Two days ago we received our title report. There was a lot of information in the title report – easements, covenants, you name it! The major thing we found in the title report is that the property has a special valuation which dedicates a portion of the property as open space.
When this lot, along with 3 others around it, was subdivided from one larger lot (totaling 20.32 acres), the owners decided to keep a portion of each property as open space, 13.15 acres in total. This means that our lot (5.08 acres total) has approximately 1.79 buildable acres and the other 3.29 acres is to remain in its native vegetated state. Our property really only has about 1.3 acres that could be built on anyhow because of the sensitive areas (wetland + wetland buffers) that are located on the property. So ultimately we’re not even dedicating any space that we feasibly could build on anyhow.
The reason that having the special valuation is so fantastic is that it lowers the taxes on the portion of the property that is dedicated to 30% of what they could have been. For our property, King County’s Tax records show that for the tax year 2013 the appraised land value is $245,000, but the Taxable Land Value is only $134,148. So basically we’re getting taxed less because we aren’t going to use the 3.29 acres that have been dedicated as open space. That’s fantastic!!
Ok, so why is this extremely important at this point in the process? The special valuation does not transfer between owners at the sale of the property, and furthermore, if we aren’t to continue with the open space dedication we would have to pay all the taxes on it that would have been owed for the past two years! Yikes. And in order for us to continue with the open space valuation, we need to have a “Notice of Compliance” on the Excise Tax Affidavit completed and submitted to King County’s Assessor’s Office before the record of conveyance (our closing date). And of course, this all takes extra time to do.
Of course, Joel and I have never done this so we ask our realtor, Lance Woodruff, what to do. And as usual, Lance knows exactly what all this means and what to do. In fact, he’s done four Open Space Continuances this year alone! He knew exactly what we needed and who to talk to at King County about getting it done. Thank God! It really is so fantastic having him working with us.
So, a new process begins in order for us to close (mind you that our preferred closing date is May 31st…two weeks from today). There are two documents that need to be signed and given to King County in order for them to approve the Open Space Continuation: 1) Letter of Continuance for Open Space Classification and 2) Excise Tax Affidavit. The first is pretty easy – just a document for us to sign (King County needs the original), and the second is a little trickier because escrow needs to prepare this (who knows how long that will take) and then we need to sign four copies of it for King County. Then it’s pretty simple, Lance will take it to King County and give it directly to the approver, King County will call us to discuss the continuation and make sure that we understand what exactly the designation means and that we plan on living up to the regulations. And within a week we should have an approved continuation.
What does this mean when we’re in construction? Well, there’s a compliance component to the program during construction. It’s likely that we’ll need to prove to King County that we will still be in compliance with our proposed home site and the construction work before construction commences. In addition, a representative from King County will pay us a site visit to ensure that we’re meeting all of our commitments. Seems good to me!
The really good thing is that I actually read the title report and all of the underlying documents. Without reading it we would have had no idea about the special valuation. The listing, listing office, nor the seller told us about the classification – which is a huge problem. So, lesson learned – make sure you read all the documents pertaining to what you’re buying. You never know what you could be liable for!