In Colorado, all licensed real estate brokers must use forms approved by the Colorado Real Estate Commission or have an attorney draft a form specific to each transaction.
The most common form is the state-approved contract to buy and sell real estate. This document allows the buyer and seller to come to an agreement on price and terms before earnest money is deposited or any money is spent on inspections or loan applications.
The most common contingencies in the contract – physical inspection of the property, title review, appraisal review and loan approval – are described below. Sellers should be aware that a buyer generally is able to terminate the contract without forfeiture of his earnest money if the buyer is not satisfied with the resolution of the contingencies.
By contract, buyers have the right to have the property inspected for any physical condition, including condition of home and appliances, utility service to the property, existing or proposed transportation projects or any odor or noise. The inspections are paid for by the buyers, and the buyers have the final say on whether they are satisfied with the results.
Title review allows a buyer to investigate any document that has been recorded against the property, including covenants, road agreements, easements and liens. If a property has mineral rights or leases, a mineral search may be important, as well. Other documents involved in a homeowners association are reviewable by the buyer and will help determine the financial stability of the HOA. Final determination regarding the acceptability of these items lies with the buyer, as well.
If a loan is required, an appraisal will be required by a lender but may also be requested by the buyer when there will not be a loan. The appraisal contingency gives the buyer the right to terminate the contract if the property does not appraise for the agreed-upon price.
The lender must approve the buyer for the requested loan. If approved, the buyer still may object if the terms of the loan are not his earnest money. The buyer is required to act in “good faith” and should not use one of the contingencies as a technicality to terminate the contract.
As always, an attorney should be consulted if there is confusion regarding the rights of a buyer or seller.
Gina Piccoli has been a licensed real estate broker in Colorado for 30 years and owns Coldwell Banker Heritage House Realtors in Durango. She also serves on the Colorado Real Estate Commission. Piccoli can be reached at gina@realestatedurango.com.
