Garfield & Hecht

III. What a Buyer Should Know.

What follows are some of the considerations a buyer should know about:

A. Financing Contingency.

A financing contingency allows you to terminate the contract and have all earnest money returned to you if you are unable to obtain the necessary financing.

C. Title.

In general, the contract should require the seller to convey the property to you via a general warranty deed, which guarantees against all title defects arising before or during the time the seller owned the property, and to provide a title insurance policy for the property containing only those exceptions to title approved by your attorney during the due diligence period. Consult with your attorney before accepting a special warranty, quitclaim, or any other form of deed.

B. Survey.

Unless you are buying a condominium, the seller should provide a survey of the property containing the legal description for the property as well as showing all property boundaries and the location of improvements, including fence lines. It is especially important to obtain a full Improvement Survey, as opposed to a less expensive and less informative Improvement Location Certificate. Depending upon your special needs, the age of the improvements and history of the property, it may be worthwhile to obtain a full Improvement Survey even in a situation where the title company will issue survey protection based merely upon an Improvement Location Certificate. Survey protection should cover the harm you suffer as a result of any encroachments or boundary line conflicts not shown on the survey.

D. Seller Representations and Warranties.

You may want to obtain representations and warranties from the seller that are not contained in either the standard contract form or the Seller's Property Disclosure discussed below. Following are examples of such additional representations and warranties:

(i) has obtained all necessary land use approvals, building permits and certificates of occupancy and is in compliance with applicable zoning regulations;

(ii) has no soil defects;

(iii) is not subject to any pending assessments, other than homeowners' assessments;

(iv) has not entered into any agreements with any governmental authority or any other person that would restrict, limit or affect your proposed use of the property;

(v) has paid all applicable utility tap fees or other connection fees;

(vi) is not located in a wetlands area; and

(vii) no governmental authority has ever denied a request for development of the property in a manner similar to your intended use of the property.

E. Transfer Tax.

You may be surprised to learn that over and above the purchase price for your property, you may be required to pay a real estate transfer tax. If the property is located in a jurisdiction that imposes a transfer tax, the contract will allocate responsibility for payment of the tax. Generally, the tax is payable by the buyer unless the parties agree otherwise. Real estate transfer taxes are imposed on sales of property within the city limits of Aspen, Snowmass Village, Vail, Minturn, Avon, Beaver Creek, Gypsum, Telluride, Crested Butte and Winter Park. Similarly, some homeowners associations impose transfer assessments on sales of property governed by the association. In the case of certain transactions (e.g., gifts to children), there may be an exemption available from the tax or assessment. Consult the applicable transfer tax or transfer assessment language to determine whether you qualify for an exemption.

F. Earnest Money.

The amount of earnest money varies by area, purchase price and type of transaction. The contract should provide for interest to be earned on your earnest money by requiring it to be placed in an interest-bearing account.