“It’s impossible to drive more than 50 feet on the streets in the Holmes Harbor Sewer District without seeing at least three real estate signs proclaiming lots and homes for sale.Considered by real estate agents to be one of South Whidbey’s most affordable housing developments, the area has attracted land speculators, builders, and homebuyers at a higher rate over the past decade than most neighborhoods. New and older homes and bare lots surrounding the area’s centerpiece, the Holmes Harbor Golf Course, have sold steadily since developers resurrected the course in the mid-1980s and built a sewage treatment plant in 1994.But on June 30, the area’s reputation in the real estate market and as an affordable place to live evaporated. On that day, sewer district property owners learned from a South Whidbey Record article that the district’s commissioners illegally sold $20 million in bonds the previous October.Since then, property owners have watched state audit and legal bills mount, and have been told they will have to pay some large attorney bills to get the district out of the biggest public bond mess since the WPPSS bond default 20 years ago.It’s not a good selling point for South Whidbey real estate companies.There’s a pretty serious cloud over it, said Kirk Bohrer, a real estate agent with Windermere Real Estate in Freeland. Almost anybody would be pretty leery about stepping into that situation.During the past two months, Holmes Harbor property owners with land and homes on the market have watched deals fall through as some buyers turn their backs on the community. During a meeting with the sewer district’s new board of commissioners last Thursday, Holmes Harbor homebuilder Gordon Koetje seemed to speak for many property owners with a desperate and frustrated plea for relief from the bad reputation the blown bond sale has given the area.It’s cost me three sales, Koetje said. It may break me.It is imperative to us to know what the hell is going to happen from this point forward, he said.Other propertyowners agree that not knowing what will happen in the aftermath of the bond sale makes them wonder what their homes or land will be worth should they decide to sell. In early July, when even the state Auditor’s Office had yet to uncover the nature of the bonds, district property owners were worried they could be responsible for paying off the $20 million to the tune of $40,000 per lot if the bond goes into default. Since then, state auditors and attorneys have shown that property owners will more likely be the target of lawsuits brought by bondholders. They will also likely pay the legal bills for defending such a lawsuit.The possible cost of this scenario has some home sales in limbo. Shirley Owen, who has owned her 1,240 square-foot home on the sewer district’s Everette Lane for the past five years, said the sales contract she signed with prospective buyers on June 20 is now in a holding pattern. She said the buyers are waiting to hear how much the bond debacle could cost them.Though Owen has felt encouraged during the past month as five new sewer district commissioners dove into the task of untangling the bond mess, she believes it will be months or years before those officials can declare the real estate market all clear in her neighborhood.I don’t think there is anything they can give me right now, she said.Other home sales are completely falling apart. New sewer district resident Mike Sampson said he may not be able to get the equity out of a house he inherited from his father last spring. A few weeks ago, he almost sold the house to an interested buyer. But after the buyer read an article in a Seattle newspaper about the bond problem, he decided to back out of the purchase the night before the house was scheduled to be inspected.Since then, Sampson said, no one has been interested in the house.Nobody wants to come and look, he said.Word about the shaky market in the district has spread much further than just the Seattle area. Tyler, Texas, resident Stuart Iverson said he had his heart set on a $23,000 view lot in the sewer district prior to the bond scandal. After he heard about the district’s troubles, he asked an attorney how much moving into the district could cost him beyond the price of the land. The answer was more than he could afford.It could easily be $10,000, he said.The damage caused by the bond issue could be worst for large-scale property owners. Developer and Holmes Harbor Golf Course owner Jack Sikma said the bond mess is the latest in a series of events that have battered his ability to sell lots in the district.In 1998, Island County rejected Sikma’s plan to develop acreage he owns in the district into 50 to 70 home sites. Now even the 25 platted lots he is trying to sell may not move.It’s tough to sell lots to builders when builders’ homes are hard to sell, he said this week. We need to develop property there now.Alluding to the impending tax foreclosure on the millions of dollars of property he owns in the district, Sikma said he can’t see the sense in paying taxes on his land when events such as the bond scandal make it impossible to sell. He said he is out of options.We’re handcuffed, he said.People looking for an affordable place to live are still buying on South Whidbey, just not so much in Holmes Harbor. Charlene Arnold, a real estate agent with Coldwell Banker/Tara Properties, said Monday that home sales have picked up in communities such as Lakeview Terrace and Scatchet Head. However, she said, her company is still selling property in Holmes Harbor. We’ve been selling things with the advice that people should get legal counsel, said.Coldwell Banker is looking for other strategies to promote sales in the area in the short term. With the help of an insurance agent, the company has looked into having a bonding company extend what amounts to a letter of credit guaranteeing that sellers will pay the costs associated with clearing up the bond situation. So far, no bonding company has expressed interest in the idea.One local attorney, Tom Palotas, said buyers don’t need to push sellers to an action like this. He counseled his mother-in-law, Dody Ward, when she purchased a house in the district in July. The future financial risk, he said, does not appear large.If people understand what’s involved, it’s not that big a deal, he said.Ultimately, any costs incurred by district property owners may be reimbursed by the state. At Thursday’s commissioners meeting, State Rep. Kelly Barlean, R-Langley, said he felt the state did not do an adequate job of warning the district away from selling the bonds, an action that he said could harm property owners.I just really worry there may be some liability on the state here, said Barlean, who is an attorney in private life.But for people like Stuart Iverson, who will not get his dream lot on South Whidbey, assessing blame is not the priority – having a home is.It’s really kind of sad, he said. “