With over 35 years of experience handling real estate transactions in Aspen and its surrounding areas, the Gary Feldman Group has identified the best sources for attorneys, inspectors, architects, builders, designers, and title companies. When clients ask for referrals for legal matters concerning real estate, Gary Feldman Group’s “go-to” real estate attorney is prominent Aspen attorney Joseph (Jody) Edwards.
Below is a Q&A with Jody, highlighting some of the Aspen/Pitkin County-specific legal issues associated with home purchases or sales.
Are there any market-specific costs associated with purchasing property in Colorado?
Aspen and Snowmass Village both have real estate transfer taxes (RETT), but there is no similar tax in Pitkin County. In 1992, Colorado voters amended the State Constitution by adopting the “TABOR” amendment to, among other things, prohibit new RETTs; but existing RETTs were allowed to remain in place. RETTs are paid by the buyer at closing. In Aspen, the RETT is approximately 1.5%, of which .5% is payable into the Wheeler Opera House fund and 1% of all amounts in excess of the first $100,000 is paid into the affordable housing fund. In Snowmass Village, the RETT is 1% and the money may be used for several different types of capital improvements within Snowmass Village. In both cases, there are certain exemptions, such as transfers for no consideration (e.g., to a family trust).
How do you estimate closing costs?
It depends on whether you are a buyer or a seller and, for a buyer, it depends on whether you are subject to a RETT. For the buyer, closing costs are pretty low, except for any RETT which may be due. A buyer will pay some recording fees ($13 for the first page and $5 for additional pages of each document), there may be some prepaid utility or HOA pro-rations, and there is a state documentary fee based on the value of the property times $0.0001 ($100 per $1M); and the buyer will receive a credit for the property tax pro-ration (see below). In Colorado, the seller usually pays for the title insurance policy and the survey. The primary closing costs for the seller are to pay off any existing debt, the real estate brokerage commissions, unpaid property taxes, the title insurance policy, survey costs, and any unpaid utilities or HOA dues (or receive a credit for pre-paid utilities or HOA dues).
How is buying and selling real estate in Aspen different than in other parts of the country?
Our land use codes look a lot like the Internal Revenue Code. If the buyer wants to do anything with the property other than what exists today, there needs to be a very careful analysis of the land use issues concerning the property. All-mountain properties will have patent reservations and some properties have minerals reservations (where the rights to minerals were severed from the surface property rights). Also, being in an arid mountain region, issues concerning water rights can be critical.
How are property taxes calculated and how are they handled at closing?
In Colorado, real estate property taxes are calculated by multiplying the assessed valuation of the property times the mill levy. Compared to many states, Colorado property taxes are low. The property valuations are determined by the County Assessor’s office (subject to objection and appeal by the property owner) and mill levies are set by governmental entities and special districts (school, water, and sewer, fire, etc.) with statutory taxing authority. The County Assessor re-values all properties within the County every two years. Taxes are paid in arrears – that is, 2018 taxes will be payable in the spring of 2019. As a result, at closing, the seller will need to give the buyer a credit for the portion of the year that the seller owned the property and for which taxes will be paid the following year by the buyer. Usually, this is based on the prior years’ tax or most recent valuation and mill levy and the credit is considered final; but this can easily be varied by contract if the parties want to re-adjust after the actual tax is known in the following year.
Joseph (Jody) E. Edwards, III is a skilled attorney whose practice focuses on real estate development and transactions, land use, commercial lending and foreclosures, business organization, and municipal law. Practicing for nearly 30 years in the Roaring Fork Valley, Jody has provided counsel for matters ranging from complex real estate acquisitions to the negotiation of planned unit development documents. For more information or to contact Jody Edwards, call (970) 925-8700 or visit KCECLAW.
If you would like to learn more about costs associated with home buying or are interested in making Aspen your home, call Gary Feldman.