970.901.0888 \\ di.bridges@sir.com
970.901.0888 | Di.Bridges@SIR.com

FAQs

What is a 1031 Exchange?

Under Section 1031 of the United States Internal Revenue Code (26 U.S.C. § 1031), the exchange of certain types of property may defer the recognition of capital gains or losses due upon sale, and hence defer any capital gains taxes otherwise due. In 1979, this was expanded by the courts to include non-simultaneous sale and purchase of real estate, what is colloquially known as a Starker exchange.

How a 1031 exchange is accomplished

The following sequence represents the order of steps in a typical 1031 exchange.

  1. An investor decides to sell investment property and do a 1031 exchange. He contacts a qualified intermediary (QI) and they enter into an agreement.
  2. The investment property is placed on the market.
  3. An offer to purchase the investment property is accepted and signed by the QI.
  4. Escrow for the sale is opened, and a preliminary title report is produced.
  5. The QI sends required exchange documents to the escrow closer for signing at property closing.
  6. Escrow closes.
  7. Within the first 45 days after the close of escrow on the sale of the relinquished property, the investor identifies replacement properties as required by law. This is known as the “Identification Period”.
  8. Within 180 days after the close of escrow on the sale of the relinquished property, the investor closes on one of the replacement properties which he has identified. This is called the “Exchange Period”. This completes the exchange. No cash – or ‘’boot’’, as it is known – is taken by the exchanger.

An alternative to the 1031 exchange

A Structured sale Annuity or “Ensured Installment Sale” is a capital gains tax deferral tool that enables the seller to gain benefits that other sales and capital gains deferral methods do not offer. It is a hybrid of the common installment sale and a structured annuity, and it enables the seller to collect a stream of payments, leverage equity, earn a pre-tax return, and other benefits. This method is a tool for those who want to do a 1031 exchange but cannot find a property within the time frame, and it allows the seller to have a backup plan.

What are the differences between Tenants in Common, Joint Tenancy and Ownership in Severalty?

Joint tenancy and tenancy in common are two most common classifications of ownership of a property. The difference between these two is important when owning a house or a piece of real estate. This is due to the fact that more and more people are interested in purchasing real estate. These purchases are often done by spouses, who are legally married, or by friends who decide to buy and share a house together. During these purchases, the parties must be able to determine how they are going to take the title to their newly purchased house. This is important since it will determine their rights toward the home, whether they are still together, if they have moved to another house or if one of the parties already transferred residence.

Basically, joint tenancy pertains to a home ownership in which each party is on the home title and has equal interest in the property. An example of a joint tenancy is the ownership over a house by a married couple. In this situation, each of the spouses have equal share and interest over the house. In case of divorce, each spouse may sell his or her share in the property. Once there is a sale, the joint tenancy becomes tenancy in common.

Tenancy in common, on the other hand, refers to ownership over a certain property by two individuals without any right of survivorship. They are co-owners of the property and their shares and interest over said property are equal. However, there are also situations in tenancy in common when the parties do not have equal shares. The sharing scheme shall depend entirely on the stipulation of the parties.

Joint tenancy and tenancy in common have different rules concerning the death of one of the tenants. This is the main difference between these two kinds of tenancy. In tenancy in common, death of one of the parties shall have the effect of transferring the rights of the decedent tenant in favor of his heirs. In joint tenancy, the parties enjoy the right of survivorship. This means that when one of the co-owners die, the survivor co-owner shall get the decedent’s share over the property. In joint tenancy, each co-owner’s possession, interest, time and, title of the property is vital. In order for the transfer of rights to accrue, there must be a will of a deed executed in favor of the survivor.

Ownership in severalty (aka tenancy in severalty) is when real estate is owned by a single person or legal entity, and provides the owner with the most complete control of the land. The name is derived from the fact that the owner is “severed” from other owners. A sole owner is free to do anything with the property that is within the law—sell it, lease it, gift it, or pass it to heirs without anyone else’s permission.

What is the Crested Butte Land Trust?

The mission of the Crested Butte Land Trust is to forever protect and steward open lands for vistas, recreation, wildlife, and ranching, thus contributing to the preservation of Gunnison County’s unique heritage and quality of life.

https://www.cblandtrust.org/

What is a Conservation Easement?

A conservation easement is a voluntary legal agreement between a landowner and a land trust or government entity which contains permanent restrictions on the use or development of land in order to protect certain values of that particular property. The conservation easement is recorded in the county records and binds all current and future owners of the land. If you think of private property rights as a bundle of sticks, conservation easements give you a way to fulfill your intentions to protect your land by donating one of the sticks, like the right to subdivide and the right to commercially develop. Then you, the landowner, receive some tax benefits recognizing your donation. Colorado Open Lands “holds” the conservation easement, but does not own the property or get involved in day-to-day management.

The majority of conservation easements that Colorado Open Lands holds protect working farms and ranches, wildlife habitat, and scenic views from public roads or nearby public land. A conservation easement does not allow the public to access your land (unless you want to allow access). A conservation easement does not prevent you from mortgaging, leasing, selling, or passing on your land, subject to the restrictions of the conservation easement.

Colorado Open Lands Link: http://coloradoopenlands.org/considering_easement/

What is BOZAR?

The Board of Zoning and Architectural Review (BOZAR) consists of a seven-member Board comprised of local residents appointed by the Town Council to serve for a term of at least three years. One Chairperson is elected by the Board and ratified by the Council to preside over the BOZAR meetings and approve insubstantial changes.

BOZAR generally holds one public hearing a month to review all of the published building, zoning and land use requests submitted to the Building Department. Submittal dates are referenced on the BOZAR calendar and can be obtained in the Building Department or by calling Town Hall at 349-5338. The Board also makes recommendations to the Town Council regarding issues affecting zoning, land use, historic preservation and design review.

What is the Design Review Committee’s purpose?

The Design Review Committee (DRC) consists of two BOZAR members and one Town staff person, which hold a permanent position on the Committee. Work sessions are held twice per month to review insubstantial determinations, informal plan reviews and formal applications.

The DRC reviews all building and most land use proposals with the Applicant to resolve issues in conflict with the purposes and intents of Chapter 16 regarding Zoning in the Municipal Code, Design Guidelines and neighborhood context. As a result of the discussions, the DRC makes a recommendation to the BOZAR for approval, denial or no recommendation. Historic properties often require a more in-depth review of Design Guidelines in determining how the proposed alterations and materials relate to the historic building and surrounding historic district.

There are three different types of review required; Formal, Insubstantial, and Informal. Click the link to read further about the types of review.

BOZAR Website

What are closing costs?

Closing costs typically range between 1 and 5 percent of your loan amount. These fees are due in cash at the time of closing or sometimes may be included in the loan. Your lender can provide a Loan Estimate of your total costs to buy well before you contract to buy your home. I can review your final figures with you before you go into closing.

What is a Sellers Property Disclosure?

The Sellers Property Disclosure form asks the seller about appliances, electrical/plumbing/heating systems, roof, structural and site conditions. The buyer receives a copy of this form and may rely on the seller’s representations in determining whether property condition is satisfactory. Buyers should, have the property be independently inspected as well.

What are the Seller’s obligations regarding Lead-Based Paint?

The seller of a house built prior to 1978 must complete a Lead-Based Paint Disclosure that asks if the seller is aware of any lead-based paint or any reports that were ever issued about lead-based paint on the property. The buyer of a home built prior to 1978 must receive the Lead-Based Paint Disclosure, signed by seller, and have the right to inspect for lead-based paint during the inspection of the property.

What are the Seller’s obligations regarding Radon?

The Environmental Protection Agency has stated that 4.0 picocuries/litre of airborne radon is the maximum safe level in a home. As part of the inspection process, the buyer may choose to test the air inside the home and the seller is usually responsible for “mitigating” or reducing the radon level if the test determines a radon reading of over 4.0 pc/l.

Can I have a professional inspection done prior to purchase?

Paragraph 10 of the Colorado Real Estate Commission-approved Contract to Buy and Sell Residential Real Estate form allows the buyer to inspect the property within a given time (Inspection Objection Deadline) and for buyer and seller to agree by a given time (Inspection Resolution Deadline) on repairs or other arrangements, if any, to be completed by closing. Buyer’s inspection rights are virtually unlimited under this provision.

How will I know if the Well and Septic System are in good working order?

For properties not served by public water and sewer, buyers are usually very interested in obtaining reports indicating that the well and septic systems are operating satisfactorily. Buyer generally pays for the tests, including well yield, water potability and septic inspection.

What is the Title Examination?

While the title exam in most metropolitan areas is usually routine, title examination is an important and sometimes challenging part of buying and selling mountain property. Driveways that encroach on neighbors’ lots, utility easements that run through the middle of homes and lack of legal access to a county or state road are examples of thorny issues that the rural home buyer and home seller must be vigilant in looking for.

Home sellers and home buyers should be aware that these disclosures and inspections are a necessary part of any successful real estate transaction and should appropriately look to their Realtor for guidance and assistance.

What is Title Insurance?

Title insurance is a form of indemnity insurance which insures against financial loss from defects in title to real property and from the invalidity or unenforceability of mortgage loans.

What is Transfer Tax?

A 3% transfer tax is imposed on all real property sales within the city limits of Crested Butte. Half of this tax goes to the preservation of open space and the other half goes into the Crested Butte’s General Capital Fund. The 3% transfer tax is often, but not always, split between the buyer and the seller.

Can we close on a real estate purchase from a distance?

Absolutely, I just need to know in advance and the title company will overnight the paperwork.

What about earnest money?

Offers are usually presented with a 3%-5% deposit in our market.

How long does it take to close?

Most financed purchases close within about 50 days after execution. It’s possible to close as quickly as in 1-2 weeks (or the amount of time it takes for title examination) with a cash purchase, or you could negotiate a longer closing if the seller agrees.

Back to Top
Enter your Infotext or Widgets here...