Common Land Terminology

1031 Tax Deferred Exchange  If  you will have a capital gain on your land sale,  this may be a way of deferring the (taxable) capital gain  by selling one property and buying another of equal or greater value within certain time frames. By doing a series of 1031 exchanges,  it is possible for a property owner to escape capital gains taxes altogether!   On his death, the property will pass to his heirs with a new stepped up basis.However, there are some strict  deadlines and procedures that must be followed, so a good real estate attorney must be consulted.

Acre, size of  An acre is  43,560 square feet in size.  It can be any shape, but if it is a perfect square it will measure 208.7 feet by 208.7 feet. For a house with a septic system, the minimum lot size required ranges from 1/4 acre to 1 acre, depending on the local regulations. Typically, to keep large animals, like horses or cattle, local regulations require 5 acres per animal.

Adverse Possession  State laws vary, but most states decree that if someone occupies part of or all of your land in an open and hostile fashion for a continuous twenty years or more, and you are either not successful in removing him, or just ignore his presence, that he will get ownership of the land in question. It’s very important therefore if you own a large tract of land, to periodically walk the boundary lines, to see if there is any encroachment on your property. A common ploy is for neighbors to move fence lines. Oddly enough, there is a simple way to overcome this: you can simply write the offending neighbor a letter giving him permission to encroach, stating that  the  permission can be revoked by you whenever you wish. Such a letter should be recorded at the county courthouse. However, get the opinion of your lawyer on this, as state laws may vary.

APN  Assessors Property Number. This is the ID number assigned to your parcel by the county assessor.

Board Feet     A commonly used unit of measurement for standing timber. One board foot is twelve inches square by one inch in thickness. The density  and value of a timber tract is often measured in the number of board feet per  acre.

Capital Gains  The profit made upon the sale of a property owned one year or longer.  This is determined by the sale price  less any expenses,  and depletion or depreciation,  incurred during the holding period.  The tax rate on capital gains is subject to change, so consult your accountant.

Capital Loss   The loss made on the sale of a property held for one year or longer. It can be deducted from your regular income, and is therefore an important tax-saving device. For investment property you can normally add up all of the expenses you have incurred in all the years you have owned the property  to figure your loss, including property taxes, assessments, maintenance, and various improvements. If you had to travel to your property during the time you  owned it, you may be able to deduct travel expenses as well;  but check with your accountant, as individual circumstances may vary.

Closing   The transaction that transfers ownership from the seller to the new buyer, usually with the execution   of a new deed signed by both parties. It is normally then recorded at the County Recorder’s Office.

Deed    A document that conveys the property from the seller to the buyer. There are two main types in general use: the Warranty Deed, in which the seller guarantees that he has clear title with no exceptions or gaps in the chain of ownership; and the Quit Claim Deed, in which the seller merely states that he passes over to the buyer any rights that he may have as concerns the property.  The County Recorder’s Office will normally get a copy of the deed, and it becomes part of the public  records.

Easement  A privilege or  right held by  the owner of one property to perform an activity on another property. The activity could be anything- from harvesting  a neighbor’s apples, to  taking a dip in his siwmming pool. The most common easement is the right of ingress and egress, usually called a right of way, which gives one owner the right to travel across someone else’s property in order to access his own property. An easement usually has to gotten by purchasing it, after  negotiations between owners of  adjacent properties. However, in the case of landlocked properties, rights of way can sometimes be assigned by judicial decree.   To be valid all easements must be in writing, and should be recorded at the county courthouse.  A title search will usually, but not always,  find existing easements.

Equity  The difference between the value of a property, and the sum total of all debts and liabilities pertaining to it.

Installment Sales  This can be a tax-saving device, in that If you sell your property and take payments  that last more than one year, you can save on your taxes by  stretching out the recognition of your  profit (or loss) so that is  proportionate to the payments you receive.   For more information, check with your accountant.

Joint Tenants  Usually called “joint tenants with right of survivorship”, this type of ownership applies to  persons who own a property together. However, if one joint tenant dies, ownership  passes entirely to the other tenant, and not to the deceased tenant’s heirs. It is most often used with married couples.

Land Contract  Sometimes called ”contract for deed”, this is an agreement between an owner and a buyer to give the buyer the   deed  to the property when  the purchase sum is paid in full;  either in a lump sum or by means of periodic installments.  The buyer is usually given possession of the property at the outset when the contract is signed, but the seller retains the deed until all the money has been paid.

Mineral Rights  In many states where oil and gas wells are common, mineral rights are often sold separate from the so-called surface rights. Mineral rights do include oil and gas, but can also be the right to mine gravel, gold, copper, precious stones, etc. Surface rights include the right to grow crops, grow trees, and to build structures such as houses.    This  can become a problem for owners of smaller tracts, as  mineral rights trump surface rights. In other words, the owner of mineral rights can do whatever it takes to extract the minerals, even though that may hurt the owner of the surface rights. For instance, oil production generally requires an area of from 3 to 10 acres, and also access roads.  For an owner of a small property, who only bought the surface rights, and not the mineral rights,  this may be devastating.

f you need to cure this problem, there are basically three different approaches. ( 1) By lapse of time. States differ, but usually if 20 or 30 years have passed since the first granting of the mineral rights, and the person who bought the rights has done nothing on your property,  you may go to court to extinguish  the mineral rights claim.  (2) You may  buy it back from the owner or owners of the mineral claim, who will then give you a quit claim deed. It may, however, be a problem finding the owners, since often several generations will have passed since the original purchase. (3) You may file a partition law-suit. If you own the surface rights, and someone else owns the mineral rights, you are considered co -owners of the same property, and your interests can be separated by means of a court-ordered  auction. You can then buy  the mineral rights back at the auction.  If the owners of the mineral rights or their heirs cannot be found, you may be able to  file a quiet title suit  to solve this problem.

Option  The property owner, called the optioner, gives the  exclusive right to someone else, called the optionee, to purchase his property at a specified price within a specified time frame. The optionee has a right to buy the property, but is not obligated to, and can let the option expire without exercising it if he wishes.

Option, Non-Exclusive   When this type of option is used, the owner gives the optionee the right to purchase the property at a certain price, and by a certain date, but reserves the right to sell to anyone else for whatever price he wishes at any time.  The optionee therefore has the right to buy the property at the option price  unless the optioner sells it to someone else  before he buys it.

Ordinary income.  This is income that the IRS deems is earned income. Examples of earned income are wages for work done, and the profit that a business earns. Profit from property bought and sold could be considered ordinary income by the IRS if the property is owned less than a year. This is contrasted with capital gains, which has a lower tax rate, but applies only to property held more than one year.

Perc test This is a test done on a potential building site by a soil scientist to determine the suitability of the soil for a conventional septic system. If a site does not “perc”, there are other options for a septic system available, but they tend to be much more expensive.

Purchase Contract  An agreement between on owner of a property and a buyer in which the owner agrees to sell the property for a certain price on a certain date. The property must be described in a way so that it is identifiable. Many more elements can be added by mutual agreement, but these are the basic terms.

Quiet Title Suit  A lawsuit to determine who owns a piece of real estate and so “quiet” any disputes over the title. By “title” is meant “ownership”. Some examples are uncertainty about the boundary, claims by a lien holder, a question about an old mortgage, or an easement that’s been used for years without  a recorded description. A quiet title lawsuit names as defendants anyone who might have an interest (including descendants — known or unknown — of prior owners). Notice of the action must be posted on the property and published in an approved local newspaper. If the court rules that the plaintiff is the rightful owner, it will grant a quiet title judgment, which can be recorded and will settle the issue of ownership. Quiet title actions are a common example of “friendly” lawsuits in which oftenthere is no opposition. Depending on the state, a quiet title suit may take from 3 to 6 months, with legal fees ranging from $1,500 to $3,000.

Tenants in Common  A way of holding title for two or more parties, where they each hold an undivided interest in the property. If there is no agreement to the contrary, it is assumed that each has an equal share.  If one tenant in common dies, his share passes to his heirs.  This form of ownership is rarely used  for married couples.  Joint tenancy is more likely to be used.

Timber Cruise  This is an inventory  of timber on a timber tract taken by a professional forester.  It will                              contain the total volume of timber, broken down by  species and the  average sizes of  the trees. The volumes are usually expressed in terms of thousands of board feet (MBF) or tons, and are further broken down to reflect the amount of  saw timber, which  has a diameter at breast height (DBH) of  14” or more;  veneer logs, which have no          imperfections and have a diameter  DBH of 16” or more ; chip-n-saw timber, which have a diameter DBH of 10-13”; and  finally pulpwood, which has a diameter of 6-9”.

Title Insurance  The usual definition of “title” is “ownership”; so title insurance is  a guarantee by an  insurance company that the previous owner  had proper ownership, so that he could  convey  clear title to the new owner. Prior  this guarantee, the title company searches  the public records  to make sure that there is an unbroken  chain of  proper conveyances going  back many  years, sometimes to the very beginning of the original land grant.  They also search for    anything else that could be a cloud on the title, such as mechanics’  liens, judgments, easements, divorces, probates, etc.

 

 

Ready To Sell Your Vacant Land?

Get a fair all cash offer on your unwanted raw land below. We're professional land buyers and can make you a no-hassle no-obligation offer on your property.

Get Started: Get Your Cash Offer Below...

We are direct land buyers. There are no commissions or fees and no obligation whatsoever. Start below by sharing where your property is and where we can send your offer...
  • What city and state is the property located in
  • This field is for validation purposes and should be left unchanged.

Leave a Reply

Your email address will not be published. Required fields are marked *