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October 15, 2019 By stowelawpllc

7 TIPS WHEN SELLING YOUR WASHINGTON STATE REAL ESTATE

1. Legal Lot Status. It is important that the property being sold complies with the Washington State Subdivision Statute and local county or city codes unless exempt. Otherwise, the Seller may be liable to the Buyer for a subdivision violation, which may result in sanctions and other remedies for the Buyer. https://app.leg.wa.gov/rcw/default.aspx?cite=58.17.210. Local Jurisdictions usually will not issue building, septic, and other developmental permits without confirmation of Legal Lot Status.  In order to establish Legal Lot Status the Seller should confirm on what date the lot was created and then look to the local land use code for compliance. If the lot was “created” before the enactment of the Subdivision Statute and/or reciprocal local code the lot may be “grandfathered in”, and thus, avoid noncompliance.  Usually, when the legal description contains a Lot number and the name of a Plat there is not an issue. But a metes and bounds legal description, a portion or part of a larger tract, or a tax parcel in the legal description may be a tell tale sign of an illegal lot. It is recommended to contact the local jurisdiction directly and see if the property has any record of Legal Lot Status:

Whatcom County:  “Lot of Record”.  See: https://www.whatcomcounty.us/1090/Lot-of-Record

City of Bellingham: “Lot of Record Determination”. See: https://www.cob.org/Documents/planning/applications-forms/legal-lot-determination.pdf

Skagit County: “Lot of Record Certification”. See: https://skagitcounty.net/PlanningAndPermit/Documents/Forms/Lot%20Certification/Lot%20Certification%20Info.pdf

Snohomish County: “Lot Status Verification”. See: https://snohomishcountywa.gov/2923/Lot-Status-Form

King County: “Legal Lot Status” See: https://www.kingcounty.gov/depts/permitting-environmental-review/info/PermitTypes/landuse/LegalLot.aspx

2. Proper Legal Description. Washington Law strictly requires a complete legal description to be included in a Purchase and Sale Agreement otherwise it may not be enforceable. A street address, the Property ID or the Assessors Parcel Number is not enough.

3. Ownership. Normally the parties are lead to believe that confirmation of ownership is done there is Title Insurance in a real estate transaction. However, standard title insurance does not cover adverse claims, encroachments, or prescriptive rights, for example. The existence of any of these matters causes defects in title or ownership. Another ownership problem arises when the property may have purchased under a Real Estate Contract earlier in the chain of title. In that case, title or ownership is not conveyed until the balance owing to the Seller has been paid in full by the Buyer. If for some reason the Seller does not provide the Buyer with a Warranty Fulfillment Date to satisfy the Real Estate Contract or even if the Deed is provided but the Buyer fails to record it then there may be a gap in ownership. Without perfecting ownership before the Seller signs a Statutory Warranty Deed conveying title to the Buyer, the Seller may be on the hook to the Buyer for breach of warranty.

4. Disclosure Statement. Under RCW 64.06 the Seller has a duty to provide the Buyer with a Disclosure Statement for unimproved or improved residential real estate unless waived by the Buyer.  However, the Disclosure Statement is not binding according to the the Statute.  The parties, may however, agree to include the Disclosure Statement as part of the Purchase and Sale Agreement.

5. Duty to Disclosure Known Material Defects. Regardless of the Disclosure Statement, the Seller has a duty to disclose known material defects relating to the property, or its condition.

6. On Site Septic Inspection Report Compliance before closing. It is recommended to check with the local jurisdiction about septic system reporting and disclosure compliance.

Whatcom County:  Whatcom County Code 24.05.160 (13) provides: “At the time of property transfer, provide to the buyer a copy of the current report of system status on file with the Whatcom County health department, and any available maintenance records, in addition to the completed seller disclosure statement in accordance with Chapter 64.06 RCW for residential real property transfers.” See: http://wa-whatcomcounty.civicplus.com/DocumentCenter/View/2067/OSS-Report-of-System-Status-PDF

Skagit County: https://www.skagitcounty.net/Departments/HealthEnvironmental/realestatetransfer.htm

King County: https://www.kingcounty.gov/depts/health/environmental-health/piping/onsite-sewage-systems/property-sales-transfers.aspx

7. Violation of the Washington Forest Practices Act, RCW 76.09. A landowner who does not properly comply with the requirements of a Forest Practices Permit may have a six (6) year development moratorium imposed by the local jurisdiction against the property. This may result in a denial of building, septic, subdivision, and certain other developmental permits. http://app.leg.wa.gov/RCW/default.aspx?cite=76.09.460. A common scenario involves the harvesting of more than 5000 board feet (1.5 logging truck loads), and a conversion of the land from forestry to non-forestry use, e.g. land use development. Without compliance the Seller likely has a duty to disclose to the Buyer and the Seller may be liable otherwise. The Seller may also have a duty to disclose to the Buyer reforestation obligations. http://app.leg.wa.gov/RCW/default.aspx?cite=76.09.070

The above is list is by no way exhaustive. And the above is not intended to be legal advice but is general information provided as a courtesy.

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Real Estate: Purchase and Sales Agreements, Deeds and Conveyances, Financing and Title Issues.
Property Rights: Easements, Covenants, Agreements, Adverse Rights and Disputes.
Land Use: Permits and Approvals, Property Development and Environmental Compliance.

Canadian Non-U.S. Residents Buying Real Estate in Washington State

  • Buying Real Estate in Washington is different from B.C.
  • Plan before and consider a B.C. Trust or other alternatives to hold title with your B.C. Lawyer, as well as other alternatives in Washington.
  • “Closing” or completion documents are usually prepared by an escrow agent (usually affiliated with a Title Insurance Company), and not by an attorney as in B.C.
  • South of the Border, Title Insurance Companies insure the ”title” and certain matters may or may not be covered. But recognize that it is possible for a property owner to lose property rights by adverse claims over time. So there is often risks in any real estate transaction.
  • In order to reduce the risks, it is recommended that a buyer obtain a survey before completing the purchase of Real Estate in Washington.

Canadian Non-U.S. Residents Selling or Gifting Real Estate in Washington State

  • A sale of U.S. real estate requires the buyer to withhold 15% of the amount realized by the foreign seller on most transactions unless exempted.
  • A sale of U.S. real estate may result in U.S. tax liability to the foreign seller although the tax rate may be reduced by capital gains treatment. Any tax paid in the U.S. may be a credit against taxes owed in Canada.
  • A gift of U.S. real estate is generally not favorable and may result in U.S. tax liability. Non-U.S. residents are generally limited to gifting $15,000 USD per year of U.S. based assets tax free.
ARE YOU EXEMPT?
  • Canadian Non-Residents with US based assets are exempt from US estate tax if the value of the assets is $60,000 USD or less. And in this case, no US Estate Tax Form 706-NA would be required. If the Canadian Non-Resident owned U.S. Real Estate it is recommended a Transfer Certificate be obtained from the IRS before any transfer from the decedent’s estate/ Above $60,000 USD a US estate tax return 706-NA is required to be filed within nine (9) months after the date of death. In order to determine if there would be any US estate tax due, a formula under the US-Canada Tax Treaty kicks in. See US- Canada Tax Treaty link below. Normally, there is no US estate tax if the value of your worldwide assets does not exceed the maximum amount, which is adjusted annually. In 2017, it is about $5.4 Million USD. But if your worldwide assets exceed the formula or the $5.4 Million USD (as adjusted annually) there may be US Estate Tax due (which can be around 40%). And the decedent’s estate should request a transfer certificate from the IRS before the estate transfers any property.
  • Link: U.S.-Canada Tax Treaty
  • Article XXIX B (Taxes Imposed by Reason of Death) of the U.S.-Canada Income Tax Treaty (“Treaty” ) provides special rules that may reduce taxes for U.S. citizen or resident decedents with Canadian property and Canadian residents with U.S. property. These rules were first incorporated into the Treaty under the 1995 Protocol to the Treaty.
  • If the decedent was a Canadian resident but not a U.S. citizen at the time of death, the estate can take a “pro rata” unified credit to compute U.S. estate tax. The pro rata credit under the Canadian treaty is determined by multiplying the exclusion amount available to a U.S. citizen decedent by a fraction of the value of the decedent’s U.S. assets over the value of the decedent’s world-wide assets. A statement invoking the right under the Treaty described above and showing the tax calculation must be attached to Form 706-NA. See paragraph 2 of Article XXIX B of the Treaty.
U.S. GREEN CARD HOLDERS
  • Watch abandoning your Green Card, including by failing to change your address and extended visits abroad for more than 180 days.
  • Watch the Expatriation Tax if you abandon your Green Card after satisfying the 8 of 15 year test.
  • Watch U.S. Estate Tax liability if you remain a Green Card holder indefinitely, and do not naturalize and become a U.S. Citizen. In 2017, a U.S. Citizen is entitled to a unified credit of $5,400,000 USD against U.S. Estate Tax.

Canadian Non-Residents Have Preferred Non-Probate Alternatives
to Transfer Real
Estate in Washington State

  • Washington State has innovative non-probate alternatives to transfer real estate upon death in comparison to B.C.
  • Options include Community Property Agreements between spouses, and Transfer on Death Deeds (“TODD”), which can be used between spouses, children, relatives, or other beneficiaries.
  • Another option includes an Affidavit of No (or Lack of) Probate in Washington, and in effect, transfer ownership to the surviving heirs.
  • And even if a Probate is necessary it is often not as burdensome and expensive as in B.C. While there is a court filing fee in Washington, there are no “probate fees” as in B.C.

Canadian Non-Residents Buying Real Estate in Washington State

  • Buying Real Estate in Washington is different than in B.C.
  • Plan before and consider a B.C. Trust or other alternatives to hold title with your B.C. Lawyer, or other alternatives in Washington.
  • “Closing” or final documents are usually prepared by escrow companies, and not completed by an attorney like in B.C.
  • South of the Border, title companies insure the ”title” and certain matters may or may not be excepted. But it is possible for a property owner to lose his property rights by adverse claims over time.
Canadian Non-Residents Selling

Canadian Non-Residents Selling or Gifting Real Estate
in Washington
State

  • A sale of property may trigger U.S. tax liability but the tax rate may be reduced by capital gains treatment. There is often a withholding on most transactions.
  • Gifting U.S. real estate is generally not favorable and may result in U.S. tax liability.
DISCLAIMER

The articles and information contained on in this website were prepared by Stowe Law PLLC. They are a general statement of the law of the State of Washington. The laws of other states differ from Washington law, and these articles are not intended to describe the law of any state except Washington. The articles and information found on this web site are intended for general informational purposes. They are not legal advice for a reader in any particular legal situation. The only way to obtain legal advice on a particular situation is to consult a licensed attorney. The reader’s use of this website and the information contained herein does not create an attorney-client relationship of any kind with Stowe Law PLLC.

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The BC & Whatcom County Connection

  • Mark understands B.C. and Canadian Culture.
  • Mark, a resident of Point Roberts, WA, has been surrounded by Canadians visiting
    their cottages for many years.
  • Mark’s daughter, born in B.C., plays sports in B.C.
  • Mark enjoys hiking on the Northshore.
  • Mark relishes the views of Mount Baker and the Salish Sea.
  • Mark enjoys walking the family dog, Enzo, in the woods at Point Roberts.
  • Mark is still trying to “successfully” ride his mountain bike down Galbraith Mountain.
  • EDUCATION
  • University of Washington, Seattle, WA                                          1983
  • Bachelor of Arts in Philosophy–Cum Laude, Honorary Distinction, Phi Beta Kappa
  • Phi Delta Theta Fraternity
  • Gonzaga University, Spokane, WA 1986
  • Juris Doctorate
  • AFFILIATIONS
  • Washington State Bar Association, Member.                    1987-present.
  • US District Court, Western District of Washington, Seattle, WA. 1987-present.
  • Certified Player Agent by the National Hockey League Players Association (“NHLPA”). 1996-present.
  • US Tax Court, Washington D.C. 2009-present.
  • Practitioner of Foreign Law, The Law Society of British Columbia 2017-present.
  • INTERESTS  
  • Enjoys Family, Hockey, Baseball, Mountain Biking, Hiking, and Travel.