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Transactions and Utilities

April 17, 2017 By Tayson Rockefeller Leave a Comment

Fall River Electric

Here in Teton County Idaho, closing a transaction is a bit more complex due to the proration of utilities at closing. A couple of things need to be taken into consideration. Those items typically include property taxes, electricity, liquid propane or oil, water and sewer bills, local improvement district assessments, and so on.

Most of the above items will be addressed in any real estate transaction in most every state. Here in Idaho, taxes are assessed in arrears. I have written a few different articles on how property taxes work, I’m happy to provide that link. If anyone has pre paid their taxes, they will get a credit at closing. Otherwise the seller might have a deduction on their closing statement. In this scenario, the buyer would be responsible for the entire tax bill when it comes due.

Things I would like to focus on would be electricity, liquid fuel, and Municipal Water and Sewer bills.

When it comes to electricity in Teton County Idaho, the provider is Fall River Electric. Fall River Electric is actually a co-op with over 13,000 members in three states and eight counties. The co-op owns and manages several hydro-electric stations in the region. The co-op operates on a non-profit basis with a primary goal to deliver safe and reliable electricity to it’s owners. Revenue that exceeds the cost of delivering this service is allocated back to the owners in the form of capital. This capital is distributed approximately every 20 years. Over time this Capital accumulates. So, what happens if you sell your property prior to receiving your funds whereas co-op only distributes every two decades? The answer is that you are still entitled to these accumulated funds, but you can’t receive payment until distributions are made. With that being said, if you’ve owned the property here in Teton County for any significant amount of time, it’s a good idea to make sure you continue to keep your account address updated with Fall River Electric. In the short-term, you will be working with prorating electricity charges through the date of closing. Fall River is extremely efficient when it comes to keeping track of member accounts. It is a good idea for a new buyer to set up an account prior to taking possession, and providing the exact date of closing. If the seller also provides the exact date of closing, Fall River Electric can bill accordingly. For this reason, we usually don’t see any prorations on a closing statement when working with your real estate agent and Title Company. It’s also important to remember that Fall River ties the bill to the property, not the owner. Even if the owner leaves an unpaid balance, it will run with the property and the new owner will be responsible to make that payment. Most of the title companies are very good about making sure balances are current prior to closing.

Liquid propane and fuel oil or diesel fuel is a different story. Idaho’s contract provides for a section that describes who is ultimately responsible to receive, or pay for any fuel left in a tank upon closing. Since we don’t have natural gas piped and metered in the area, and very few Community Propane systems with meters, this comes up frequently. If the contract states that the buyer is responsible to reimburse the seller at closing for fuel remaining in the tank, a representative from the title company who acts as a third-party will usually get a reading on the tank or a percentage level and to multiply that by the size of the tank and at the current rate. In this circumstance, you will see a proration or a credit or a debit on the closing statement. Build is less common, fuel oil is something that comes up periodically. If the buyer is not responsible to reimburse the seller at closing they are entitled to any remaining fuel in the tank. In this scenario, it’s easy peasy. If the buyer is required to reimburse the seller for the fuel remaining in the tank, it gets a little complicated without a gauge present to provide information as to how much fuel is left in the tank. The basic process for testing how much fuel remains in a fuel oil tank is basically a dipstick similar to you are car oil. Oftentimes The seller might top off the tank so that they can calculate based on a full tank. Alternatively, the buyer can top off the tank and deduct that amount from the total tank volume. There a few other moving factors with all of this, usually comma and more specifically with liquid propane, the tanks are never filled to 100%.

Water and Sewer is also a bit peculiar when it comes to the way things operate in Teton County Idaho. In most cases, the cities do not want to try to prorate to the day any bills as it complicates their Billing System. In most cases the buyer and the seller are able to come to an amicable agreement as to who will pay for it, or how they will split the difference. If a tenant resides in the property it can further complicate things as the city’s generally require owners to keep the city water and sewer Billings in their name since the owner is tied to the property and the Tenant is not. This allows the city to have better control with regards to who is using the service comma and who the owner is. If a tenant moves out of the property, they would rather be able to communicate with the owner as opposed to keeping track of the different residents or tenants in each property.

Time to sell: Landlord vs Tenant

February 12, 2017 By Tayson Rockefeller Leave a Comment

And I should have added real estate professional or Realtor into the mix…

Any of you that have a rental property, or a residence that has been converted to a rental property while waiting for this market to recover has probably had an experience with this. Now that the market has recovered, many of us whom have been waiting to sell are anxious to act, and these sellers have every right to do so, for the most part. It’s been a complicated life as a real estate professional watching this market through the recession and recovery. Many had to rent their property to offset the cost of ownership through the unexpected downturn nearly as decade ago.

This challenge comes at a time today when supply is low – hence the improving market. That supply however, unfortunately includes available rental properties as Commerce begins to grow and we begin to see a shift in population during that growth period. Now, those who have been operating their home is a rental property with tenants for the past several years are faced with a task at hand, transitioning from a rental property to a property that is for sale. This can be taxing for the tenant as well, who faces notice to vacate at a time when rental supply is so low. Throw the Realtor into the mix, and things get complicated.

Seller advise:

For the obvious reasons on behalf of the tenant, my first suggestion is to remember that it is a difficult time, and to be sensitive about certain issues. Providing notice to vacate in the middle of winter, for example, can be difficult for anyone. Next, review your lease agreement. Many leases have a provision for a 60-day notice to vacate if the property sells. If you own a property, you have every right to exercise this right, but do so in a sensitive manner as I have suggested above. If you are considering selling in the future, try to time this properly. To avoid major push-back, it might be best to wait until your lease is it month to month or in holdover status. After you review your lease, the next step would be to have an honest and straightforward conversation with your tenant or through, and with your property manager. Your tenant might be looking to vacate early, perhaps they are looking to purchase a home. There are numerous opportunities to resolve the problem before a problem develops. As a final bit of advice, once you have gone through the proper steps to make sure you are handling the process ethically and properly, remember that you are the homeowner. You have every right to sell your property, and when the time is right, don’t make the mistake of being overly sensitive to put your own interests at risk or to jeopardize a major decision. If the home isn’t kept in great condition, or the tenants are making demands about reasonable showing requests, it might be in your best interest to provide notice and market a vacant property. This could mean thousands of dollars difference in sales price. This is your home, and your investment.

Tenant advise:

As a tenant, you likely have an interest in the property, this is called a leasehold interest. Basically, this gives you the right to occupy the property. These rights are associated with the lease agreement that you have in place. I have not had very many experiences (especially with property management companies) where these agreements are written illegally. Assuming your landlord or Property Manager has taken the proper steps to provide notice or to inform you they will be listing the property, you can review your lease to see what your options are. Remember that if you are in the middle of a tenancy with months left on your agreement, there may be a clause as I described above where the owner can provide notice to vacate upon sale or transfer of the property. On the other hand, as an owner, there a certain number of rights that you do not have. One of these rights include the right to sell the property (feel free to check out a recent post on the “bundle of rights” that come along with property ownership). You may feel upset about the situation for the reasons I described at the preface of this post. It’s not a great time to be a tenant without a place to live in this area. With that said, if you are at the end of your lease, the owner has the right to give you notice to vacate the property. If the timing does not work for you, the owner may be able to market the property for sale while you still reside in the property with the owner retaining the ability to provide notice when the property goes under contract or sells. If this is a goal you wish to accomplish, the first thing you need to remember is that it may not be an option. This does not mean that your landlord is a bad person. Second, go about it the right way. Be respectful and understanding of the situation. When your landlord or property manager meets with you, show them that you are capable of keeping a show ready home in good condition. Express your concerns, but understand their concerns as well. In my experience, the best way to get what you want is to go about it with respect and understanding. Providing push back and expressing dissatisfaction during these times is a surefire way to move in the opposite direction and potentially receive notice to vacate. Finally, if you are able to work out an agreement to stay in the property during the marketing period, remember that there may even be an opportunity that the new owner of the home will retain you as a tenant for sometime. If this is also something you would like to accomplish, remember that a buyer’s first impression will make all the difference if they are considering this, and there are more of these types of buyers than you might guess. Finally, when it comes to the real estate agent involved in all of this, they represent the seller. They should, and in some cases are required to report any problems with the property to the owner. Putting on a good show for the owner but not the real estate agent involved certainly doesn’t help the situation. If a real estate agent representing a buyer feels that you have been difficult to work with or don’t keep the property in good condition, you can bet that they won’t recommend keeping you as a tenant in the event the buyer is an investor owner, or does not need to take occupancy right away. If the real estate agent representing the owner is not providing reasonable notice to show the property, entering the premises without permission, or otherwise, feel free to speak with them or the owner. Having a good relationship with the real estate professional makes for a much easier process. Finally, if you are interested in purchasing the property, have that discussion with the owner prior to the home being listed. Unless the owner has provided for an exception for you to purchase the property, speak with a real estate professional if you would like to purchase the property. Working in the shadows to manipulate a situation into getting what you might want is not the right way to handle things.

Real Estate Professional advice:

We know that our job is to represent the seller when it comes to an active listing. Our job, however, is not to harass, or take matters into our own hands when it comes to working with someone who occupies a property. If a Tenant is causing a problem, it’s a discussion you should have, and in my opinion, must have with the owner of a property. If a home is not properly maintained, this could mean thousands of dollars for the seller. Remain neutral, and show respect to any occupant while also properly representing the seller.

Commercial real estate, not all Brokers are created equal

October 16, 2016 By Tayson Rockefeller Leave a Comment

Depending on where you are from, you’re probably used to seeing real estate agents that typically work with residential home buyers and lot sales. Then, you have the commercial real estate brokers who are described by many as a “whole ‘nother animal”. This is usually because commercial real estate agents don’t do much in terms of residential sales. In some cases such as Idaho Falls, the brokers network with one another as well as more regional (or brokers in other regions) commercial brokers, and the local client base. It was described to me as “a lot of going out to lunch” (networking) when I asked a local real estate professional about trying to find information in the local MLS, which oftentimes commercial agents don’t do. Anyway, they hold things close to their chest. Maybe that’s because they are protecting their client base and interest as a commercial broker, or maybe it’s simply because they don’t need to use the MLS because it’s not the way it works in that area.

Regardless of the reason, the training, lingo, and education is indeed entirely different. Things like allocation, highest and best use, different types of commercial leases, trade fixtures, and many more other items come into play, that don’t apply to residential real estate. In many cases agents that begin working with the commercial real estate applications are oftentimes considered to have changed careers entirely. If they decide to continue working with all forms of real estate, additional training and even Realtor designations come into play.

Now that we have a grasp on the differences between the two types of Brokers, and how they do business in our area, such as Teton Valley, Jackson and surrounding areas? In my experience, there are different types of agents here, but that usually applies more to agents who specialize in farm and ranch and Residential rather than residential and commercial. Typically, any agent that has an opportunity to work with a commercial project or Prospect does so regardless of their experience or training. It’s worked for many years here and particularly in Jackson. While there are many agents who do have specific commercial real estate training, many do not. To complicate things further, comes the property management aspect. Because our area borders both Idaho and Wyoming, we find that they are different state regulations for property management which is also involved with commercial real estate applications in most cases. Wyoming Agency Law requires licensure for property management practice. However, Idaho is one of the only States in the Nation that does not require licensure for property management practice. So, we do see some separation with property management firms in the Jackson area that do carry real estate licenses to practice commercial primarily because of the property management aspect. Then, you get to Teton Valley, ID where you have residential real estate brokers practicing commercial real estate, that don’t necessarily practice property management because there are independent companies handling these tasks in most cases.

We are not likely to see dedicated commercial firms come to our region because of the lack of available work. However, it is important to understand that there are many moving parts to commercial real estate applications and property management. It would be prudent for those interested in working with a local Realtor to understand that Realtor’s knowledge in the commercial real estate sector. We do find in some cases that out-of-area commercial real estate brokers are brought into our area. However, because it is customary here to work in conjunction with the MLS with regards to Commercial Real Estate, and the fact that these out-of-region or out-of-state Brokers do not have access to our local MLS, it is far less effective from a marketing standpoint. We also find that because these non-regional commercial brokers do not understand the local market, it complicates things further.

The National Association of Realtors does have special training and designations for commercial real estate, such as the CCIM designation.

HOA’s & Rental Restrictions

May 17, 2016 By Tayson Rockefeller Leave a Comment

If any of you read the local paper, or follow social media etc. here in Teton Valley, you probably remember the drama with a Condo Homeowner’s Association in Driggs, ID that made the decision to require landowners and property managers to restrict long-term rentals (longer than 30 days) to “single family” use. That association later defined single family as:

(In an email to TVRManagement & other local property management firms dated January 5th, 2016) “Tenant” is defined as a single person, or a couple living together as a family, regardless of gender. The other occupants may include the child or children of the “Tenant.” Occupancy of each rental unit will be restricted to a maximum of six (6) persons. No subletting shall be permitted. All other provisions in Section 8 of the Amended Rules and Regulations shall remain in full force and effect.

Many of us tried to make an argument that the HOA was in a violation of the Fair Housing Act, but remember the protected classes under the act are race, color, religion, sex, handicap, familial status, national origin. This does not include marital status or sexual orientation – however you will note “regardless of gender” in the above definition, which was a product of another issue which arose during the HOA’s – successful – eviction of all tenants that did not meet the strict guidelines above.

As mentioned above, that homeowner’s association was successful in evicting all tenants in violation based on their own definition, mostly due to threats of immediate action for hefty fines and liens. That sparked me to write a post on HOA Fines and the procedures HOA’s must follow.

Read the story here: Can Homeowner’s Assosiations fine me for violations?

THEN – (and rather ironically) Idaho Legislature amended the bill where I derived the information for the above article, House Bill 511 to go on to state:

(3) No homeowner’s association may add, amend or enforce any covenant, condition or restriction in such a way that limits or prohibits the rental, for any amount of time, of any property, land or structure thereon within the jurisdiction of the homeowner’s association, unless expressly agreed to in writing at the time of such addition or amendment by the owner of the affected property. Nothing in this section shall be construed to prevent the enforcement of valid covenants, conditions or restrictions limiting a property owner’s right to transfer his interest in land or the structures thereon so long as that covenant, condition or restriction applied to the property at the time the homeowner acquired his interest in the property.

With the above said, the HOA in this example in Driggs will probably keep the rule in effect stating that it was passed by the board prior to the amendment of this bill- whether that’s legal or not. In fact, the original amendment was passed by a board majority vote based on the board’s authority to do so… meaning there is a separate statement in the bylaws authorizing the board to make amendments without approval of the owners as stated in the bylaws. I am sure this statement was meant to be used in an emergency situation (authorizing emergency repair work without consent of the owners) and not for purposes described above, but I digress.

I am sure the situation with this particular HOA will work itself out. Despite my posts about HOA’s, they are not evil. They are created with a necessary purpose, and operated on a voluntary basis. Most of the time, (99% of the time) for good, genuine reasons. At least we know these situations happen elsewhere, and are gaining attention.

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