[WSBARP] Short Platt developer and excited buyer

[Jeanne Dawes]

Josh, if I understand correctly the developer is going to deed the entire 40 acres to your client?  Sounds dangerous.  In addition to Steve’s comments, there may be some tax consequences, if the value of the property is more than the annual gift tax exemption.  One more thought, the Treasurer will assess REET on the FMV, even if the purchase price is $1.  Additionally, the bank still won’t lend on just part of it, they will want to take the entire 40 as security.  Big problem on the deed back to the developer if it is now subject to a mortgage.    It sounds like a bad idea.

Jeanne

Jeanne J. Dawes
Attorney at Law
Gore & Grewe, P.S.
103 E. Indiana Avenue, Suite A
Spokane, WA 99207-2317
Voice:  509-326-7500
Fax:      509-326-7503
jjdawes at goregrewe.com<mailto:jjdawes at goregrewe.com>
INFORMATION CONTAINED IN THIS E-MAIL TRANSMISSION IS PRIVILEGED AND CONFIDENTIAL.

From: wsbarp-bounces at lists.wsbarppt.com [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Josh Grant
Sent: Tuesday, June 23, 2015 2:20 PM
To: wsbar
Subject: [WSBARP] Short Platt devloper and excited buyer

Developer is developing a 40 acre piece.  He will be short platting it into 5 acre pieces.  Surveyor is telling him this should be no problem in getting this approved.

My client is a prospective buyer.  They have a legal description for his five acres from the surveyor.  He wants to get going with a new house.  I told him, “no, you have to wait til the short plat is approved, for a bunch of legal reasons, but in addition the bank won’t lend you the $250,000 for the new house til you are a fee owner”.

So now the two of them have agreed as follows:

Developer will sell the 40 acres to the client for the agreed upon purchase price of the five acre ($35,000). Developer will continue to pay all costs to get the short plat approved (about a year from now).  Developer will be obligated to pay all costs even though client will be signing the applications etc.  Developer will be granted an option to purchase the 35 acres back when the short plat is finally approved for $1.00.

Would the 1% excise tax be based on the $35,000 first sale?  Probably.  The transfer back of the 35 acres for $1.00 plus all the development costs... what would the excise tax be based on?
I see lots of problems from the developer’s side, but what else would the buyer be exposed to if this never gets approved?

and if this is a doable thing, anyone have forms for the option to purchase ?  (yeah right).

Thanks

Josh

Joshua F. Grant, PS
Attorney at Law
P. O. Box 619
Wilbur, WA 99185
tel 509 647 5578
fax 509 647 2734
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