruntled NRPI customers called “Scams, Shams and Flim-Flams.” Corresponding via e-mail, Sanders noted he originally tried to separate fact from fiction when it came to the company’s infomericals.

“I had a version of my site before with a little info about some of the infomercials I’d seen, and when I redid the site, I did a lot more research on most of them, wrote it up with a page for each infomercial I researched, and separated them into types,” Sanders said.

He added he was naïve about whether people would read the disclaimers he attempted to direct them to, and the site continues to be updated with new stories of NRPI troubles, with a number of them from people who bought lots in Ocean Shores.

“NRPI purchases and resales of property raised values of all land in our area during the three years they were involved in Ocean Shores,” said one post on the Sanders’ site. “However, land was much less expensive to purchase locally than through NRPI, a fact that a simple Google search could reveal to anyone considering buying. I found it irresponsible that most NRPI buyers did not take the simple effort to check the Internet to see what real estate activity was like in Ocean Shores before they purchased.”

Another popular consumer website, Ripoff Report, has dozens of postings about the company.

“In September 2004, we purchased a piece of land from NRP/Ocean Shores Inc. for $70,000 (a bargain, according to our salesman),” said a post by “Alysson” of Los Angeles. “After signing the paperwork, we started looking for our own financing and decided to go with Washington Mutual. During the process, we called NRPI repeatedly to get a copy of the appraisal report. They gave us the run around until the loan officer at Washington Mutual demanded it. Come to find out from this report that the value of the property is actually $35,000, half of what it was sold to us for.”

Sanders points out his site contains both negative and positive experiences with the company, including this message from a former NRPI employee in Ocean Shores:

“When I first encountered NRPI I also thought it was a bit of a scam. I worked for NRPI about three years, both at Ocean Shores and also at Anderson Island. The more I observed while at the company the more I realized it was no more out of line than any other sales operation (cars, furniture, electronics) or anything else.”

The company also was the subject of several national news stories, including an Associated Press story in January 2005 that contained an inteview with company founders Jeffrye Frieden and Robert Friedman, descrbing them as “two Orange County (Calif.) entrepreneurs who once sold stereos and back rubs” and then went to resurrect sales in “other left-for-dead subdivisions across the country.”

“Through the Internet and television, infomericals in English and Spanish feature faded actor Erik Estrada, their company, National Recreational Properties Inc., is aggressively marketing land that looks cheap to distant buyers,” the AP story by Brian Melley said.

“We are riding on the coattails of developers from the ’50s and ’60s,” Friedman was quoted as saying of the company at the time of the article. “We identify these things, we re-expose them to the world, and our clients in the long run get incredible values.”

BUYER BEWARE

Those values, however, are now in serious dispute with a number of former clients, many of them from around Washington state.

Michael Piechowiak, a Boeing employee from Maple Valley, bought an Ocean Shores lot a year ago last June in what appears to be one of the company’s last auctions. Unlike Skramstad and Byrne, he was able to research a list of the properties ahead of time so he knew what he wanted to bid on. But he said he never knew there were assessments and fees that came along with the property.

“I was not aware of the assessments they had already for the sewer systems, and three or four months after we got the property, there was another set of assessments done for the roads. I didn’t know that was coming either,” Piechowiak. “They never told us any of that.”

The auction, he said, was frantic and “they don’t give you much time.” But he felt like he got a good deal at the time on a piece of property located on the corner of a cul de sac.

“We ended up at the end when they had to unload all of the properties they basically couldn’t sell” at earlier auctions, Piechoiak said. “We bought it as an investment and most of the other ones we looked at basically weren’t worth anything.”

Another buyer, Karen Cruz of Yelm, said her husband ended up bidding on and then buying a lot from NRPI in Mason County that couldn’t be built on or accessed. They even had to have the fire department show them where it was located. It was on a steep hill with no possibility of hooking up to a septic or sewer system.

“Now I’m stuck with something for like a million years,” she said, estimating the couple spent more than $50,000 on the property and still owes $12,000.

“I worked my buns off to try to build there, but I could never make it work,” Cruz said. “I tried to give it away and nobody wanted it. If you can’t build on it, what good is it? I just wanted to give it back to them, and they didn’t want it. All they wanted was the money.”

Cruz, however, doesn’t place all the blame on the company.

“They are pretty up front. They tell you to go research it and check it all out before you buy,” she said. “My husband got crazy. I’m sure it’s a frenzy when you go to the auction and it’s easy to get caught up in that.”

She said she was contacted by Skramstad and Byrne about the possibility of a class-action filing against the company, but doesn’t believe it would have any success.

“You’re not going to get a dime out of them because they change their name. It’s just a big conglomerate,” Cruz said.

The Sunnyvale, Calif., couple just hope to let their two lots go into foreclosure and then be rid of further obligations. The husband said he originally bought them to hold them as investments, but he soon learned that he had made a bad purchase. He concedes he might have become too caught up in the emotions of the auction, which drives prices up far beyond what a piece of property actually is worth, especially when compared to California prices.

“When I came home from the auction and started doing a little research, I found there were lots selling for $10,000,” he said. “On a business trip to Seattle, I finally went down and looked at the lots and there wasn’t really anything special about the ones I bought. But with the taxes and everything else, I just wasn’t able to carry them any more. When I got the road assessment, I just threw that away. After that, I just really didn’t keep track because I had other property I had to let go, too.

“It was just a huge disaster.”

Skramstad and Byrne now are trying to challenge the title and signing documents to their Ocean Shores property, contending that what is on file with Grays Harbor County is a document that is completely different from the title they saw at the auction. They said the county document contains a hand-written description of the property, unlike a typed one they have in their possession, and that Byrne’s signature appears to be forged.

Mike Melville, vice president and manager of Grays Harbor Title Co., reviewed the document held by Skramstad and Byrne.

“She says she never signed it, and I have no reason to disbelieve that,” Melville said.

Skramstad also discovered that two days after their auction, National Recreational Properties had an agent in Irvine, Calif., sign their title documents on their behalf, even though they already had notified the company they wanted to cancel any pending sale.

“They continued the processing even after we apprised them of the cancellation,” Byrne said. “It just shows this complete intent to commit fraud.”