Sunday, April 30, 2006

WATER FACTS: Approximately 66% of the annual water flows from the Colorado watershed occurs during the late spring/early summer runoff. These water flows cannot be fully utilized by Colorado agriculture, communities and residents unless they are stored in reservoirs. Vallecito, Lemon, McPhee and Jackson Gulch Reservoirs store spring water flows from the San Juan and Dolores watersheds for year-round beneficial use in southwestern Colorado. Only 3% of the annual water flow occurs during the winter months of December, January and February. Without water storage in southwestern Colorado, there would not be stable water supplies for our agriculture, communities and residents during either the low-flow inter months or the dryer late summer months.

Colorado Water Table
& Water Terms
One acre foot of water equals...
~ An acre of land covered with one foot of water
~ 325,900 gallons of water
~ Enough water to supply a family of five for one year
One cubic foot per second (cfs) equals...
~448 gallons of water per minute
~1,983 acre feet (af) of water in twenty-four hours of water flow
~ 646,320 gallons of water in twenty-four hours of water flow
One million gallons of water per day (mgd) equals...
~ 3.07 acre feet (af) in one day
~ 1,120 acre feet (af) in one year
As we earlier posted, water allocation is normally controlled by ditch companies and measured in cubic feet per second (cfs.) The amount of water represented by one share in the ditch company can vary from company to company. A buyer should to be thorough in their due diligence when purchasing irrigated property to be certain there is enough water for their needs. That's where we can help. If you have questions or would like additional information about Durango real estate, give us a call or email.

Tuesday, April 25, 2006

BAYFIELD: Here is an update on our April 17 post. The cease-and-desist order issued last month against the Bayfield Sanitation District has been amended to allow the town to resume issuing building permits and sewer taps. As a condition of the amendment, the sanitation district must complete a plant expansion by July 1. If the district fails to do so, the moratorium will be reinstated. All other provisions of the cease-and-desist order remain in effect, including meeting deadlines for completing studies and submitting regular progress reports.

The most crippling affect of the order was it prevented Bayfield from issuing new building permits and sewer taps that would result in more waste flowing into the town's treatment plant. In the 25 days since the order was issued, the town has had about 20 building permit requests. Those permits will likely be issued this week according to Interim Town Manager Joe Crain.

We applaud the Town of Bayfield for its rapid response to what was a critical situation. The moratorium threatened to spoil the entire building season. Hopefully now the builders, subcontractors, workers, suppliers, and most importantly the homebuyers can get on with the business of making southwest Colorado the best place to live in the U.S.A.

Monday, April 24, 2006

WATER RIGHTS: We find that one of the most confusing things for newcomers to our area to grasp is Colorado water law. Since the 1860s, The Colorado Doctrine has defined the four essential principles of Colorado water law:

1. All surface and ground water in Colorado is a public resource for benefical use by public
agencies and private persons.

2. A water right is a right to use a portion of the public's water resources.

3. Water rights owners may build facilities on the lands of others to divert, extract or move
water from a stream or aquifer to its place of use.

4. Water rights owners may use streams or aquifers for the transportaion and storage of water.

Practical application of The Colorado Doctrine means that water can be moved from where it is found to where it is needed based upon a priority system of "first in time, first in right." People, with water rights, who live along the river usually have diversions from the river to their lands. Away from the river, landowners are dependent upon irrigation ditches to deliver their water. The irrigation ditches are mutually-owned non-profit corporations established to deliver water to owners. Each ditch company has a board of directors, a secretary to handle the office business, and a ditch rider who controls the actual water flow. Operations are based on the by-laws of each ditch company and by Colorado corporate law.

We'll discuss more water facts and issues in future postings. In the meantime, if you have questions or would like additional information about Durango real estate please give us a call or email.

Thursday, April 20, 2006

TITLE INSURANCE: Having spent over 20 years in the title business this article caught my eye. According to a 2005 member survey by the American Land Title Association (ALTA), title problems were found in 36 percent of all residential real estate transactions (new and resale homes and refinances), up from 25 percent in 2000.

According to Rande Yeager, president of ALTA, "The most frequent curative action taken last year was obtaining releases and/or pay-offs for discovered liens, such as prior or existing first or second mortgages, unpaid child and spousal support, outstanding taxes, and other judgments against the property." The next most common action was obtaining releases for assignments followed closely by recording errors of names, addresses or legal descriptions of the property.

In my opinion all of these curative items are daily "housekeeping" problems inherent to the business. Title companies rarely suffer losses due to these types of issues because they are easily discovered and cured. So where is the real risk in the title business and why is title insurance important to the consumer? Title companies take loses, sometimes huge, every year due to fraud, identity theft, etc. Two examples, one involving a seller and the other a buyer will illustrate my point:

Several years back I conducted a closing. The sellers were an elderly couple selling their home and relocating to be near the grandchildren. The buyers, a mother and son, paid cash. A nice clean deal, right? Wrong! Ninety days after the closing we received notice that the buyers had embezzled the funds used to acquire the property and legal action was forthcoming to retrieve the funds. In the absence of title insurance the sellers would have faced a long ordeal not to mention huge legal expenses. The title company negotiated a settlement and the sellers never new there was a problem.

In the early 1980's a prominent Houston mortgage banker's business was lending purchase money, secured by a deed of trust, to homebuyers and then selling the loans in the secondary market. All was well until homeowners began receiving foreclosure notices from lenders they had never heard of. The mortgage banker had sold the same loans to two, three or even four investors and eventually couldn't support the snowball. Texas title companies took enormous loses on this one.

Real estate involves lots of money. Anytime big money is on the line there's always someone trying to figure a way to get their hands on it. THAT'S why title insurance is vital to both buyers and sellers.

Monday, April 17, 2006

BAYFIELD: The much anticipated growth boom in Bayfield may have hit a speed bump. The Colorado Department of Health and Environment has issued a cease-and-desist order against the Bayfield Sanitation District. The order prevents the district from issuing new sewer taps for Bayfield and surrounding areas. It also prevents the town from issuing building permits that would result in more waste flowing into the district's plant. The order was issued at the request of the Southern Ute Indian Tribe which complained that the district has exceeded capacity and polluted the Los Pinos River. The tribe takes its drinking water 1.5 miles downstream from Bayfield. The sanitation district is a special district and is not owned or operated by the Town of Bayfield. How long the cease-and-desist order remains in effect largely depends on what the state will require and how quickly the sanitation district moves forward with expansion plans.

There are about 625 homes in Bayfield. The Town Board has approved more than 400 new homes. Building permits must be issued before construction can begin. That can't happen until the order is rescinded and we don't see that happening any time soon. Our area is growing. Until the sanitation district problems are resolved the growth has to occur in areas not served by the district such as Forest Lakes; thereby creating a upward pressure on lot and home prices. /

Tuesday, April 11, 2006

REVERSE 1031 EXCHANGE: The IRS code also provides for a "reverse exchange." As a matter of fact, Mary & I are in the middle of a reverse 1031 exchange at the present time. The basics are the same as a regular 1031 except in a reverse the individual acquires the new property up front. From the day of closing you have 45 days to announce the property or properties that will be relinquished (sold) and 180 days to complete the sale to remain within the "safe harbour" period. The primary difference in a "regular" and "reverse" 1031 exchange is in a regular exchange you MUST complete the exchange within the 180 day safe harbour period. A reverse exchange still has the 180 day safe harbour period but experts tell me to the best of their knowledge the IRS has never looked at a reverse exchange that went beyond the 180 day period.

This should not be construed as providing tax or legal advice. If tax or legal advice is needed, please consult your attorney or accountant. Or, we can put you in touch with a "Qualified Intermediary" in Durango.

Monday, April 10, 2006

TAX DEFERRED EXCHANGES: Internal Revenue Code Section 1031 states:

"No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment."

This code provides that capital gains taxes are deferred when investment real estate is exchanged rather than sold. Over the long term, acquiring real estate through exchanges is an excellent method of building wealth. Section 1031 allows continued exchanges, enabling the owner to increase equity without the burden of capital gains tax.

We've seen a lot of real estate investment dollars move to the Durango area via 1031 Exchanges. Important items involved in a 1031 Exchange:

- Both your old property and new property must qualify as 1031 property.

- You have 45 days after the closing to prepare a list of properties you want to buy.

- You have 180 days after the closing to acquire one or more of the properties on your 45 day

- You may NOT touch the money. Typically the money is held by a "Qualified Intermediary"

- The holder of title to both your old property and your new property have to be the same.

- In general, you must equalize the debt on your old and new property.

This should not be construed as providing tax or legal advice. If tax or legal advice is needed, please consult your attorney or accountant. Or, we can put you in touch with a "Qualified Intermediary" in Durango.

Saturday, April 08, 2006

DURANGO: The City of Durango has released its annual report for 2005. It notes that the Department of Planning and Community Development is responsible for overseeing the review, development and inspection of private and public development projects, and implementation of plans and programs related to the location and quality of the City's growth and development.

In 2005, the planning staff restarted the Comprehensive Plan Update process and saw the Residential Infill Design Guidelines process to adoption. The Downtown Vision and Strategic Plan as well as the Three Springs Development Agreement projects were also completed to adoption. Three Springs is the development that will occur surrounding the new Mercy Medical Center. In addition, the department initiated review of the Three Springs Codes and Standards, adopted revised Downtown Design Guidelines and new Commercial Use Design Guidelines. Permits for 244 new residential building units, primarily infill, were issued, the second highest on record. /

Thursday, April 06, 2006

DURANGO HERALD: "Ewing Mesa Land Goes for $40M" Wow! Looks like the big boys have found us. For those of you who don't know Ewing Mesa is a 1,965 acre tract that lies between Durango and the new hospital development in Grandview. Durango officials approved the Ewing Mesa Area Plan in 2004. The plan envisions a mini-city with houses, parks, schools and commercial development on the mesa above Highway 3 and south of Horse Gulch. The purchaser, Denali Partners LLC, based in Minneapolis, is currently in a 60 day inspection period. A senior city planner is quoted as saying the development will not occur soon. Our view is no one lays down $40 million and just sits on it. If this deal goes through look for the development wheels to start turning. /

Wednesday, April 05, 2006

LAS VEGAS: Re/Max International announced at our annual convention the launching of a new When fully implemented the consumer will have the ability to see virtually every property that is listed in the United States regardless who is the listing broker. We will be the only real estate company in the country with this incredibly customer friendly tool on our corporate site. Our section of Colorado is scheduled to be on line sometime in late May. Mary & I are very excited to be associated with such a progressive company like Re/Max. It enables us to deliver an ever increasing level of service to our clients. /