Over the last 26 years of selling rural real estate, I have worked with many buyers that have what I call "Land Baron Syndrome" - the desire to own a hundred acres away from the crowds. They find the mountains and valleys that speak to their souls and begin the search for a parcel of land or a home for sale. When I first meet buyers, they usually know little about the area and need a lot of guidance. Every community is different, as different as the people that live there. Helping buyers locate the right rural property is more than just being a tour bus driver. It requires that the buyers be fully involved in the process - sharing their dreams, their priorities, present and future financial capabilities, lifestyle choices, and limitations. It's a little like dating, a little on the intimate side. When the communication is right, the energy of the buyer/broker team makes the buying process comfortable and fun.Buyers like being fully informed by a broker willing to share all the knowledge needed to make a decision for value and quality. Dreams then become reality and the buyers can experience the peace of mind that comes from knowing that they met their own needs on their own terms without surprises and unknown compromises.
Jan King is regularly featured as a mountain real estate specialist in Estates West, Unique Homes, Mountain Living, and Northwest Fly Fishing magazines. Jan's experience makes it easy for her to assist buyers in land selection and planning of the new home project in rural mountain settings. Her land expertise extends to all areas of the Bitterroot Valley from river bottom to high elevations.In the sections that follow, certain general land features are covered that are critical to a rural land purchase. These land features, whether present or absent, will significantly impact the value and feasibility of creating a residential dream in a rural environment. The features mentioned either contribute or diminish value. While this information is general in nature, the content will greatly assist buyers in the search for land outside city limits where services are not provided by a municipality.
WATEREach of us uses about 100 gallons of water a day. If your land search is outside an area serviced by a municipal water company, a water well will be needed. In Montana, it is not difficult to obtain a permit to develop a groundwater well for domestic use. Currently, the fee in Ravalli County (Bitterroot Valley) is $5.00 and can be obtained at the County Courthouse from the Department of Sanitation/Planning. A copy of the map relating to the land is needed or the tax identification number of the parcel. A distance of 100 feet is required from any existing or approved septic drain field on the subject property and neighboring properties. More information will be covered on septic systems in later sections.
While it is not difficult to get permission to drill a well, it may be difficult to get water. Certain areas are historically productive with quality potable water, while others are historically difficult, deep, or impossible within the normal range of budget. It is easy to understand why the presence of water would be the single most critical feature in the decision to purchase a rural property for residential use - without water you have nothing but dirt.
One way that buyers can determine water well feasibility is to ask about neighboring wells. At We Lead the Way Group we can access the Ground Water Information Center's general data base at Montana's Bureau of Mines. We can obtain information very quickly pertaining to the depth and gallons per minute of all the recorded wells surrounding a parcel of land under consideration for a future home. While this data is not a guarantee of a successful well, it is helpful in determining whether the area is problematic for water.
I once had a buyer that said to another broker of a well that was 400 ft. deep, "Isn't that kind of deep?" His comment was a classic when he said, "Not if there's water in the bottom."
Depending upon the information available, the buyer may choose to ask for the seller's permission to drill a well prior to closing the transaction as part of the offer to purchase. Sellers are sometimes cautious about this because the disclosure of a known dry well will inhibit a future sale should that occur. But, most of the time, sellers will agree to closing the transaction after a satisfactory well is drilled at the buyer's expense within a reasonable time. The purchase agreement should clearly state the maximum depth and minimum gallons per minute that the buyer will accept (which can be based on the available research data).
DRILLING A WELL
The names of water well contractors throughout Montana can be obtained by writing the Board of Water Well Contractors, DNRC, 48 North Last Chance Gulch, Helena, MT 59620-1601 or by calling (406) 444-6643. Also check local agencies, normal advertising sources, and references before you select a contractor. Comparing prices and services is always a good idea. The general rate at the time of this publication (2000) is around $30.00 - $32.00 per foot for a finished well, not including wiring or pressure tank, but including the submersible pump. Well drilling contractors are required to be licensed and bonded in Montana so check to see that the contractor of your choice is current, has experience, good equipment, and is reliable. You should have a written contract stating the materials to be used, maximum depth, financial arrangements, and costs before drilling begins.
DON'T START CONSTRUCTION OF THE HOUSE UNTIL YOU HAVE WATERIf water witchers - dowsers are available in your area, consider asking for their services. Many disbelievers have been convinced of the merits of dowsing. The well location may have a significant influence on where the home is located. Remember to make the well accessible when you design your driveways, fences, out buildings, etc. If the well needs servicing in the future, the big well truck will need to get back to the site safely in any weather conditions.
PRIVATE SEPTIC SYSTEMS
Homes not served by public sewer must depend upon a septic system to dispose of wastewater. The design and installation of septic systems is under the legal supervision of county authorities in Montana. When land buyers contemplate a purchase in Montana, it is a MUST to verify that the property will meet the requirements needed to obtain a septic permit.
NEVER BUY PROPERTY FOR RESIDENTIAL USE WITHOUT VERIFICATION OF A SEPTIC PERMIT!
A conventional standard septic system consists of a tank and soil drainfield. The tank is usually made of concrete and designed with a 1,000 gallon liquid capacity. The size of the tank and the drainfield is legally determined by the number of bedrooms in the home. Therefore, it is important for land buyers to size the home they will be building on the land in the future. The real treatment of wastewater occurs in the soil beneath the drainfield. Long underground perforated pipes connect to the tank and are laid in gravel-filled trenches in the soil. Liquid waste flows out of the tank and is evenly distributed into the soil where it percolates downward and outward and eventually into the groundwater. Chemical and biological processes treat the effluent before it reaches groundwater.
The presence of high ground water will greatly effect whether a property is suitable for a septic system. Steep terrain, hardpan or bedrock, and heavy clay soil, will also limit whether a property can qualify for a septic permit and be used for a residence.
MANY PARCELS OF LAND IN MONTANA HAVE NEVER BEEN REVIEWED FOR SEPTIC APPROVAL
Review of the soil makeup by the county authorities will provide the specifications for the system and the placement of the drainfield. This may dramatically effect where the home is placed or require that wastewater from the home be pumped from the home to a distant location of the drainfield. Buyers sometimes envision the ideal building site with the fabulous mountain view without considering the septic system placement. Be informed before you buy!
Septic systems are relatively easy to maintain when cared for properly. Raw sewage from the toilets settles in the bottom of the tank where it is eventually decomposed by bacteria. Some non-decomposing solids remain, forming a sludge layer that must be pumped from the tank periodically. Maintenance depends upon the size of the home and number of occupants. Water waste goes into the drainfield, and light solids, such as soap scum and fat, float to the top and form a scum layer. Septic users should avoid pouring grease or cooking oils down the sink drain and restrict the use of your kitchen garbage disposal. Paints, disinfectants, and chemicals kill the microorganisms which decompose waste and can damage the soil structure in the drainfield. Most systems will last the lifetime of the home when pumped regularly and cared for. Design landscaping, walks, and driveway in such a way that there is access to the tank for maintenance and that traffic will not be traveling over the drainfield.
Location of the septic tank and drainfield must be measured a minimum and maximum distance from foundation walls, property lines, natural slopes over 15%, wells, ditches, creeks/rivers, and flood plains. Obtaining the necessary specifications and permits prior to buying land will greatly contribute to the success of optimal building placement, views from the home, vehicle use design, and ease of care.
In Montana, roads are owned by different entities. These entities are State, U.S. Forest Service, County, or private individuals or groups. Only State or County roads are public. It is important to determine both ownership and maintenance of the roadways that lead to the property that is being considered for purchase. The road may look easy to travel in the summertime but be quite another matter with winter weather and snow removal. U.S. Forest Service roads are maintained only for the Service and not necessarily for the residents in the area. Many Counties have road agreements pertaining to such roads. Contact the County Road Department in the area where you are buying and ask about road maintenance. Before closing on a property where a new home is to be built, check with the County Road Department to determine whether an approach permit can be obtained for a new driveway. Many properties that were platted before such regulations were strictly enforced have no access approval. Costly driveways, culverts, and bridges may be the result of the information. Bridges require special permits and environmental review when placed over perennial flowing streams and rivers. Ditch companies must give their permission when bridging over water delivery ditches. A good review of access to the proposed building site and all physical features - wells, septics, future barns, etc. is a must before you buy the land.
TITLE INSURANCE
Title insurance provides protection to the named insured for any loss sustained from title defects not excepted in the policy. When a property goes to closing/settlement in Montana, the rule is usually "he who benefits pays". But with regard to title insurance, the SELLER PAYS FOR THE TITLE INSURANCE. The single premium paid at the time of closing by the seller is based upon the sales price and is fairly uniform from one title company to another. The buyer is insured for their entire ownership of the property and the policy is usually not assignable.
Title insurance has two types of policies - an owner's policy and a mortgagee's policy. A mortgagee's policies is required by a lender when money is borrowed against the property. The additional premium for the mortgagee's policy is always paid by the buyer. These policies cover different interests in the property so be sure to read and understand the dollar amount of coverage that is provided.
Title Insurance will address the following items for coverage:One of the most misunderstood aspects of purchasing acreage in Montana is that of acreage size. Title insurance does not insure acreage size. Only a survey of the property by a licensed surveyor will determine acreage.
• Access to the property
• Legal description
• Verification of ownership
• Verification of liens against the property or owner
• Taxes due against the property
• Zoning or private restrictions on the property
• Utility easements
Title Insurance will NOT guarantee the following items for coverage:
• Unrecorded liens against the property
• Acreage amount - size
• Encroachments on the property (i.e. the neighbor's fence or barn)
• Boundary line disputes
• Water rights
In Montana, there are many parcels that are described by what is called rectangular survey. A portion of a section of land is called an aliquot part. A visual aid for rectangular survey and aliquot part is shown below:
A Section of Land = 640 Acres
(One Mile x One Mile)
THE PRELIMINARY COMMITMENT FOR TITLE INSURANCE is a very important part of the land purchase! Buyers need to understand the entire document prior to moving forward in the transaction. If your real estate agent/title company representative cannot adequately explain the conditions under which the insurance will be issued, the buyer should have the title commitment reviewed by a local attorney familiar with real estate.
CLOSING OF SALE
At We Lead the Way Group, 80% of our transactions are closed by mail. The title company that is providing the insurance is licensed and bonded to facilitate closing the transaction, paying off underlying liens and taxes, and recording the new documents at the County courthouse. Property sales that use bank financing are usually closed by the title company, rather than the bank. It is a valuable service and the costs are very reasonable at around $350.00, which is usually split 50/50 by buyer and seller. Recording fees, title insurance, and miscellaneous fees constitute the balance of the costs making closing expenses for each party much lower than in other states - under $500.00 per half not including taxes, mortgages, and insurance. Unless there is a need for legal counsel, many transactions go forward with little or no legal review.
UTILITIES
Electrical service and telephone are not widely available throughout Montana. Development of such services was not required in the past to create subdivisions of land. Buyers should be certain to inquire about the availability of services and the costs to bring them to the property when evaluating asking price and formulating offers to purchase. Rough cost for underground electrical service is around $6-7 per foot. Permission for obtaining easements through neighboring properties or along public roads should be determined as well.
High speed telephone lines and cable television services are not widely available throughout Montana. Check with your real estate professional to determine availability in the area where the property in consideration is located.
PERMITS
BUILDING PERMITS
In areas outside cities, building permits are not required in some counties for farm buildings or residential buildings containing less than five dwelling units, private garages, and private storage buildings used for the owner's personal use.
ELECTRICAL PERMITS
State electrical permits are required on all electrical work done in Montana except in cities certified to issue electrical permits and conduct inspections. A homeowner may wire his own home, garage, and premises using a state homeowners electrical permit. Inspections are conducted by State Electrical Inspectors. All contractors performing electrical work for others must be licensed to do so in Montana. All work must be inspected before being covered up in order to meet National Electrical Code.
PLUMBING PERMITS
State plumbing permits are required to connect to public water systems and sewer systems. Homeowners may do their own plumbing without a permit on their own single family dwelling. Farms and ranches are exempt from state plumbing permits. Plumbers providing services to others are required to be licensed in Montana.
For further information: Contact Building Codes Bureau (406) 444-3933
WATER RIGHTSWater is precious. The presence of water will usually increase the value of land in Montana. No other single feature is more misunderstood or disputed than water rights.
The following is a brief of the high points of water rights understanding intended to enable a prospective property buyer to ask good questions and know where to seek good answers in matters related to water.
"FIRST IN TIME IS FIRST IN RIGHT." A person's right to a specific amount of water depends upon when the use of water began. When years are dry, the first person uses the water he has historically used before the second user, and so forth.
Later records are kept by the Department of Natural Resources and Conservation. Field offices are located around the State to serve the public in documentation and brief review. Private water consultants are available for hire to prepare summaries on individual properties and water claims. Review fees range from $100.00 to $500.00 depending upon the complications and number of claims to be reviewed. Montana Water Court has prepared temporary preliminary decrees from water claims in much of western Montana making review easier for buyers in that region. Claims made for private domestic wells and livestock are exempt from the review and adjudications process.
Water is divided into several categories:
• Domestic Water
• Livestock
• Groundwater
• Surface Water
• Instream Flow
In practical residential/farm use, the household is served by a domestic well. The livestock drink from water that flows through the property either by ditch or stream. The pond fills from a small spring or underground source and water is pumped from the river to irrigate the hayfields. One piece of land may have all types of water and therefore all types of claims.
Water rights have been disputed for many years. Many a story is told of neighbors squabbling over the water to care for the fields. In today's world with today's land prices and dollar yields for crops, it is unlikely that the crop will be used as the sole source of revenue for the mortgage on the "farm". A comprehensive review of the water that has been historically used to care for the land and the responsibilities associated with ditch shares or water management are important for the buyer to review with their agent and consultants. The goal is to manage weeds, keep the land green and lush for stock and wildlife, and enjoy the lifestyle rural living has to offer. Be informed and be happy.
Water rights transfers are done at closing as part of the documentation process and the fees are usually well under $100.00 and are paid by the buyer. Any change of water use or diversion must be reviewed and approved by the Department. Forms are relatively easy to understand and staff is available to assist with their completion. Ponds and stream development are closely regulated. Existing ponds, especially those that have approval for stocking with trout, are treasured land features.
For more detailed information contact:
Montana Department of Natural Resources and Conservation
Water Resources Division
Water Rights Bureau
PO Box 202301
Helena, MT 59620-2301 (406)444-6610
CONSERVATION EASEMENTS
MONTANA HAS MORE ACRES PROTECTED FROM DEVELOPMENT BY CONSERVATION EASEMENTS THAT ANY OTHER STATE IN THE NATION
The efforts of private land trusts to assist landowners in the voluntary preservation of natural landscapes throughout Montana have helped insure that the beauty of Montana will remain for generations to come.
A conservation easement does NOT mean that the public has permission to use another's land. It means that certain rights have been pledged away to a local land trust in perpetuity to protect open space, wildlife habitat, and special plant life. This charitable pledge is much like the donation of fine art to a museum - it can benefit the land owner in tax review and certainly benefits the public by increasing the preservation of natural landscapes from residential and commercial development.
FINANCIAL BENEFITS
High income buyers may benefit financially by purchasing a parcel of land and then placing a conservation easement on it. The loss in value by pledging the subdivision rights, logging rights, and other development rights results in a charitable contribution that can be deducted from gross income. Jean Hocker, president of the Land Trust Alliance, states " We live in a time of change unimaginable just a short time ago - unprecedented prosperity has brought development to parts of the country we never thought would be touched by sprawl." Conservation easements on significant land parcels great and small will protect land for generations to come.
People who turn to conservation easements are usually motivated by their love of the land. But tax incentives are increasingly part of their rationale, thanks to both the enormous increase in real estate values and recent tax-law changes. Estate taxes can be lessened by a conservation easement making it possible for family members to keep the property rather than being forced to sell the land to pay the taxes due upon death. Assessments for taxes are also reduced.
CONSERVATION BUYER'S PROGRAM
We Lead the Way Group works with non profit land trusts to preserve scenic wildlife and ranching values by matching buyers with properties that merit protection. By working with land trusts to purchase and preserve these properties, buyers may become eligible for significant tax advantages. Look for the notation "Conservation Property" on many of our listings that have been identified as properties of conservation merit.
For More information contact Jan
Jan has served on the Board of Directors for the Bitter Root Land Trust, the local non-profit land trust organization that is preserving scenic wild life and ranching values in the Bitterroot Valley.
FROM COMMERCIAL PROPERTY TO MONTANA RANCHES
IRC 1031 EXCANGES
Thanks to the IRC 1031, a properly structured exchange allows investors to sell property, to reinvest the proceeds in a new property and to defer all capital taxes. Pursuant to IRC 1031, capital gain deferment requires the exchange of like-kind relinquished property for other like-kind replacement property. Any real property held for investment or real property used in trade or business can be exchanged for other real property held for investment or any real property used in a trade or business.
 LIKE-KIND PROPERTY  |
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