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What should we look for in a final walk-through inspection?

by Allison Simson & Joyce Nenninger
Question: Allison, we have just put a contract on a place in Frisco and notice in the contract that it talks about a “final walk through”. What should we look for in a final walk-through inspection?
Answer: Basically, the property should be in same condition as day you signed the contract.
Most home buyers will have at least two opportunities to inspect their property before closing on the purchase.
First, most buyers will include a contingency in the contract that allows them to do a professional home inspection by the home inspector of their choice. This inspection typically happens right after the sales price has been agreed to, usually within a week or 10 days.
If the home inspector finds anything wrong in the property or decides further inspections (perhaps for radon, heating and air conditioning systems, or mold) are called for, the home buyer will be able to hire specialists to figure out if there is an insurmountable physical problem with the property.
Assuming those inspections go well, the second opportunity to inspect the property is just before the property closes. The pre-closing inspection, or final walk-through, as it is often referred to, is a home buyer's last opportunity to walk through the property before closing.
According to Ilyce Glick of Inman News, what you're looking for here is not at the same level as the initial professional home inspection. In a preclosing inspection, you simply want to make sure that the property is in the same condition as it was on the day you agreed to buy it.
To avoid getting burned, you schedule the walk-through as close to the actual closing as possible, certainly within the 24 to 48 hours prior to closing. If possible, the sellers should have already moved out.
The whole point of the walk-through is to protect yourself and your future property from sellers who aren't as nice as they seem to be or who are actually as nasty as they appear. By inspecting the premises, you're making sure the seller has lived up to his or her agreements in the sales contract. And if he or she hasn't, you want to know about it in advance of the closing so remedies (both monetary and otherwise) can be agreed upon before money changes hands.
What should you look for in a walk through inspection? To start with, you want to make sure that the condition of the home hasn't changed since you signed the contract several months earlier.
Believe it or not, a lot can change in the ensuing weeks. To make sure the home is in the same condition, you'll want to turn on every appliance, open every door, make sure nothing's broken (lights, fixtures, windows, etc.), be certain everything the seller agreed to leave is actually there and in good shape, and be certain that when the sellers moved out, they did no damage to the home.
Sometimes movers can accidentally scrape a wall or pull up carpet in the process of packing up the contents of a house. If you do your walk through inspection while the movers are there, you'll have a harder time getting around them to make sure that the property is in good shape.
If you get there before the sellers have packed anything up, you might wind up with some unpleasant surprises on the day you move into the property.
Ilyce Glick learned the hard way that sometimes sellers just don't want you to find out certain things until you've closed on the property.
Nearly 20 years ago, her husband and she bought their first place. It was a vintage co-op built in the 1920s. The sellers were seniors, and they were a bit quirky. The property hadn't been touched in years.
When they did our final walk-through, they noticed that the water was turned off in the kitchen sink. They wanted to run the dishwasher, which was really old, but didn't want to turn on the water if it was off.
“Looking back”, as she says, “it's hard to imagine why this wasn't a red flag for us. But we were really happy to be buying our first place, which was taking just about all the money we had in the world. We didn't question it. We just bought it and moved in.
The first night we unpacked the dishes and decided to run a load in the dishwasher. At well past midnight, my husband turned on the water and we put in the dish soap and turned on the machine. We went to bed.
We were awakened early the next morning with pounding on our front door. Our downstairs neighbors came into their kitchen and noticed that the liquid contents of our dishwasher had dripped down through the ceiling into their kitchen, ruining their window shade.
My husband and I looked at each other and we knew why the water had been turned off. Too bad we didn't find that out ahead of time. Still, the damage could have been worse.
As I recall, it cost us $600 to fix the damage in our neighbor's apartment.”
Take some time to do your walk-through inspection. It might just save you time and money later.
 
For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field. Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  

Can a second home qualify for 1031 tax-deferred exchanges

by Allison Simson & Joyce Nenninger
Question: Allison, we’ve heard a lot about 1031 tax-deferred exchanges and would like to know if our second home would qualify for a like-kind exchange with another piece of property that is closer to our home. We have never rented our current property, but consider it an investment due to it’s appreciation the past few years.
Answer: Your question is a good one – and one that has been in the media and in the courts quite a bit in the past few months. To get an accurate assessment of your particular situation, I recommend you speak with a company that specializes in 1031 tax-deferred exchanges. According to Inman News, a similar case to yours was tried in court. Here are the details. In 1988 Barry and Deborah Moore purchased a second home on Clark Hill Lake. It included a home to which the Moores added a deck and other improvements.
The property was a three-hour drive from their principal residence. The Moores and their children visited the property two weekends each month between April and September each year.
But in 1995 the Moores changed their primary-residence location, making the drive to the Clark Hill Lake property a five- to six-hour trip. As a result, they used the property only a few times each summer.
The Clark Hill Lake property was never offered for rent to short- or long-term tenants. On their income-tax returns, the Moores deducted their mortgage interest and property tax payments as personal itemized deductions.
In 2000, the Moores found a five-bedroom, four-bathroom house on 1.2 acres of land adjoining Lake Lanier, just a few hours from their home. It has five screened-in porches, a party deck and veranda.
They decided to make an Internal Revenue Code 1031 tax-deferred trade of the Clark Hill Lake property for the larger and closer Lake Lanier property. They justified the exchange by stating both properties were held for "investment" rather than for personal use.
Upon audit, the IRS denied the IRC 1031 tax-deferral on the sale of the Clark Hill Lake property. The IRS auditor noted the property had never been rented and was used only by the Moore family on weekends. But the Moores argued they held the property as an investment for future appreciation in market value. They took their dispute to the U.S. Tax Court.
If you were the judge would you allow the Moores to defer the capital gains tax on the trade of the Clark Hill Lake property as an investment?
The judge said no!
To qualify for an IRC 1031 tax-deferred exchange, the judge began, both properties involved in the trade must be held for investment or for use in a trade or business. Although the Moores pointed to the appreciation potential of the Clark Hill Lake property, he continued, "It is a taxpayer's primary purpose in holding the properties that counts."
"Property held for investment is property held for the production of income," the judge explained. "We accept as fact the Moores hoped that both the Clark Hill and Lake Lanier properties would appreciate," he noted.
"Mere hope or expectation that property may be sold at a gain cannot establish an investment intent if the taxpayer uses the property as a residence," the judge emphasized. There was no convincing proof either property was held for the production of income as a rental since the family used both properties primarily as vacation retreats, he added.
Because the evidence strongly showed both vacation homes were held for personal use, rather than for production of income, neither property qualifies for an IRC 1031 tax-deferred exchange, and the Clark Hill Lake property sale is taxable, the judge ruled.
Based on the 2007 U.S. Tax Court decision in Moore v. IRC, T.C. Memo 2007-134.
 
For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field. Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  

Don't buy home without checking title report

by Allison Simson & Joyce Nenninger
Liens and easements could make purchase a bad move
How would you feel if you bought a home that seemed perfect, only to find out you couldn't use the property like you thought you could?
One buyer bought a home with a good-sized yard that he thought would be perfect for his large dogs to roam free. Soon after the sale closed, he hired a contractor to construct a fence around the property. The day the work started, a neighbor showed up to inform the new homeowner that he couldn't completely fence the property because of an easement that ran across his property.
An easement grants property rights to someone other than the property owner. Common easements are for ingress and egress, utilities and sewers. Easements must be kept unencumbered.
In the case above, the easement provided the neighbors access to their property. A fence could not be built over the easement because it would deny the neighbor their rights to access.
The property owner had to revise his fence design, which was disappointing. But, easements can be even more problematic, particularly if you assume there is an easement in favor of your property but there isn't.
According to Dian Hymer of Inman News, A homeowner in the Oakland Hills (Calif.) subdivided his property and sold off the lower half to a builder who constructed a new home on it. The homeowner then put his home on the market and entered into contract to sell it.
The buyer's real estate agent reviewed the preliminary title report and found that there were no easements either benefiting or restricting use of the property. In particular, there was no sewer easement.
The agent asked the seller how the sewer line from the house connected to the main city sewer line. It turned out that the sewer line ran downhill across the portion of the property that had been subdivided and sold.
In this case, an error of omission occurred during the subdivision process. A sewer easement should have been granted in favor of the owner of the upper portion of the property. Consequently, the owner of the upper property no longer had a legal right to run his sewer line across the adjacent property.
HOUSE HUNTING TIP: Make sure you have a clear understanding of the title issues affecting a property before you buy it. In some states such as California, title companies check the record and issue a title report that includes such things as the recorded owner and liens, easements and encumbrances affecting the property. In other states, buyers hire attorneys to search the title record and produce a report.
In the aftermath of the subprime lending crisis, it's especially important to investigate the status of any liens secured against the property. A preliminary title report will give you the original amount of such items as mortgages and taxes owed. But, the preliminary report won't necessarily tell you the amount the sellers currently owe.
All liens secured against the property must be paid in full in order for the seller to pass clear title to a buyer. If the seller has an interest-only mortgage and has not made any payments toward retiring the principal amount borrowed, he could still owe the original amount he borrowed. If the mortgage was a teaser-rate adjustable with an option to pay the minimal amount due, the seller could owe more than what is indicated on the title report.
THE CLOSING: Problems that could delay or derail closing can develop when the owner of record is not the same person who listed the property for sale. Before concluding a home purchase, make certain that the seller has the power of sale and that the property you're buying is what you bargained for.
Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.
 
 
For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field. Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  

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Summit Real Estate
The Bright Choice
330 Dillon Ridge Way, Suite 10
Dillon CO 80435
970-468-6800
800-262-8442
Fax: 970-468-2195

Allison Simson, Owner/Broker, is a licensed Colorado Real Estate Broker