When selling real property in Washington State, there are several considerations to keep in mind:
Purchase Price Determination: Setting the appropriate listing price is essential to attracting potential buyers and maximizing the property’s value. Sellers may consider factors such as market conditions, comparable sales in the area, the property’s condition and features, and advice from real estate professionals.
Seller Disclosure Requirements: Washington State law requires that unless waived by the buyer in writing, sellers are required to provide a Seller’s Disclosure Document (Form 17) to a buyer, disclosing known material defects and other pertinent information about the condition of the real property. If any answers to the environmental section of Form 17 would disclose an environmental condition, the buyer cannot waive receipt of that section.
HOA Related Disclosure Documents: Real property that is subject to a homeowner’s association or condominium association, with limited exceptions, falls under the Washington Uniform Common Interest Act (WUCIOA) which requires delivering a disclosure document to potential buyers called a “public offering statement.” In the case of resales of condominium units, unit owners must provide resale certificates to potential buyers.
Title and Ownership: Ensuring that the title to the real property is clear and marketable is essential. Purchase and sale agreements commonly provide that at closing title will be free and clear of any liens or encumbrances. During the due diligence phase a title company will issue a title report which includes the legal description of the property, the current legal owners and all recorded encumbrances on the property, such as mortgages (recorded as deeds of trust), easements and any liens. Unless specifically agreed to otherwise, every contract for the sale of real property contains an implied promise that the seller will convey “marketable” title to the buyer at closing. This means that at closing, title to the real property will be free of any claims and disputes as to ownership, or from any threat of litigation. At closing, a title company will issue title insurance to the buyer which insures against title defects (unless specifically excluded in the pro forma at closing) that existed prior to the date of the policy. An experienced Washington real estate attorney will review the title report and ensure that title is clear of encumbrances and clear title as needed prior to closing.
Purchase and Sale Agreement: A Washington experienced real estate transaction attorney will prepare a legally binding purchase and sale agreement that outlines the terms and conditions of the sale, including the purchase price, closing date, and any contingencies.
Contingencies: Contingencies in a purchase and sale agreement are provisions that outline specific conditions that must be met for closing of the transaction to occur. Contingencies protect the buyer and sometimes the seller by allowing them to back out of the deal without penalties if certain contingencies are not met. Common contingencies include:
Financing contingency: This contingency allows the buyer a specified amount of time to secure financing for the purchase of the real property. If the buyer is unable to obtain financing within the agreed upon time-period, the buyer can terminate the purchase and sale agreement and is entitled to a return of its earnest money deposit.
Title Contingency: A title contingency ensures that the seller has clear title to the property and can legally transfer ownership to the buyer. If title issues arise which cannot be cleared by closing, the buyer can terminate the purchase and sale agreement and is entitled to a return of its earnest money deposit. A title search attorney will review the title report and determine if any title issues need to be addressed.
Property Inspection and Feasibility Contingency: Buyers typically conduct a thorough inspection of the property to assess its condition and identify any potential issues. A condition to closing may be for seller to complete certain repairs prior to closing or a lack of repairs may lead to renegotiating the purchase price. The feasibility contingency period allows the buyer to ensure that it can obtain any entitlements or other governmental approvals, complete an environmental study as needed, review any leases on the property and ensure the property is suitable for the buyer’s intended use. Typically, buyers can terminate the purchase and sale agreement for any reason prior to the expiration of the feasibility period and are entitled to a return of the earnest money deposit. Working with an experienced real estate attorney for property transactions during the feasibility period can ensure that contingencies are met and that expiration dates for the contingencies are followed. Purchase and sale agreements typically provide that if the buyer fails to give notice to seller of its decision to not waive a contingency but fails to close the transaction, this entitles the seller to retain the buyer’s earnest money deposit as damages for failure to close.
Closing Process: The closing process involves finalizing all closing documents such as lease assignments, if applicable, seller financing documents such as a secured promissory note and deed of trust, and the statutory warranty deed transferring title to the property to the buyer, as well as escrow and closing documents prepared by the closing agent at the title company. As real estate brokers and closing agents cannot prepare legal documents and provide legal advice to the parties, engaging an experienced Washington real estate closing attorney for property transactions ensures that all prepared closing documents are legally enforceable, and the transaction is closed properly.
Tax Implications: Washington state imposes a real estate excise tax (REET) on transfers of real estate, unless exempt under certain circumstances, such as the sale of agricultural land, gift transfers or transfers that are considered a mere change of identity. Sellers should also be aware of federal tax implications of selling real property, including potential capital gains taxes and any applicable exemptions or deductions. Sellers should consult with a tax advisor to understand their tax obligations and minimize their tax liability from the sale of real property.
By working with an experienced Vancouver, Washington real estate transaction attorney and other professionals such as real estate brokers and financial professionals, sellers can navigate the selling process smoothly and achieve a successful closing.
Contact an experienced Vancouver, Washington real estate attorney at Lotus Law to consult on the sale of your real property.
