Here is a little Real Estate 101 for buyers that want to stay informed and receive a better understanding of Real Estate Basics. I’ve been in the real estate industry for almost 20 years. I am passionate about the industry and truly enjoy assisting buyers and sellers in this incredible second home/resort market of Winter Park, Colorado.
Lately, I’ve noticed that I throw out real estate related words and phrases, expecting these buyers and sellers to know what I mean without further explanation. It’s interesting that my vocabulary is full of terms that most people generally do not recognize! While touring around the various areas of Grand County, I not only give a bit of a sight-seeing tour since the Rocky Mountains and the Winter Park Resort are spectacular for viewing, but I am espousing real estate advise at the same time. No wonder I get some blank stares back at me. Immediately upon pointing out that Grand Lake represents the headwaters for the mighty Colorado River, I delve into a discussion on septic systems, leach fields and aquifers.
Here are a few definitions that real estate practitioners will use on a regular basis, especially in a resort, second-home community. This might help you to limit the need to give blank stares from the passenger seat of the car while touring your areas.
Agent – Unless you have signed an Exclusive Right to Buy Agreement selecting the real estate practitioner as your Buyer’s agent, or an Exclusive Right to Sell Listing Agreement selecting the practitioner as your Seller’s agent, you are working with a Transaction Broker. Agency is established when one of those two agency agreements is signed. Transaction Broker simply means they are an advocate for the transaction, and not specifically the Buyer or the Seller.
Condo – Condominiums are simply “air space”. You own the land underneath the building and around the building in common with the other owners. When you purchase a condo, your insurance agent can get you a quote to purchase insurance that will cover from the wallboard and in. Your insurance does not have to cover the exterior of the building, you will pay for that particular insurance policy through the Owner Association’s monthly assessments.
Household Use Only Well – In the State of Colorado, water use is a very big deal. In the Winter Park area, many of the residential properties are on wells. Household use only simply means that it is for the single residence that has been constructed on that piece of land. It’s not meant to provide water to the reindeer in your corral, nor is it meant to water the 1/2 acre of tomato plants that you have growing outside.
Perc Test – Again, many of the residential properties in the Winter Park area have their own septic systems. Our water and sanitation districts do service the towns of Winter Park. Fraser, Granby, etc., and some other small neighborhoods, but the majority of the homes in this area have their own septic system. Prior to building, or even purchasing a lot, it’s a very good idea to hire an engineer knowledgeable in this area to perform a perc test. This test simply gives the engineer an idea of how quickly the ground will absorb the waste water after it has gone through the septic tanks and then “leach” (hence the name leach field) into the ground through the potential leach field’s filtering system for purification purposes.
Property Taxes – In Grand County, Colorado, property taxes are assessed in arrears. This means that the taxes for the current year have not yet been established. In January, the taxes for each property are established for the previous year. In the case of, let’s say, a June 30th closing, seller owned the property from January 1st through June 30th, so typically you’ll see that the prior year’s tax rate and assessment value will be used to calculate an estimate of how much the property taxes WILL BE when billed in the next year. Seller will credit the Buyer that amount on the settlement sheet then the Buyer agrees to pay the full amount (regardless of if they are more or less than the estimate) when the taxes become due and payable. Nothing will supersede closing, meaning that as of closing date, no one will owe anyone anything unless a specific agreement for some future payment has been established.
Settlement Sheet – A few days prior to the actual closing on a transaction, buyers and sellers will receive a settlement sheet from the title company involved in the transaction. This information should be reviewed for possible errors or omissions, as it is the basis of the sale. Sales price, earnest money, lender’s fees, appraisal costs, prorated property taxes, closing fees for title, etc. can all be found on this sheet. It will tally down to a final number of money due to (hopefully not from but it happens) Seller at closing and money due from Buyer at closing.
Survey – There are so many different levels of surveys, it’s hard to know where to begin. In our area, we have several surveying companies that we recommend that will take the guess work out of what type of survey to get for your land or residential property. Many times, an ILC (Improvement Location Certificate) will provide both you and the title company the peace of mind that you know what you are buying and that there are no encroachments on the property boundaries.
That’s my Real Estate 101 lesson for today! I hope it was helpful in trying to decipher what your real estate practitioner is trying to tell you regarding the real estate process.