Every two years, Colorado Assessors must appraise all real estate in the state. Sales prices of properties taken from deeds, are used extensively in the appraisal process. Because of circumstances surrounding a sale (for example, a sale between family members), some selling prices may not be truly indicative of a property’s value.
Appraisers typically adjust sale prices when unusual circumstances exist, or disqualify (ignore) these sales altogether. The Real Property Transfer Declaration (TD-1000) alerts the appraiser in the Assessor’s Office to sales which may not be an indication of a property’s value. The following is a brief explanation of the purpose of each question on the Real Property Transfer Declaration:
1. Address and/or legal description for the real property sold:
Either the property address or legal description is acceptable. This information links the sale to the assessor’s records and identifies the property’s location.
2. Type of property purchased:
Place a check mark next to the type of property purchased. This information allows the assessor to use one form for all uses of property and to identify the type of property purchased.
3. Date of Closing:
The date the property is transferred from the seller to the buyer.
Date of Contract if Different from Date of Closing:
This allows the assessor to establish the exact date of the “meeting of the minds” concerning the date the sales price was agreed upon. The contract date may be of great importance, especially if the contract was signed a lengthy time prior to closing. This will have a great effect on market adjustments and thus on valuation.
4. Total Sale Price:
The total sale price is the most essential item of information concerning the sale, and its accuracy is carefully scrutinized. The total sale price will sometimes differ from the recorded documentary fee. The sales price usually matches the deed, but should ALWAYS reflect the amount the property was valued by the parties. While Quit Claim Deeds can have a $10 deed price, the “true” sales price should be reflected here. Adjustments to the sale price, often necessary before a sale can be used, are more accurate when the true price has been identified.
5. Was any personal property included in the transaction?
Personal property is generally defined as any property not affixed to the real property (structures). Obvious examples are automobiles, boats, dining room tables. Less clear examples are freestanding appliances (such as a refrigerator that rolls into place). This is one of the most important questions on the transfer declaration because this directly influences the adjusted sales price for that transaction. Over the course of thousands of transactions, these adjustments may influence the valuation models and thus the final property values for property tax purposes. See Examples.
6. Did the total sale price include a trade or exchange?
This question is looking for real property trades or 1031 exchanges. Transactions involving trades of additional items or property are sometimes excluded from the Assessor’s data bank of sales information, particularly when the value of the traded property is substantial or cannot be reliably established. A trade under the IRS Code Section 1031 would be included in the analysis and therefore needs to be identified.
7. Was 100% interest in the real property purchased?
This is crucial to identify whether or not the sale is a fee simple transaction (100%). If it is not, the sale price cannot be considered representative of the total market value of the property.
8. Is this transaction among related parties? Indicate whether buyer or seller are related. Related parties include persons within the same family, business affairs, or affiliated corporations.
It is important to know whether the buyer and seller are related individuals or corporate affiliates because such sales often do not reflect market value.
9. Check any of the following that apply to the condition of the improvements at the time of purchase.
When determining market value, the condition of the property at the time of sale is very important. If one or more of the items are checked, further analysis is conducted in order to establish the condition at the time of the sale. If the property was in poor condition, the sales price may have been lower than the actual market.
10. through 13. Finance Questions
When financing reflects prevailing market practices and interest rates, which is ordinarily the case with third-party financing, sales prices would not require adjustments. However, adjustments or other disqualifications may be considered if the type of financing is determined atypical or non-market.
The remainder of the questions are for purchases of property other than residential.
14. Did the purchase price include a franchise or license fee?
If a franchise fee or license fee is included in the sale price and the amount can be substantiated, the sales price will be adjusted to reflect the sale price of the real property only. If the franchise fee or license fee that is declared on the Transfer Declaration appears to be atypical, further analysis may be necessary before the sale is used.
15. Did the purchase involve an installment land contract?
Title is not transferred until the final payment is made. Oftentimes the purchase price is agreed upon years prior to fulfillment of the contract and filing of the deed. Therefore, the purchase price may not be reflective of the current date on the deed.
16. If this was a vacant land sale, was an on-site inspection of the property conducted by the buyer prior to purchase?
If the answer to this question is no, the possibility exists of an unknowledgeable buyer. Follow-up with the grantee may be necessary.
Validation by the person completing the Transfer Declaration form. Transfer declarations are confidential documents and may made available for inspection only to the grantee specified in the conveyance document, the grantor if they completed the declaration, Assessor staff and the Colorado Property Tax Administrator or employees.
18. Address and Telephone Number:
Telephone number and address to which all future correspondence regarding the property is to be sent. This is helpful if the property sold is not the same address as the owner of record. The telephone number is used to contact the person completing the Transfer Declaration for additional clarification. This number is not retained in the Assessor’s records nor is it shared with anyone.