ALTURAS, Calif. — In the evergreen-cloaked hills and sagebrush flats near this Northern California outpost, dreams are for sale. Visions of a vacation getaway, a nest for retirement or an investment in rural land have lured thousands of buyers to California Pines.
But more than three decades after a now-departed developer filed plans for a subdivision here, the promise appears little more than a mirage in the high desert.
In a development platted for 15,000 lots, fewer than 400 houses dot the hills or surround the glorified lake, a muddy cattle reservoir that shrivels in the heat.
That hasn't stopped Jeffrey Frieden and Robert Friedman, two Orange County entrepreneurs who once sold stereos and back rubs, from resurrecting sales in this and other left-for-dead subdivisions across the country.
From Florida to Washington state — and coming soon to developments in other states — their Irvine-based company has sold thousands of lots in subdivisions that mostly predate planning laws requiring sewer, water and power.
"We are riding on the coattails of developers from the '50s and '60s," said Friedman. "We identify these things, we re-expose them to the world, and our clients in the long run get incredible values."
Through the Internet and television infomercials in English and Spanish featuring faded actor Erik Estrada, their company, National Recreational Properties Inc., is aggressively marketing land that looks cheap to distant buyers.
But prices are often steeply inflated compared with surrounding land.
Though in some cases prosecutors have charged misrepresentation and forced compensation, many real estate experts and consumer advocates offer simple advice to those pondering the appealing ads: Buyer beware.
More than half the taxable lots in remote Modoc County lie in California Pines, but only a few hundred people live in the subdivision.
Most of those who have bought land in Cal Pines live hundreds of miles away — too far to commute and too far for weekend visits. All the lots have sold at some point and many have changed hands — through traditional sales, tax auctions and foreclosures.
Still, the flocks of prospective buyers keep coming on NRPI's fly-before-you-buy promotional weekends.
In 2000, the Rev. Vika Wills led about 10 members of her Bay Area congregation to buy their own lots in what she hoped would be a heaven on earth.
"They said it's a good deal," Wills said of the NRPI sales force. "They said it would be fast growth. I thought maybe it's a good idea to buy when it's still cheap."
Four years later, after a few of her congregants lost their land because they couldn't make payments, the pastor of the Emmanuel Revival Church in Menlo Park isn't so confident she made a wise purchase.
Wills spent more than $64,000 on four lots that would probably sell on the open market for $3,000 to $6,000 apiece, according to local real estate agents.
"My gosh," Wills sighed when notified of the going price. She's now thinking of selling.
It's an all-too-common reaction. In California and some other parts of the nation, the prospect of spending five figures for land is alluring to those trying to achieve the American dream.
Yet, in Modoc County, where the population shrank in the last census and unemployment is high, real estate is as affordable as it gets. Three-bedroom houses near Alturas can sell for $70,000.
For unfarmable raw land, "$1,000 an acre … would be a fair amount," said Cheryl Knoch, the county treasurer and tax collector. "I guess people don't research what property values are in the county."
Speaking of land sales in general, Stephen Brobeck, executive director of the Consumer Federation of America, said: "If the land is marked up by over 50 percent, that would probably represent a consumer rip-off. And if the price is marked up five to 10 times that then the consumer is simply being fleeced."
William Dudas, of Norwalk, Conn., bought land in Lehigh Acres, Fla., in 1966 for $2,095. He sold it in 2002 for $700 to NRPI, which sold it four days later for $10,900 to a couple from Lawrence, Mass., according to Lee County, Fla., property records.
"I feel sorry for that person," Dudas said about the buyer. "It was a dud, a real dud. That was the worst deal I ever made in my life."
The same lot was taken back by NRPI in November last year after the buyer defaulted on the mortgage, according to court records. It was resold in January for $14,900.
Lehigh Acres, a 30-minute drive inland from Fort Myers on Florida's Gulf Coast, was among the many poorly planned subdivisions that lured uninformed buyers in earlier decades.
Known as "antiquated subdivisions" to land experts, they are vestiges of land speculation and planning before the dawn of modern zoning.
Most such subdivisions are located in Florida, the desert Southwest, the Poconos of Pennsylvania and several counties in Texas, according to a report by Bill Spikowski, a planning consultant, and Hubert Stroud, a geography professor at Arkansas State University.
Modern zoning laws, such as California's Parcel Map Act, would prohibit many of these developments today.
Friedman and Frieden said they run NRPI according to state and federal regulations and personally resolve buyers' rare complaints.
Five years ago, prosecutors in Santa Cruz County, Calif., targeted a company they operated, Land Disposition Co., for claiming buyers could build estates in the Happyland subdivision where a previous developer platted lots in the early 20th century.
Buyers complained that they couldn't find the properties because the roads on the maps didn't exist. Friedman said company brochures warned buyers to inspect the property in advance.
"The people we talked to were mostly immigrants," said prosecutor Morgan Taylor. "They wanted part of the American dream."
County prosecutors sued the company for misleading advertising, saying the mountainside land was unbuildable. The company denied the allegations, but quickly settled, offering refunds to buyers who came forward.
After the settlement, a buyer who paid $6,000 for a lot in 1997 got a refund. Three years later, however, Santa Cruz property records show, the company sold the lot to another buyer for $11,500.
County Assessor Gary Hazelton said the company doesn't do much business in the county anymore. The brochures also provide better warnings, he said.
Another Frieden-Friedman company, Real Estate Disposition Corp., hit similar problems in Santa Monica in 1992, by promising ocean views at 56 condominiums, the city attorney's office said. Newspaper ads showed the beach and what appeared to be Malibu Pier, which was miles away. The city attorney's office accused the company of false and deceptive advertising, unfair competition and bait-and-switch to lure consumers, according to court papers.
Admitting no wrongdoing, the company quickly settled, agreeing to a permanent injunction and paying $7,400 in costs and penalties.
"We're not looking to fight with anybody," Friedman said. "If we make a mistake — and we do every now and again, we're not perfect — if we make a mistake, our goal is to make it right."
Friedman said he wanted to know more about a couple from Brooklyn, N.Y., who said they were misled about land they bought in Lehigh Acres.
Judy Rajkumar said she and her husband, Junior, bought there, hoping to set aside a plot for retirement. But when they learned someone on their tour bus bought "waterfront" land along a canal, they wanted the same.
The salesman sent a videotape depicting canalside lots, and the Rajkumars, natives of Trinidad who wanted something near water, liked what they saw. They traded in the other property and purchased two adjoining lots, each more expensive than their first.
An aerial photo from the Lee County property appraiser's office, however, shows no canal on the property.
The couple paid $24,300 for the two lots that cost NRPI $5,000 just three months earlier, records show.
"You think if we were aware of that we would go for it?" Judy Rajkumar said. "You think we're that stupid?"
If the story was true, the salesman would probably be fired, Friedman said, adding he's insulted by comparison to old-time land hustlers.
The company has recycled lots sold in the very places where land fraud played out: in California City, a two-hour drive north of Los Angeles, and in the Florida subdivisions of Lehigh Acres, Palm Coast and Port Charlotte.
Some customers complain NRPI properties are sold on installment contracts at interest rates as high as 15 percent at a time when fixed mortgages were going for less than half that rate. Critics say company marketing is misleading.
For example: Promotional videos of landlocked Lehigh Acres show sweeping footage of white sand beaches that are about an hour's drive away. An alpine lake depicted in a Cal Pines ad is Blue Lake, 30 miles from the development.
Friedman and Frieden, both 43, took a roundabout path into the real estate business.
They started after high school with a string of stereo businesses. Frieden tried selling cars and phones, and both men even tried to set up a chain of chiropractic massage businesses.
Throughout, they dabbled in real estate, eventually founding an online auction company that sells raw land across that West. That led to NRPI.
Seeking a high-profile spokesman, the two flipped through a talent agency's portfolio and picked Estrada.
Estrada, remembered as a likable motorcycle cop on "CHiPs," was also the star of a popular Mexican soap opera that also airs on U.S. Latin networks. TV ads featuring him appear throughout the country.
"They approached me because they were looking for somebody who dealt with people on the street," Estrada said in an interview.
In addition to getting paid, Estrada is given a lot in each of the subdivisions.
In Cal Pines promotional material, Estrada exclaims: "This place is gorgeous! Take my word for it because I own property there myself." A sign along California Pines' main road touts "Erik Estrada's Home Site."
But Estrada said he had no plans for building on any of his NRPI lots.
Privately held NRPI doesn't have to release its earnings, but a statement filed by Frieden in an Orange County lawsuit against a software company said the company earned profits of approximately $562,828 a month between January and June 2002.
Last November, Frieden bought an oceanfront house in posh Laguna Beach for $4.3 million, according to property records in booming Orange County.
In struggling Modoc County, officials said they have reservations about NRPI's land sales, but those deals help pay for county services. Fewer than 10,000 people live in the county and nearly a fifth of the county's taxes come from California Pines owners, most of them mailed across the state.
County workers sometimes field calls from unsatisfied buyers; they usually refer the complaints to a state agency.
"We get a lot of, 'This isn't quite what was advertised to me,"' said Knoch, the county treasurer. "People complain, 'This isn't fair, they didn't tell the truth."'
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