There are a great number of time sensitive processes and actions involved in a real estate transaction after you've come to a contractual agreement and until closing. We'll list them here and link to descriptions of each. To make it easier, a new window will open with each to keep this one visible. First a few definitions:

Delivery - The deadline date for delivery of documents or inspection or other reports.

Objections - Buyers, upon receipt of certain documents, surveys and inspection reports, have a specified amount of time in which to object to the contents of those items.

Resolution - When there are objections, the Seller has a specified time in which to respond as to whether they can or will correct items or not. Resolution of an item normally means that the transaction is still on track and that item is no longer an issue.

OK, we have those basic definitions out of the way, so let's go on to the steps in a normal transaction. If it's land, then items that have to do with structures and inspection of them would not be a part of the process. Here are the steps:

1. Contract is signed, so copies are delivered to all parties and the title insurance binder is ordered from the appropriate title insurance company. Details
2. The property condition disclosure is normally delivered right away for land or homes. There are objection and resolution deadlines. Details
3. If there are road maintenance documents, water rights, or well documents, these are normally delivered quickly also. There are deadlines for objections and resolutions. Details
4. If inspections are part of the process, the buyer should begin lining up inspectors and appointments as soon as possible to meet all deadlines. Inspection deliveries are a part of this step. There are deadlines for objections and resolution. Details
5. Special inspections and objections requirements are involved for septic systems. Details
6. The title insurance binder is provided by the title company and delivered to the Buyer(s). There are deadlines for objections and resolution. Details
7. If financing is involved, the Buyer(s) should apply for their loan quickly, as there are deadlines for this, as well as for proof of final approval. Details
8. If a home or structure is involved, the Buyer(s) should apply for insurance right away, as there is a deadline to get out of the transaction if insurance isn't available. Details
9. If a home is being purchased, there will likely be objections to the inspections. These may involve requirements for repairs, etc. There are deadlines. Details
10. A survey is almost always involved in a purchase. There are deadlines for delivery, objections and resolutions. Details
11. A day or two before closing, all objections should be resolved. In the case of a home, there can be a walk-through by the Buyer(s) to make sure all is in order for the closing and funding. Details
12. The closing takes place either local or remote. The title company funds the transaction only after recording at the courthouse. Details

That's it! It's a lot of paperwork, many deadlines, and hopefully not too much stress. Our goal is to make it all a walk in the park for our clients.

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This post is about water rights, but I suppose the situation could crop up on any item, such as mineral rights, that the title companies will not insure in the Taos real estate market.  It's not the fact that they will not insure these rights, as that's understood.  However, a recently closed deal brought up a practice that flies in the face of what buyers assume they get for services from a title company.

The Taos Real Estate Title Search

When my buyer thought of a title search, he assumed that he would be provided with ALL documents related to the property that were found in the county records in the search.  NOT THE CASE!  Because they don't want to insure water rights, the title companies will file away a document and not give it to the buyer if it pertains to water rights.  That's even if it is a recorded deed.  This is not unique to the Taos real estate market, but you should be aware of this practice.

While it is suggested that buyers retain an attorney to transfer water rights, there was an expectation that any documents pertaining to those rights would be provided when they are found in the search.  NOT THE CASE.  Since the title company doesn't want to increase their risk, they simply don't provide the documents found.  Since a great many taos real estate properties do not have recorded water rights documents, this forces them to spend extra money to hire an independent searcher or an attorney to make sure that documents aren't overlooked of filed away.  Make sure you get all of the documents related to your Taos real estate market purchase.

So, don't assume that a title search is going to give you all documents recorded for the property's legal description.  If there's a puddle there, and you want to know if you have rights to the puddle, you're going to have to hire an attorney, or at least an independent researcher in the taos real estate market.

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There are a number of changes, but Fannie Mae's Form 1004MC and Freddie Mac's similar Form 71 both require calculation of an area's absorption rate, and a comparison of that rate by time period.   This gives a picture of inventory, how much is out there, whether it's increasing or decreasing, and other trends.  Here's Fannie Mae's absorption example:

Step 1: Calculate the absorption rate. If there were 60 sales during a 6 month period (e.g., “Prior 7 – 12 Months” column), the absorption rate is 10 sales per month (60/6).
Step 2: Calculate the months of housing supply. If there are 240 active listings, there is a 24-month supply of homes on the market (240 active sales/10 sales per month). This may support the appraiser’s conclusion that there is an over-supply of homes on the market. Anomalies in the data such as seasonal markets, new construction, or other factors must be addressed in the form.

I took the Form 71 Ed sent me and completed it for the entire Taos real estate market.  It looks at three time periods; previous three months, four to six months, and seven to twelve months back.  Even taking into account the seasonality of the last three months with the holidays, it isn't the prettiest of pictures for the Taos real estate market as a whole.  The absorption rate is trending down, with inventory increases.  We can hope that this will turn soon, as we're entering the best part of the year for real estate.

Ed was careful to explain that these absorption numbers would be done on comparable properties in their specific area of the Taos real estate MLS, not the entire market.  So, it could present a better or a worse picture in a subject property's area of the MLS.  Why is this a concern?  Whether seller or buyer, if you can agree on a price, but you can't get the loan because the lender's loan-to-value ratio requirement can't be met, then you're back to square one.

Two other factors are analyzed in the form.  Days on Market trends, and "sale-to-list" ratios.  The amount of the average or median discount at which properties sell compared to the prices at which they  were listed is reported.

The Taos real estate market has a great many vacation homes placed on the market by sellers who don't necessarily NEED to sell.  There is a tendency to list at prices higher than the comparable sales suggest are plausible.  This increases days on market, and can result in wider discounts between list and final selling prices.  Both of these factors are negative for lenders, especially if they are increasing.

If you are a seller, ask your real estate broker to run the absorption numbers for your home's MLS area.  If they don't know how, point them to this post and the Fannie Mae example.  It's hard enough these days to locate a buyer and get a deal negotiated.  It's a real shame to lose them in the financing stage.

Fannie Mae Guidelines

Freddie Mac Information

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Using the general home inspection as an example, the Taos real estate general inspector has completed their inspection of the home to include:

• structural;
• roof;
• electrical;
• plumbing;
• well; and
• septic inspector does septic.

Generally, you're dealing with two reports here.  The general inspector writes up everything except septic issues, as that is a separate license.  The septic inspector writes up any septic problems.  You and your real estate broker sit down and go over the inspections carefully.  You make decisions about what type of items you are willing to assume, and which ones you would like the Seller to correct.  Your "objections" document is then prepared on what is called a Waivers, Objections and Resolutons Form.  This form is not unique to the Taos real estate market, but a New Mexico for that all our state Realtors® utilize.  You can have more than one of these, with a different one for each type of inspection if you like.  It's usually less confusing if you put all problems on one.

A copy of the inspection report is attached with your statements as to what items you want corrected by the seller.  An option is not to ask for repairs, but instead for a dollar amount.  You can then do the repairs the way you want after closing.  This is a sticky thing though if a lender is involved.  Lenders live in a perfect world of perfect homes, and it's no different in the Taos real estate market.  A very small amount, say under $500 might get through lender approval.  Any large dollar items generally will not.  The lender will want them repaired prior to closing.

We mentioned in our report on the purchase agreement deadlines that there is a chart of inspection, objections and resolution deadlines.  They are already set dates, so your objections document will require a response from the seller by the pre-agreed date if you delivered them on time.  This is the "Resolutions" document.  It's the same document actually, just a different page.  The Taos real estate Seller will reply with their agreement, partial agreement or turn-down of items.  They could agree to all, some or none.  You then must respond with a signature indicating your acceptance of their resolutions.  If you can't agree, the deal could terminate.

A purchase of Taos real estate can be a complex process.  Your broker should be explaining all these forms and assisting you in objections and resolutions responses.

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• very old adobe homes;
• pueblo style with flat roofs;
• territorial style with peaked roofs;
• geodesic domes;
• off-the-grid earthships; and even
• homes converted from railroad cars and water towers.

The Taos real estate market could have it's own Extreme Homes Show for sure.  But that's just one aspect of inspections.  Let's go through the process.  First, the most common inspections done on homes include:

• structural;
• roof;
• heating and rarely cooling;
• electrical;
• plumbing;
• water well;
• wood destroying insects; and
• radon.

The first 5, and sometimes six of the inspections are normally done by the general home inspector.  They do a thorough inspection of the home's condition and write up an extensive report of what they find.  We're not plagued with termites to any great extent, but carpenter ants are around.  Many homebuyers call in a pest person to do a wood destroying insect inspection.

As far as radon goes, some of the Taos real estate general inspectors do it, and there are specialists available as well.  Just know that northern New Mexico is one of the highest radon areas in the country.  It is very likely that a radon inspection will turn up higher levels than the government recommends.  It's also very likely that Taos real estate Sellers will not want to make corrections or to pay for them.  It's one of those things that are frequently requested by buyers, but usually turned down by sellers.  If you want radon abatement, it will usually be at your expense after closing.

Most of our Taos real estate purchase agreements have a date for inspection delivery at least two to three weeks after contract acceptance.  That's because we don't have that many inspectors, and they usually need some time before they can do the inspection, plus a few days after in order to prepare the report.  Our next report will be about the inspections objection and resolution process.  We welcome everyone who wants to live here to Taos.  Real estate here is always a good investment even if inspections can be a bit hair-raising.

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The loan related items chart will have all the fees and escrows associated with the loan and servicing the loan.  Taos real estate custom is for the Buyer to be filled in as the one paying these costs, as it is the Buyer that needs the loan.  This is the norm for most areas of the country.  It is, however, negotiable.  If a Buyer needs help  to get qualified or come up with enough cash, and the lender will permit it, the Seller could agree to pay some of these costs.

The closing costs chart will have check marks under all three columns.  There are some items in the Taos real estate market customarily paid by the Buyer, some by the Seller, and some that are not required.  Some of these items, as well as who customarily pays for them are:

• title company closing fee - 50/50 Buyer and Seller;
• deed preparation - Seller;
• documents recording for Seller - Seller;
• documents recording for Buyer - Buyer;
• title insurance binder or committment - Buyer;
• title insurance basic policy premium - Seller;
• title insurance lender policy and endorsements - Buyer; and
• survey or improvement location report - Seller.

Keep in mind that this is just Taos real estate market customary cost splits.  Every item is negotiable.  When you begin the process of a Taos real estate purchase, discuss all items with your broker.

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Earnest money delivery: The first date encountered in the purchase agreement for delivery is the one for the Earnest Money. Though hard dates can be used, the custom is usually to place the phrase “Upon Acceptance” here, or something similar. This indicates that a check is in hand, but will be delivered when an agreement is reached. Usually the agent will attach a copy of the check with the offer.

Documents Delivery, Objection and Resolution Dates: The documents most commonly required in a Taos real estate transaction might include:

• Seller’s Property Disclosure
• Road Documents
• Water Rights Documents
• Well Log and Record
• Condominium or Subdivision Covenants and Restrictions

There is a chart with three dates for each item. The fist is the date for “Delivery”, which is when the Seller should have the document in the hands of the Buyer or their agent. The second is the “Objections” deadline. This is the date by which the Buyer must have any objections to the documents contents in the hands of the Seller or their agent. The last is the “Resolutions” deadline. By this date, the Buyer’s objections must have been satisfied or the deal could be terminated automatically.

Inspections of the Property: The same three dates in a chart are present for the inspections. The Buyer must deliver the inspection reports, their objections to them, and the Seller must respond by the dates indicated.

Survey, Septic and Other: The same procedure is followed for the survey, septic inspection and any other contingencies in the purchase agreement.

Taos real estate are custom varies on these dates. Some brokers use hard dates. However, as negotiations can be fast or can take days to a week or more, many brokers will begin the first or “Delivery” date as a certain number of days after contract acceptance. The subsequent dates will follow as a number of days after delivery or the previous step.

In Taos real estate contracts, as well as in most other areas, “time is of the essence.” Failure to meet deadlines can result in default and contract termination.

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Easements you may NOT want: When you execute a purchase agreement in New Mexico, one of the very first things done is to order a title insurance binder from a title company. The buyer or the seller can do this, and it's spelled out in the purchase agreement. When, as a buyer, you receive this document, it is spelling out the terms of a title insurance policy as they will be issuing it. Here's the first place where you might see an easement of a type that you may not want on your property. It could be utility easement allowing high voltage overhead wires, or it can be an easement recorded many years before for the use of your property by an adjoining landowner for access to theirs. It's important to go over your title insurance binder carefully with your real estate broker. Don't hesitate to ask for more information or verifications if you feel you need them.

Easements you may not see in documents: Water rights in New Mexico can be quite confusing to new landowners, especially when it comes to irrigation ditches that cross their property. Whether you see it in your ownership documents or not, it's highly likely that the acequia association will have the right to access their ditch for maintenance, even if it means crossing your property, working on it or taking out vegetation. It's a great value to have an irrigation ditch on or adjoining your property, even if you don't have rights to the water. Just understand the rights of the local major domo to access it.

Crossing government land to get to yours: More than 60% of the land in Taos County is owned by various US government entities or the Pueblos. Assuming that you have the right to use a BLM (Bureau of Land Management) road to get to your property is a mistake. That's true no matter how long the road has been there or others that might use it. There is a permit process to gain legal access, but it can take months and may not result in approval. It also doesn't guarantee that the government won't take away your access later either. An actual failed deal in which I was involved caused the loss of a willing buyer and the failure to sell a property that had been listed for more than a year. Because the listing broker failed to advise the seller to get a permit from the BLM at listing time, when the buyer came along over a year later, they found that it would take another eight or more months to get one approved.....or not approved. Of course the buyer disappeared and the seller still holds the property at a year and a half after listing at the time this was written.

Look for "Insured Specific Access": It's really quite common in New Mexico to have roads with houses all along them with none of the owners holding written guarantee of access. How does this happen? Over the years in older towns like Santa Fe and Taos, roads were built, land was sold and homes were built. The road might pass through several other parcels before it gets to some of these homes. Custom has been to use the road, and everybody's fine with it. However, there is not a document guaranteeing, nor is there title insurance for, legal access to most of the homes. Usually, you'll see no mention of the access or road issues specifically in the title insurance binder or survey. The situation perpetuates itself when real estate brokers and buyers don't try to resolve it before purchase. If your Taos real estate broker requires "insured specific access" in the purchase agreement, the title company will have to insure your access or tell you that they cannot. You may still purchase, but at least you'll know your rights and limitations.

As you can see, easements in the Taos real estate market can be quite interesting and a real problem at times. The trick for the buyer and seller is to hold your real estate broker's feet to the fire to get you the information you need in order to make an informed decision.

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• Advantage Land Title
• First New Mexico Title
• Taos Title
• Teirras de Taos Title

As title insurance rates are regulated in New Mexico, there will be no difference in cost for a title policy at any of these companies.  They also use some of the same underwriters.  Some issues in the Taos real estate market surprise buyers.  This is particularly true when the buyer is purchasing vacant land.  Easements from old dirt roads, or easements through neighbor's property are quite common.  A buyer should be careful to thoroughly understand their rights to access the property, and whether the title insurance polcy actually insures their right to access.

Almost every buyer needs the Exceptions items explained.  Exceptions are those things "excepted" from coverage, thus they are not covered by the policy.  There are always at least 10 of them.  They include the original land grants and U.S. patents, which are what they are, and the title companies don't venture there.  They also include a list of items that are excepted, but can be covered if the buyer pays to have these exceptions removed.  I normally advise electing to have them all removed, as the title company will remove all but one for under $150.

The one that is the most important is the survey exception.  It will cost the buyer 15% of the title policy premium to have this exception removed.  I highly recommend that the buyer pay this cost so that the accuracy of the survey will be covered by the policy.  The seller by custom usually pays the title insurance premium in the Taos real estate market.  On a premium of say $2500, the buyer would pay the 15%, or $375 to have the survey coverage.

There are areas in the Taos real estate market that are unable to get title insurance at this time.  A large portion of areas west of the Rio Grande Gorge bridge were divided up many years ago into one quarter acre lots.  Carson Estates and Ranchos de Taos Estates are examples.  Many of these lots were given away or sold for a few dollars at the Seattle World Fair.  These parcels are unable to get title insurance.  There are many who build and live there anyway.

When you're purchasing property in the  Taos real estate market, don't rely on your broker to read the title insurance binder and catch problems.  You need to read it carefully and ask whatever questions necessary to satisfy your needs in understanding your title insurance coverage.

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This form covers subjects to include:

• Title
• Zoning
• Legal
• Available utilities
• Environmental hazards
• Access and roads
• Survey issues

Sellers should be totally honest in filling out this form, and no questions should be left unanswered. Not knowing something is OK, and should be indicated. Buyers rely on this document in their decision process, so it should be as accurate as possible.

All principals in a transaction should have fully signed copies of this property disclosure document. A real estate broker should be able to answer questions about the items on this document.

photo credit: veeliam

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