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Tuesday, December 7, 2021

The dream of some local neighbors in California’s luxury holiday home turned into a nightmare

For people who once dreamed of owning a multi-million dollar holiday home in a luxury resort in the United States or abroad, a San Francisco-based startup claims to be possible now—even if you are not a multi-millionaire.

Pacaso was founded in 2020 by former Zillow executives Austin Allison and Spencer Rascoff to provide “a modern way to buy and own a second home.” After determining the house to buy, Pacaso set up a limited liability company to acquire the property, and then sold eight equal portions to interested buyers. The price per share ranges from US$250,000 to US$1,000,000, plus a monthly service fee.

All houses are furnished with furniture, including bed linen, kitchen necessities (such as tableware and cooking utensils), paper products, and even basic toiletries. Owners can then use the app to schedule their vacation time for up to 44 nights per year and up to 14 days at a time.

Currently, Pacaso offers luxury homes in 25 top second home destinations in the United States, including Napa, Sonoma, Tahoe, Aspen, Malibu, Miami and Vail. But with investors such as SoftBank recently injecting $125 million, Pacaso is now setting his sights on properties in Spain, Mexico and the Caribbean. And areas of interest in France, Italy, and the United Kingdom.

Although Pacaso’s website boasted that their new real estate model was “enriching life,” Sonoma homeowners like Nancy Gardner and her husband Carl Sherrill said it was the opposite of their community. “We believe they are just a glorious timeshare,” Gardner said. “You have eight owners and their family and friends coming in and out in very short increments, and the strangers in our neighborhood are constantly losing.”

The couple live in a small dead end on the outskirts of Sonoma. Although many houses there are now selling for more than $1 million, they still call the area a middle-class community. “We have been here for more than 30 years, and prices have skyrocketed, but our house is not a mansion,” she added.

Protest against Pacaso’s slogan in Sonoma, California. (Courtesy of Nancy Gardner and Carl Cheryl)

To prevent further acquisitions of Pacaso, community groups in Sonoma, Napa, and St. Helena have created a Change.org petition, which has more than 3,000 signatures to date. There is also a “Stop Pacaso Now” website specifically designed to discourage Pacaso from buying a house and accuse the company of “turning the old house into a virtual hotel.” Some neighbors even posted slogans saying “Pacasso’s timeshare is not welcome.”

Colin Tooze, Pacaso’s vice president of public affairs and communications, believes that their business model is completely different from that of a timeshare. “Pacaso helps people buy, own and enjoy real real estate assets,” he said. “In contrast, most timeshares sell the right to use a fixed time in an apartment or hotel shared by dozens of people. Pacaso brings together a small group of co-owners to buy a single-family home.” Tooze also noted, After one year of ownership, homeowners can sell their shares on the public real estate market.

Because Pacaso’s buyers actually own a piece of real estate, Tooze pointed out that they are just like homeowners in other areas and are very proud of their property. “In many cases, for decades, they have been dreaming of owning a second house. These families spend hundreds of thousands to over 1 million dollars to buy a house and plan to return again and again.” He said. “This is very different from the mentality of renters who have no plans to return.”

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Despite this, the neighbors are still worried about the quality of life in their local area. “They are basically allowed to operate without any regulations, and soon they will be everywhere,” Cheryl said. Since Pacaso owners can “give away” their time to family and friends, neighbors have been complaining about large gatherings, noise, additional traffic, and subletting bridal showers or birthday parties. “One time, someone tried to rent it out as a yoga retreat,” Cheryl said.

According to Tuz, Pacaso owners are not allowed to rent or sell time on vacation rental websites or other public rental listing services, and all guests must register. He added: “We also remind our owners that they have neighbors and we must respect them.” In addition, the company can suspend the right to move in for owners who violate the policy.

Some opponents also believe that Pacaso paid too high a price for the house and artificially raised the local housing price. “This is inaccurate. As a real estate buyer, it doesn’t make sense to pay a price higher than the market,” Tuz confirmed. “The real estate market is extremely competitive, and multiple bids per property are the norm in many U.S. markets. It is not uncommon for Pacaso to bid more than houses.”

In addressing the question of who would spend so much money on a limited share of homes, Tuz inferred that the owners of second homes usually only use their properties for four to six weeks a year, leaving them vacant for the rest of the time. “We are helping consumers adjust their investments according to their actual needs,” he explained. “In addition, co-ownership with others allows families to buy luxury homes that they cannot afford.” Pacaso usually buys homes for between US$3 and 4 million.

Epoch Times Photos
Sonoma’s homeowner Nancy Gardner (Nancy Gardner) and her husband Carl Sherrill (Carl Sherrill). (Courtesy of Nancy Gardner and Carl Cheryl)

Since the purchase is considered a regular real estate transaction, buyers can work with banks, mortgage companies, or finance through Pacaso. The company also pays a 3% buyer’s agency commission to local real estate agents. “If I were a real estate agent, I would tell people this is a bad investment,” Gardner said. “They paid a huge sum of money for one-eighth of a house, and you don’t even know who else will live there.”

At the same time, according to the company’s recent announcement, Pacaso’s valuation has reached 1.5 billion U.S. dollars. Nearly 300 families have purchased one-eighth to one-half of the shares in the properties they manage, with a total value of nearly 200 million U.S. dollars.

However, the company still has some obstacles to climb. The city of St. Helena recently won the first round of lawsuits filed by Pacaso after the city considered its business model as a currently prohibited timeshare model. “Nancy and I are not against vacation rentals,” Cheryl said. “It’s just that these types of commercial operations do not belong to quiet residential areas.”

Mary Prenon

Mary Prenon

Freelance journalist

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This News Originally From – The Epoch Times

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