Tag: property

But really, have you met RON?

Ever since the State of Kansas passed and implemented permanent RON legislation, we’ve been hard at work to get RON off the ground and running.

We’re thrilled to introduce you to our friend RON.

Who/what is RON?

RON stands for Remote Online Notarization. This is the process of a signer appearing before a notary public (with RON designation) via a recorded audio-visual call. The documents are signed and notarized electronically, and the signer must complete KBA (knowledge-based authentication) identity verification prior to signing.

The implementation of KBA identity verification makes completing a signing and notarization with RON technology even more secure than in-person.

Why does RON matter?

Over the past few years we have come to understand the need to be flexible and introduce remote solutions. Beyond quarantine and illness, we’re living in an increasingly digital world. If you can order your groceries from your couch, why not buy or sell your house? Both are inevitably quicker and contact free.

The significance of RON goes beyond a matter of convenience. Sellers often move before the sale and buyers aren’t always available to close. Our Kansas RON notaries can complete a notarization with a signer anywhere in the United States. Over the past month, we’ve completed deed packets with sellers in Colorado, Iowa, Texas, and right here in the Flint Hills.  These signings took no more than 15 or 20 minutes, proving to be quicker and more cost effective than overnighting documents back and forth to out of state parties.

How does it work?

Tallgrass Title has partnered with the RON platform Pavaso in order to complete seamless notarizations. Like many other RON platforms, Pavaso boasts KBA identity tools and an environment to perform audio-visual sessions, that are recorded and stored for 10 years (should there ever be any question about a particular signing or document).

Pavaso also allows for your Tallgrass Title closers to act as the notary during these RON sessions, whereas many RON vendors require that you use their contracted notaries. We understand that relationships make up 90% of the work that we do – if you and your client utilize RON through Tallgrass Title, you and your clients will be meeting with your beloved Tallgrass Title closers.

If we decide that RON will be right for your next transaction, we will send the signer and any requested observers links to sign up for Pavaso in advance of the scheduled “closing” time. During this time, the signer will have access to review the documents they will be signing in advance. We feel that this gives the client opportunity to prepare questions for the closing agent and avoid the “rush” feeling that often accompanies in-person signings.

When will this be available?

It’s available now! We have been using RON to complete deed packets for several months now and have found this to be an excellent resource for sellers. We hope to utilize RON for loan packets in the future, but approval will always be up to the individual lender’s discretion. If your lending institution is interested in or already using RON, let’s talk!

That’s a wrap!

If your team would benefit from more information about this awesome resource, we’d love to sit down and provide you with more information and/or a demo! Please keep this awesome resource in mind for your next transaction. And as always, let us know how we can best serve you and your clients – it’s what we’re here for!

What the heck is a 1031 exchange?

The concept is simple enough. Sell one property (the relinquished property) and use proceeds money to buy another property (the replacement property). If you do it right, you can defer the capital gains tax on the property you sold. Of course, in practice, there are quite a few details that go into “doing it right”.

This article addresses a few basic details about 1031 exchanges. However, this article is not intended to provide, nor should it be relied upon for, tax, legal, or accounting advice. You should always consult your own tax, legal, and accounting advisors before engaging in any transaction.

Why is it called a 1031 exchange?

The 1031 part of the name comes from the relevant section of the tax code.  That section can be found here: United States Code Annotated, Title 26 Internal Revenue Code, Subtitle A Income Taxes, Chapter 1 Normal Taxes and Surtaxes, Subchapter O Gain or Loss on Disposition of Property, Part III Common Nontaxable Exchanges, Section 1031 Exchange of Real Property Held for Productive Use or Investment.

The exchange part of the name describes what is happening: you are swapping (or exchanging) one property for another property.

Who can do a 1031 exchange?

Any taxpayer can do a 1031 exchange. However, the taxpayer selling the relinquished property must be the same exact taxpayer buying the replacement property. So, if your LLC or family trust sells relinquished property, you cannot buy the replacement property as an individual; your LLC or family trust must buy the replacement property.

What type of property qualifies for a 1031 exchange?

Both the relinquished property and the replacement property must be real property held for productive use in a trade or business or for investment. So, for example, you cannot exchange an unaffixed mobile home because it is personal property not real property. Also, you cannot exchange your primary residence because it is held for personal use, not for business or investment purposes. Further, you cannot exchange dealer property, which is real property held primarily for resale.  The IRS does not consider holding property for resale to be the same as holding property for business or investment purposes.

However, you can exchange one type of real property for another type of real property. You can sell a carwash and buy an office building, or sell a restaurant or hotel and buy an apartment complex, or sell farmland and buy a retail shopping center. As long as both the relinquished and replacement properties are real property held for business or investment purposes, the specific type of real property sold or bought is immaterial.

Why would anyone want to do a 1031 exchange?

Reasons include deferring capital gains tax and increasing cashflow.

A 1031 exchange defers capital gains tax on the relinquished property sale, but it does not eliminate the capital gains tax. Whenever you sell the replacement property, you will owe capital gains tax on both the relinquished property and the replacement property sales, unless you do another 1031 exchange when you sell the replacement property. In theory, you could keep doing 1031 exchanges, one after the other, deferring the capital gains tax indefinitely. If you do it right, when you die, your heirs may take the property(ies) at a one-time step-up in basis.  This would allow them to sell the property(ies) without paying the accumulated deferred capital gains taxes. In that sense, you may be able to effectively eliminate the capital gains tax.

A 1031 exchange can increase your cashflow because you are investing money in the replacement property that otherwise would have been sent to the IRS for capital gains tax. So, that money is working for you instead of the IRS.

Should I do a 1031 exchange?

This is a question best asked of an accountant, preferably a Certified Public Accountant with experience doing 1031 exchanges. The accountant will ask several questions about your specific situation, perform some financial calculations, and let you know whether a 1031 exchange would be beneficial to you.

How do I do a 1031 exchange and who will help me?

After you talk to an accountant and decide a 1031 exchange would be beneficial, the next step is to notify both your real estate agent and your title company as soon as possible.

If your title company is Tallgrass Title, LLC, your closing agent will notify an attorney at our sister company, Pugh & Pugh Attorneys at Law, PA, and they will facilitate the exchange by (1) drafting the required closing documents, (2) retaining and coordinating with the Qualified Intermediary (the entity that holds the seller proceeds from the relinquished property sale until you are ready to buy the replacement property) and the Exchange Accommodation Titleholder (if it is a reverse 1031), and (3) tracking critical deadlines (for a forward exchange, you have 45 days after the sale of the relinquished property to identify replacement property and 180 days after the sale of the relinquished property to complete the purchase of the replacement property).

After the exchange is complete, you will take the executed closing documents from both the relinquished property sale and the replacement property purchase to your accountant.  They will assist you in filing the tax return documents required to report the 1031 exchange to the IRS.

We are here to help!

While the basic concepts are relatively easy to understand, exchanges can get complicated very quickly depending on your specific circumstances.  This is especially true if you get into reverse 1031s, construction 1031s, rules for related party exchanges, or multi-property exchanges.

Our goal, as your 1031 exchange facilitator, is to make the process as easy as possible for you. If you have any questions about 1031 exchanges or would like to start an exchange, please contact our office today.  We would love to help you accomplish your investing goals!

Legals with Lippman: Government Lots

Imagine this: you’re reviewing an informational or a commitment from the title company and you notice the legal description contains a tract in a government lot. What does this mean? Is this a concern for my transaction? This is one instance in which the word “government” is nothing to worry about!  Legals with Lippman is back to discuss government lots and what they mean to you or your client.

Government lot is a term used within the Public Land Survey System a.k.a PLSS. We briefly talked about PLSS in our first Legals with Lippman. PLSS dates back to 1785 in the United States and is the system that breaks real estate into Section-Township-Range (STR).

  Fun fact: Not all states adopted the PLSS, most notably the Thirteen Colonies.

So, what is it?

A government lot is an irregular portion of a Section as formed by a meandering body of water, impassable object, or another boundary (state, reservation, grant, etc). These “lots” are used in Sections with an irregular shape or acreage (containing less than or more than the 640 acres seen in a standard Section). While called lots, these are not the type of lot that you would see in a platted subdivision. These lots are surveyed by the government (see example from Township 10, Range 8 below) and unlike a platted lot, do not have the zoning regulations, setback lines, or restrictions that are sometimes seen on plats.

In Riley County, for example, we see government lots formed by the Big Blue River and by Fort Riley. More specifically, if we examine a survey of the government lots in Township 10, Range 8, we see how Sections 5, 4, 9, and 8 are encompassed by the Big Blue River, making them slightly irregular.


On modern versions of an STR map you can see how these Sections have some variation in size; this is another indication of the presence of government lots.

From Riley County GIS

In an STR legal description you will see these irregular portions referenced as either a ‘government lot’ or a ‘lot.’ This is an example of a tract from Section 5, Township 10 South, Range 8 East, which is located near the Big Blue River. Another county might refer to these tracts as “government lots 9 and 10.”

So, what does this mean for my property? Owning part of a government lot is no different from owning land with any other STR legal description. There are no special restrictions or government regulations. A government lot is simply a way to make abnormal shapes and acreages fit into a standard section in the PLSS. If you see a government lot listed in your legal description, there is nothing to worry about!

We love helping and we love legal descriptions; if you have a question about your or your client’s legal description, give us a call!

Closings with Karissa: Property Taxes

Closings with Karissa is back with a few helpful reminders on property taxes and second half payments.

It’s that time of year again.

Real estate taxes are due to the county treasurer. Do you pay them before closing? Will the Title Company pay them before closing? What if the seller’s lender pays them before closing and the Title Company collects for them too? These are some of many questions that might swirl around homeowners’ heads right before closing.

First & Second Half

Taxes are available for payment in November of the current year with due dates of December 20th of the current year and the following May 10th. Taxes can paid in full in December or paid half and half in December and May. They first half is considered delinquent on December 21st and will start accruing late fees and penalties on that date. The second half is considered late on May 11th and will start accruing late fees and penalties on that date. If your closing is taking place after one of those dates and you do not have taxes set up in escrow, it is advisable for payments to be made prior to closing to avoid extra charges.

Taxes & Your Closing

Taxes are considered a lien on real estate. They are always there (unless the landowner is tax exempt) and will be in first lien position to all other liens – including mortgages. This means that taxes will always be paid out first in the event of a court action and your closing agent will make sure that tax payments are up to date.  If current taxes are not yet paid, they will apply that payment to your settlement statement to be paid at closing, including any applicable fees.

If closing takes place in October or November, it is likely that the seller rather than the buyer will receive the annual tax statement.  This is because the county treasurer’s office may not have new owner information updated prior to mailing out November tax statements.  If this happens the taxes are still the responsibility of the party that agreed to pay the year’s taxes as part of the real estate contract.

Things to remember:

  • Taxes are due December 20th and May 10th
  • The Title Company will pay off taxes based on the terms of the contract
  • The Title Company will never keep funds collected for taxes already paid, they will always refund payments rejected by the treasurer for previous payment.

If you have more questions about taxes, please reach out to your closing agent and they will walk you through taxes and prorations. It is our job and our pleasure at Tallgrass Title!

Closings with Karissa: Contract Best Practices

The heart of any real estate transaction is the contract. It is the meat and potatoes.  Everything that the realtors, lenders and title company need to know to close a deal is in the contract and any amendments or addendums that follow.

Therefore, it is important to have everything that the parties desire within the transaction clearly outlined in the contract . This might include a seller credit or home warranty, Or if certain appliances are to stay or go with the seller. All these things must be included in the contract to set a standard of expectation. It also prevents incidences of: “Well that was my washer and dryer” and the seller running off with appliances the buyer is expecting. Or even worse: “That other lot was supposed to be included.” If it wasn’t on the contract, it won’t get conveyed.

 

Here are some helpful tips to make sure there are little to no issues when writing your real estate contract:

Identify the Real Estate

Know what you are selling. Even if all you have is an aerial from Google Maps with a hand drawn outline of what is intended to be sold and an address. Send that to your title company and ask for a preliminary report. In their search process, they will the correct legal description to include on your contract, preventing issues later with lots or tracts being omitted or included by mistake.

Identify the Parties

A preliminary report will include how the real estate is currently vested. So, if John and Jane Smith want to sell their house, the preliminary report will note that the property is actually owned by John A. Smith and Janice Smith (their legal names) or Jane Smith’s Trust.

The Buyer in the transaction will direct how they want to take title to the real estate on the contract.  The buyer might prefer to take title with first, middle and last names or just first and last.  Or they may request to take title via a trust or a company.  This should all be included on the initial contract or a follow up Addendum.

Set a Purchase Price and Terms

Agree on a purchase price. Once the purchase price is decided, set the terms. Who will pay closing costs to the title company, title insurance and any? Will there be a Home Warranty and who will pay that and how much? Is the Seller willing to offer a seller credit to help with the buyers closing costs? What stays and what doesn’t stay with the property? Never assume that appliances stay, even if it seems logical.

Pick a date to close

Closing dates can be very flexible and easily changed with addendums so long as all parties agree to it. Often contracts will state “on or before” and that just means that at any time before the stated close date in the contract the transaction can be closed if all parties agree. In the current market, unless it is a cash deal, give yourself, your client, and lender time and set closing out 30 to 45 days. Best practice is to avoid closing on the very first or last day of the month as these are the busiest days for closings, and it may be difficult to get the time you want unless you schedule early.

Ask questions

If something doesn’t seem right to you, ask questions! For Buyers purchasing or sellers selling a home this is a huge change and can be very tense. We understand the stress of each transaction and are here to help and answer any questions. Even if they seem trivial, we are happy to assist and walk you through the process, it’s our job!

 

 

 

Earnnest: the future of real estate transactions

Last March we introduced our partnership with Earnnest, a tool that allows for the fully digital transfer of funds (much like PayPal or Venmo) but made for real estate transactions! That means it was designed with safety and security in mind.

Earnnest provides a way for the digital transfer of client earnest money into the title company of your choice’s escrow account, verifies “good funds,” and distributes documentation of the payment and deposit to all parties.

How does it work?

The title company or the buyer’s agent can complete a request for earnest funds through the Earnnest app.  We are happy to complete this request on behalf of the realtor – just ask us!  In order to, we will need your buyer’s email, phone number, the property address, and the dollar amount. Your client will then receive a text and an email that “Tallgrass Title” is requesting funds.

     

Utilizing electronic methods of contract signing and delivery along with Earnnest allows your client’s new home to go under contract in minutes with zero travel and zero wire fees. The only cost associated with Earnnest is a $15 processing fee paid by clients when they complete the request.  With wire fees approaching $30 or $40, this saves you time and your client money.

What makes it secure?

Earnnest is partnered with the payment processor Dwolla, which sets up a secure connection between all parties with multiple levels of encryption. Earnnest uses Plaid to connect the buyer to their bank to complete the earnest money request and neither party obtains or stores your client’s bank account credentials or financial information.

It’s quick!

Once the buyer completes the request for earnest funds, all parties – the escrow company, the realtors involved, and the buyers – receive an email receipt verifying “Proof of Payment.” This tells us that the earnest money has been withdrawn from the buyers account, is verified as good funds, and is on its way!  Within 3 days, all parties will receive another receipt called “Proof of Deposit” – this tells us that the funds are officially in the hands of Tallgrass Title.  Contrary to how quick handing over a check seems, it isn’t always so fast.  Personal checks can take up to 10 days to clear the bank. Earnnest is the cleanest and quickest way to ensure the secure delivery of earnest money.

While entirely coincidental, adding Earnnest to our toolkit when we did was a gamechanger! Many of our everyday business practices have changed and we will continue to adapt as we move out of the Covid-era.  Adopting cutting edge tools for secure and paperless transactions will continue to be our standard.  We’re happy to utilize PaperlessCloser, CertifID, Dotloop, HelloSign, Earnnest, and another nifty product we’ll share with you in a couple of weeks that is going to make mobile transaction information and document access a reality.

Earnnest has even more to offer than we can cover here, if your curiosity is brimming, give us a call! Or you can check out Earnnest here! And if your client wants to complete their earnest deposit through Earnnest, we’d be happy to place the request for you or show you how!

 

Real Estate Property Taxes are Due Soon – Don’t Forget!

It’s property tax season! In Kansas, property taxes are due in arrears and paid twice a year. Taxes for the first half of the year are due December 20th of the current year; the second half of the year is due on May 10th of the following year. This means that unpaid taxes for the current year are considered delinquent as early as December 21st.

In order to avoid delinquency, we recommend paying before December 20th, otherwise you could encounter long lines or delays in processing your payment.  With varying restrictions due to Covid-19, be sure to contact your county treasurer in advance to see if an appointment is required to pay your bill or be sure to mail in your payment early enough to ensure it is postmarked prior to the due date.

Selling your real estate?

If your real estate is currently under contract, you may have very specific questions. Like, what if I am selling my real estate and the closing date is near the tax due date? How does our title company handle taxes? Do we pay them ourselves? Do we pay them at closing?

First, take a deep breathe. Then call your closing agent and ask them how they would prefer to handle the taxes.

If the closing date is prior to the due date your closing agent may prefer that you wait and pay the taxes through closing. If they are due after closing, they may encourage payment prior to closing to prevent late fees and penalties. Either way, if a payment is made your closing agent will need proof of payment in order to remove the payment from the settlement statement. Otherwise funds will be held in escrow and paid to the county by December 20th or refunded to the Seller upon proof of payment prior to December 20th.

How do I get proof of payment?

When paying taxes in the county office, the treasurer will provide you with a receipt for your payment. Hand deliver or email a copy to your closing agent and they will take care of the rest. If you mail in your payment, your closing agent can call the county and request the receipt.

If taxes are paid at closing, do I have to take the check to the county treasurer myself?

Nope, the title company will send a courier to the county and take care of getting them paid, you will not need to worry about the taxes getting paid we will take care of everything.

If you are unsure of next steps please feel free to reach out to our office. We can walk you through the process to make your closing as smooth and stress free as possible.

Electronic Signatures – are they secure?

In our current moment of social distancing and increased dependence on technology, many will question what is better:  wet ink signatures or electronic signatures. Some may debate that putting a pen to paper and scrawling their signature is a fool proof and tamper proof way to sign a legal document. You may be surprised to hear that electronic signatures through a program designed for just that, signing electronically, are more secure and oftentimes a better way to put your official seal on a document.

How can that be?

You receive an email asking for a signature on a document. You click accept, click to sign, select your signature, then complete the process. How in the world could that be more secure than a wet ink signature?

The programs designed for electronic signings are designed to pull multiple factors of authentication to prove that you are in fact the signer of the document. The records are retained and track the history of actions taken with the document, for example, who opened, viewed, signed and the location each action took place. When the document is completed a certificate of completion is attached to the document showing that all have signed with a time stamp, IP address and any other pertinent information to identify the signer. A digital seal is also attached to that document.

Signing in person is secure as well, however there are not multiple factors of authentication to prove that the signer did sign the document. There is no electronic witness proving the identity, location, or other identifiers provided by e-signing programs, that the signature was put on the paper by the authentic signer.

Both are secure, accepted ways of signing documents in the real estate world. For those who are less electronically inclined, wet ink signatures may be the way to go. For the more tech savvy folks among us, you may prefer clicking a button or using your smart phone to sign documents on the go. Whether you prepare in-person or electronic signings, we are here to help you through the process with helpful tools and friendly staff available to answer questions.

Legals with Lippman: Section-Township-Range and Land Surveys

We’re starting a new series on the Tallgrass Title blog: Legals with Lippman!  In this series, our Production Manager, Sydney, will be focusing on topics related to real estate legal descriptions.  Sydney will help make sense of plats (and replats), original townsites, water rights, condemnations, and how all of this affects you and your clients’ transactions.

Section-Township-Range Legal Descriptions (and Why Surveys Can Make Your Life Simple)

Legal descriptions are a graphic depiction of a property. They outline the boundaries and features of a tract of land creating a map.

Legal descriptions commonly start out with a section-township-range description (with the exception of “platted” ground which will be covered in a future post.) This type of surveying system was adopted in 1785 and is used throughout the United States.  Through this system townships and ranges are separated into sections, each section totals 640 acres and is one square mile, forming a grid pattern to help locate a given property. Townships run north and south while ranges run east and west. Each township range is broken into 36 sections making them 6 square miles.

Many legal descriptions start by dividing sections into quarters, halves, and quartered quarters. However, when real estate is broken down further, it can get a bit complicated. For example, suppose that in 1901 John Jacob purchased the NW/4 of Section 10, Township 10, Range 10. Then, John Jacob gave a portion of the property to each of his four children and each received a quartered quarter. Allen Jacob received the SW/4 NW/4 of 10-10-10. Allen wanted to pass this land on to his two sons but wanted the house to go to his daughter. This is where things can become less cut and dry. Allen decided to divide the property along a stream that runs halfway through the property. Everything North of this stream went to Bart, everything South went to Chester. Seems simple, until you take out the house and five acres surrounding. The five acres and the house are also along this stream. This is where a survey of metes and bounds legal description comes into play.

A surveyor will draft a legal description beginning at a designated starting point; also called a point of beginning. In this case it might be the southwest corner of the northwest quarter of Section 10, Township 10, Range 10. A particular degree and number of feet is then determined, and the legal description continues through a variety of angles and distances until it comes back to the point of beginning. This creates a map of the property boundaries.

After reading the above example, one can see that there are many instances where a survey is needed to produce a metes and bounds legal description. They can help resolve any possible boundary disputes, accurately determine the size of a tract of land, or to determine the location of any easements, setbacks, or other such restrictions on future development.

Surveys can also be extremely helpful when a legal description has become convoluted. Say John Jacob decided to sell half of the NW/4. Peter Crow now owns the N/2 of the NW/4. Peter then sells the South 10 acres of the N/2 of the NW/4 to Monica Chang. Monica sells four one-acre tracts off for housing development. Monica’s legal description is now the South 10 acres of the N/2 of the NW/4 of 10-10-10 less one acre less one acre less one acre less one acre. Having a survey done of the remaining six acres would  simplify her legal description. .

Dealing with legal descriptions can be tricky, that is why we are here to support you. If you have any questions about section, township, range legal descriptions or surveys feel free to contact one of our real estate professionals for guidance.

What’s the Timeline for Closing Your Deal?

Here at Tallgrass Title, once we receive the signed contract in our office, the clock starts ticking on our countdown to get everything out in a timely manner.  Our goal is to be efficient, friendly, and fast in all aspects of what we do, but, sometimes the fast part does not always happen as fast as we would like. We get asked often what the time frame is to close a transaction.  In most instances, we are able to say that we can have it done within 30 days. There are situations where that is not possible and there are situations we can close in as little as a few days. The following is a rough timeline of the steps we take to get transactions closed in order to give you an idea of the potential timeline for your unique closing.

Commitment

Within 24 – 48 hours of receiving a signed contract we try to have to commitment issued to all parties. This can take longer depending on whether additional research is needed to clear the title. Generally, this means tracking down additional documents to trace the chain of title or add exceptions.

Preliminary Documents

Once the commitment is sent out, the file is assigned a Closing Agent. Your Closing Agent will put together two preliminary packets: a Deed Packet and Buyer Documents. These packets will then be sent to the clients’ respective realtors or directly to the clients (if unrepresented) to get reviewed and signed prior to closing. Getting the preliminary packets signed and returned well in advance can help make the process smoother as we sometimes experience delays in the process of getting payoff instructions from lien holders.

Invoices and Payoffs

Once both of the preliminary packets have been sent out, the Closing Agent begins working on the preliminary settlement statements. With a cash transaction this can mean closing as soon as the deed packet and buyer docs have been returned, we receive any invoices and payoffs we need to obtain, and the buyer and seller are both ready to close. For a transaction that is being financed the process is a little longer. The lender has to disclose fees three days prior to closing, we need have underwriter approval or a “clear to close” status, and the bank has to have the property appraisal back.

Closing

Once we have everything in our office we need and the lender, if there is one, has received approval to close as well –what’s next? We will set up a time for closing either at the bank or in our office.

Cash Sale Closing

Buyers and Sellers may sign all their final documents electronically and certified funds can either be wired or dropped off at one of our offices.  After disbursement and recording the deed, the transaction is complete!

Financed Closing

When there is a mortgage involved, we ask you block off about an hour for closing as there are several documents to work through and sign. Once signing is complete, we will send the loan packet to the lender for funding authorization. Once we have authorization and all funds, we will disburse, record the deed and mortgage, and the transaction is complete.

We strive to make the closing process as smooth and easy (and quick) as we can.  Hopefully this gives you better picture of the timing of your unique transactions. We are here to facilitate everything and take the pressure off you and your clients. Please feel free to give us a call with any questions you have.