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October 16, 2019 By stowelawpllc

7 TIPS WHEN BUYING WASHINGTON STATE REAL ESTATE

1. Legal Lot Status. While it is the Seller’s duty to comply with the subdivision laws for the sale or transfer of real estate, the prudent Buyer should also confirm Legal Lot Status to avoid future complications, including litigation.  In order to establish Legal Lot Status, it is important to determine 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

Without legal lot status, the Buyer most likely not be able to obtain building, septic and other developmental permits unless the innocent purchaser exception applies. https://app.leg.wa.gov/rcw/default.aspx?cite=58.17.210 

Unfortunately, Title Insurance does not provide coverage for non-compliance with subdivision laws.

2. Permits, History and Future Intended Use. The prudent Buyer should investigate the history of developmental permits relating to the property. Many times issues of non-compliance can be determined. In order to provide some time to do so it is recommended the Buyer include the appropriate due diligence condition in the Purchase and Sale Agreement. Sometime permits do not have “final” approval and this can result in a denial of homeowners insurance coverage in the event of a liability event. Further, the Buyer should investigate whether future developmental permits can be obtained so Buyer can use the property in the future as intended. A common scenario involves a house with a Septic Permit for 3 bedrooms cannot be expanded for one more bedroom because of site limitations.

3. Utility Service Confirmation. The prudent Buyer should confirm what utilities serve the property and that there are no late-comers agreements, hook up fees, or other charges due and outstanding. Normally a proper utility account confirms everything is in good order. In rare instances some lots are served by a “spaghetti” line which is an unauthorized connection to the utility service.

4. Extended Title Insurance/Survey. Normally standard Title Insurance is specified in the Purchase and Sale Agreement. But this type of coverage has many limitations and exclusions. For example, standard title insurance does not cover adverse claims, encroachments, or prescriptive rights, as well as noncompliance with governmental laws and codes. So ideally the Buyer should obtain extended Title Insurance, which has less limitations and exclusions. But extended Title Insurance often costs 25-30% more than Standard Title Insurance and usually will necessitate a survey which may cost several thousand dollars and time delays depending on the availability of the surveyor. However, the survey should help identify any adverse claims, encroachments, and prescriptive rights. As a rule of thumb if the 4 corners of the property cannot be located and the property lines somehow confirmed it is best to have a survey done.

5. 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 Buyer should not waive the Disclosure Statement even if it is not binding according to the the Statute.  The Buyer can learn more about the property and also obtain information that may be helpful for an inspection of the property. The parties, may however, agree to include the Disclosure Statement as part of the Purchase and Sale Agreement.

6.  Inspections.   Of course the prudent Buyer should have the property inspected by a competent inspector who has suitable experience.  However, the inspection excludes hidden or latent defects or matters not easily visible or apparent. So the inspection is really never 100%. Note the inspection required by a lender for financing may not be satisfactory for the Buyer. In that case, it is recommended that the Buyer insist on a more qualified inspector or a more thorough inspection instead of paying for two separate inspections.

7. Spend the Night. As crazy as it sounds the prudent Buyer can ask for a contingency to spend the night or have an extended stay of 24 hours or more to get a “feel” for the property. A longer visit helps give the Buyer a real sense for the property and may help identify local conditions that are not apparent from a shorter visit(s), such as, noise from trains or planes, unpleasant odors from a neighbor’s failed septic system, or nearby farming or illegal activities.

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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Filed Under: Real Estate

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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.