Yesterday I posted the following: 

This post is about some of the unusual things I have run into, buying Boise, Idaho real estate.  Can anyone guess what is shown in the photo?  Please post your guesses and I will give the answer tomorrow, along with an explanation and some very valuable education.  How valuable?  Not knowing the answer to what is in this photo could potentially cost you or a client seven to ten thousand dollars!  Consider that your hint.  There is no prize for guessing correctly, but you will have bragging rights.  Please tell your friends to try to guess too and we will see who comes up with the correct (or closest) answer.  I will really be surprised if anyone gets it right.

 

 

 

The short answer to the question is:  it is a well casing.  Here is a follow up photo and an explanation:

 

What you are looking at is the top of that same pipe in the first picture, turned vertical and pounded into the ground.  It is called a sand-point well. 

When I purchased the property where this well is located, I knew this was not your typical well, but I did not know exactly what I was looking at.  I knew that some wells were pit-type, meaning the top of the well casing and the pump are located below the surface, in a pit.  This was done (before the industry started using submerisble pumps) to prevent the pumps from freezing.  The "pits" were typically covered, with some type of shed or structure, and insulated.

Since I didn't know exactly what I was looking at, I looked in the yellow pages for well drilling companies and started making some inquiries.  A very knowledgeable, retired well driller explained to me that I was looking at a sand-point well.  Essentially, it is just a length of small diameter steel pipe that is pounded into the ground.  A pump is then attached and presto, you have an instant well.  

 What I discovered was that sand point wells are actually fairly common........for watering lawns!  In places where the water table is exceptionally high, as was the case with this property, you can use this type of well for cheap irrigation.  However, they are not fit to use for drinking water.   One of the minimum requirements for a drinking water well, at least in my state, is that a well has to be at least 20 feet deep.  This is the minimum that is needed to naturally filter and purify water.  This pipe/well was only 12 feet long.

 It was not that surprising that the water test came back positive for e-coli.  The well driller confirmed what I had been guessing:  there is no possible way to make a well of this type fit for drinking water.  You could pour bleach into the well and it might kill the bacteria--for a while--but the results would be short lived.  The only solution for this was to drill a new well, and that is what I did.  It cost roughly $7,000.  That is actually cheap for a well these days. 

Things worked out ok for me though because I did my homework.  When I presented the offer for the home, I made sure that it specified a WELL inspection.  Notice I say a WELL inspection and not a WATER test or inspection.  An unfit well can be made to pass a water test by pouring bleach into it.  However, it does nothing to fix the source of the contamination.  When I bought this property, I didn't know much about the well, but I did know enough to ask questions from professionals who did.  I also knew that a water test and a well inspection were not one in the same.  I ended up compromising with the seller and they made some price concessions to help off-set the price of the well.  They did not cover the whole cost, but enough to make the deal palatable.

That is my valuable education for today.  The lesson to be learned is that if you see something you are not familiar with, a red flag should go up.  It's OK not to know the answers to everything.  If you see something that looks unusual, ask an expert.  Would you rather risk being embarrassed by asking a question that might sound dumb or risk losing a lot of money?

Regards,

David Baldwin 

Your source for Boise Idaho real estate 

This post is about some of the unusual things I have run into, buying Boise, Idaho real estate.  Can anyone guess what is shown in the photo?  Please post your guesses and I will give the answer tomorrow, along with an explanation and some very valuable education.  How valuable?  Not knowing the answer to what is in this photo could potentially cost you or a client seven to ten thousand dollars!  Consider that your hint.  There is no prize for guessing correctly, but you will have bragging rights.  Please tell your friends to try to guess too and we will see who comes up with the correct (or closest) answer.  I will really be surprised if anyone gets it right.

 

 

 

Are you confused by Idaho's property tax system?  You're not alone.  Ever wonder why taxes are higher in Boise than in Sun Valley, even though homes are much more expensive there?  Idaho's tax system isn't that confusing once you know how it works. 

Property taxes are levied (imposed) by the Counties in Idaho.  The county adds up the costs of providing all of it's services such as fire, ambulances, schools, libraries, and the like and comes up with a total dollar amount.  At the same time, they total up the appraised market value of the homes in the county, less any deductions like home owner's exemptions.  Once they have the budget and know the market values of the property, they simply work backwards to determine the tax (mil) rate.

For instance, let's say the County has a total budget of $1 Million and the total market value of all homes is $100 million.  In order to make their budget, they will have to get 1% of that amount.  The county actually breaks the budget out into numerous categories and home owners are only charged for the services they receive.  So, if you live in the county and do not receive city services, for example, you are not charged for them.  If you are receiving services, you pay your share of them.  Your share is equal to the value of your property divided by the total market value of homes receiving the SAME services.  

The cost of running a county or city government is about the same no matter where you go.  The streets in Sun Valley are paved with the same rock and asphalt as the streets in Nampa; they're not paved with gold!  Their sewer and water systems use the same basic components, and library books cost about the same amount to buy in both places.  I think you get the idea.  

So, it costs about the same amount (per person) to provide these services, but each home on average is worth much more in Sun Valley, so the county can charge a lower tax rate on each home to cover their budget.  The tax RATE is lower, but the total taxes collected (per person) is actually higher.  

As a general rule, the lower the average home price is in a county, the higher the tax RATE has to be to cover the government budgets.  Additionally, the bigger cities tend to have a lower rate than the smaller cities because they can achieve economies of scale.  Basically, they have purchasing power because they buy a lot of stuff and can get a discount on things.

 

All too often people forget that the health of the real estate market is a matter of perspective.  Someone who purchased a home at the peak of the market a couple years ago would think the market is terrible right now while someone who purchased a home 30 years ago can't believe their home has appreciated so much!  If your home appreciated in value by 200% then backslides by 10%, you still made 190%!

Real estate is not a short-term investment, yet it is being treated like one by far too many buyers and sellers.  Thanks to the internet, speculators can now find and purchase a home almost as easily as buying a stock.  Don't get me wrong; I think the internet is a great "tool" for buyers and sellers, but buying a home should not be taken lightly.  People who purchase long-term investments and treat them as if they are short-term will invevitibly get burned.  Real estate is really not a very good short term investment anyway.  It is not very liquid and transaction costs are relatively high.  

People seem to have short memories when it comes to markets.  Have you ever noticed how the life of the housing market seems to have begun on the day a buyer gets their home.  It is as if the market did not exist in their mind before that point.   At the recent peak of the Treasure Valley market, speculators were rationalizing their purchases saying things like:  "Boise has finally been discovered and this growth is just going to continue."  The truth is, Boise has been "discovered" and rediscovered many times.  Boise has experienced several growth spurts over the years.  As you can see from the following graph, Boise experienced a huge growth spurt in the early to mid '90's.  There was a smaller one in the mid '80's.  

     “Those who do not learn from history are doomed to repeat it” - George Santayana 1863-1952

I wonder how many of the speculators who purchased a couple years ago saw a graph like this one that showed the growth off the charts in '05?  Would it have made a difference in their buying decision?  Probably not, because it goes against human nature.  Instead of buying low and selling high as they should, it is human nature to follow the pack, buying when prices are going up and selling when they are going down.  

Has the Treasure Valley market bottomed out?  Only time will tell and we will only know it in retrospect (after the fact).  If you are considering buying or selling real estate, remember the saying "the money's in the middle."  The market may or may not be at it's relative low point right now, but  it is certainly lower than it was a couple years ago and there is an opportunity for investing.  Just remember that real estate is a long-term investment.