President/General Counsel of Cherry Creek Title Services, Inc.,
Agent for Commonwealth/Fidelity & First American
Please note this is a revised article written in 2016
2019 UPDATE on FSBO TIPS
The new Colorado residential real estate contract, which is mandatory for use by licensees as of January 1, 2019, contains some subtle language revisions for purposes of clarification as well as several new provisions and modifications. Some of these changes are as a result in changes in federal and state laws since the previous contract it replaced.
DOWNLOAD NOW (Writable): 2019 Purchase Contract for Residential Property courtesy of the Colorado Division of Real Estate
The Colorado Division of Real estate replaced many of the mandatory forms for licensees effective January 1, 2019 including:
- Agreement to Amend/Extend
- Contract to Buy and Sell Real Estate (Residential)Contract to Buy and Sell Real estate (Income-Residential)
- Contract to Buy and Sell Real Estate (Land)
- Contract to Buy and Sell Real Estate (Commercial)
- Contract to Buy and Sell Real Estate (Foreclosure)
- Counter proposal
- Estoppel Statement
- Notice to Terminate
- Residential Addendum to Contract to Buy and Sell Real Estate
- Square Footage Disclosure (Residential)
- Licensee Buy-Out Addendum to Contract to Buy & Sell Real Estate – Repealed January 1, 2019
This article shall cover just the Contract to Buy and Sell Real Estate (Residential). All of these and many other useful forms can all be downloaded at no cost from the Colorado Division of Real Estate’s website: https://www.colorado.gov/pacific/dora/division-real-estate-contracts-and-forms. On May 10, 2019, the Colorado Real Estate Commission changed paragraph 13 to comply with HB19-1098 regarding deeds conveying real estate. The revised form is mandatory for real estate licensees July 1, 2019. This modest change to the Contract to Buy and Sell Real Estate with the new section 13 incorporates language that if title is conveyed by a warranty deed, it will be conveyed “subject to statutory exceptions” which are defined in §38-30-113(5)(a), C.R.S. This change to the form does not affect this article regarding tips on preparing the contract.
Thankfully, the Contract to Buy and Sell Real Estate (Residential) is now writable (simply download to your computer and then open it). Just click on the document; download it and open it in Adobe (free version works fine) to enable you to fill it out directly on the document. Many/most licensed real estate agents have sophisticated e-contract programs that are writable and allow for e-signatures. If you’re selling your home with the assistance of a licensee, they’ll likely have access to an efficient system for the contract preparation, delivery and execution.
I would be remiss to begin by not first strongly urging you to seek competent legal counsel in the preparation of the contract and the ramifications of its many provisions. This article is not intended as a substitute for hiring an attorney nor is it intended to be a comprehensive analysis of the Colorado Residential Contract to Buy and Sell Real Estate. Rather, this article is intended to provide a general overview in filling out the contract and should not be relied upon in lieu of the advice of a competent attorney. I’m not going to waste your time giving advice or tips on obvious blanks or paragraphs containing blanks or boxes where it’s obvious how to fill them out.
As you fill out the form Contract, you’ll find that there will likely be many provisions that are inapplicable. Some are ideal for just putting n/a in the blank, and some should be interlineated (line through the language). In cases where you line through provisions, I recommend leaving the language you lined through still visible. So, you could draw a diagonal line through a paragraph to strike it yet leaving the language still viewable. Similarly, you can just draw a line through the middle of every sentence you wish to strike since that will also leave the language you’re striking as visible. Leaving the language visible that you are striking may assist in resolving any ambiguities that may arise by completing deleting or redacting through such provisions.
Paragraph 2.1 gives three options regarding how the buyer is taking title. Most often, one of the first two is selected. If there is only one buyer, no selection needs to be made since it will be held in Severalty automatically. If there is more than one buyer, joint tenancy gives survivor-ship rights to the other joint tenant or tenants. It is the election made by virtually all married people as their interest in the property goes to the surviving spouse automatically when they die and does so outside of probate. By electing to own as Tenants in Common, each owner’s interest passes according to their wills or intestate succession in the event no will exists. A classic example is two unrelated people investing in a rental property and owning as tenants in common thereby intending their interest to pass to their heirs rather than the surviving tenant in common.
Paragraph 2.3: The seller’s name can be easily ascertained by going to the website of the assessor for the county in which the property resides. Depending on the county, you’ll see other valuable and interesting information there such as the legal description, tax information, valuation, sales history and the present owner plus more depending on the county. You can also go to Zillow.com; type in the property address and see Zillow’s estimated value (Zestimate), photos and even comparable property sales. You can always call Cherry Creek Title Services and obtain the ownership information and legal description. If you err in how you list the owner’s name or legal description, the title examiner at Cherry Creek Title will provide the correct information in the title commitment.
Paragraph 2.4: This is where you insert the legal description of the property. This can be found at the county assessor site; in the seller’s deed; in the seller’s title policy; and through a record title search.
Paragraph 2.5.3: After “except”, it should typically read “no exceptions”. This paragraph is dealing exclusively with personal property such as a refrigerator, and most buyers want the assurance that there are no liens against such personal property.
Paragraph 2.5.4: This is where you insert all other personal property items included with the sale. Being exhaustive and perhaps redundant is preferable to having a dispute later over whether specific personal property items were to be included. Examples to include here are appliances included with the sale that aren’t built in such as the refrigerator, washer and dryer. When in doubt, just list it to be safe.
Paragraph 2.5.5: The parking and storage facilities, if applicable, are both identified and disclosure is made whether they are Use Only or Ownership. These are tough questions for the buyer filling out the contract. Is the parking and storage part of the deed or are they limited common elements giving the owner of the property the exclusive right to use? The first place to start is to ask the seller who may or may not know. A review of their deed and the documents governing the common elements such as the condominium map, if applicable, and the declaration may be necessary to ascertain whether the parking and storage is owned by the Seller or not. When preparing the contract, this is when the management company can be very helpful as they likely know. There is always time after the contract preparation to verify these facts.
Paragraph 2.6: Exclusions should include items that would otherwise be considered as included such as a light fixture which the seller is keeping, but it is also wise to list the unattached personal property such as the refrigerator, washer and dryer to avoid any misunderstandings.
Paragraph 2.7.1: If you are dealing with water rights being deeded, I’d highly suggest you hire an attorney versed in water law and let them determine the type of deed you should use. They likely will recommend a bargain and sale or quit claim deed if you’re the seller. This comes up rarely in a typical residential transaction. Water law is complex and beyond the scope of this article. However, this will virtually never come up in an urban residential transaction so you will likely be putting “n/a” in this blank.
Paragraph 2.7.2: Same advice as above. If water rights are being conveyed, likely both parties will have attorneys involved, and the selection of the deed for water rights is better negotiated by experts. Thankfully in the overwhelming majority of urban residential transactions, just put “n/a”.
Paragraph 2.7.3: If water is provided by a well, although seeking legal advice is again a wise path, at least visit the Colorado Division of Water Resources to review and verify the legitimacy of the permit. That’s the time to vigilantly look into any limitations, time frames, etc. regarding the well permit. Well issues can be complex, and obviously having water to the property is essential. The permit number can be obtained from the Seller and/or the Colorado Division of Water Resources. If you’re relying on a well for your water supply, I’d certainly advise employing an expert to inspect the well to ensure it will meet your needs.
Paragraph 2.7.4: Sometimes water rights will be transferred via stock certificates. Once again (thankfully), this is very rare in urban residential transactions. I’d highly recommend legal advice from an attorney with water law expertise in any situation involving the transfer of water rights.
Item 1: If the earnest money isn’t being paid concurrently with the contract, insert the date it will be paid here. It should be within 24-48 hours.
Item 2: I recommend choosing a date 7-10 days after the contract acceptance date to give the parties time to select the title company; get them the contract, earnest money, payoff information, and any HOA information if applicable. Plus, the title company needs time to do the title search and prepare and distribute the title commitment and related documents.
Item 3: I recommend choosing a date 3-5 days after the date selected in Item 2.
Item 4: I recommend using the same date as item 2.
Item 5: I recommend using the same date as item 3.
Item 6: I recommend using a date 3-5 days after the date selected for Item 3.
Item 7: First rights of refusal are rare in Colorado. I’d fill this out as n/a. If it applies, the seller can counter and also provide the deadline since there’s no point putting in a deadline shorter than what is actually provided in the language of the first right of refusal if one exists. For example, all the existing owners in a complex may have 30 days to match the terms of your contract and usurp you as the Buyer. So in that situation, you’d want to pick a date more like 40 days out to give the seller/association/management company time to comply with the terms of any existing first right of refusal which of course begins with notification to all parties possessing any such right, and that likely won’t happen overnight.
Item 8: I’d choose a date 5-7 days after contract acceptance. That’s plenty of time for the seller to get a full set of association documents from the property management company or association. An organized seller will have all of those documents on-hand at the time they market their home. If not, they should be able to procure them all from the management company within that 5-7 day time period.
Item 9: I’d choose a date 3-5 days after the date in Item 8.
Item 10: I’d choose a date no more than 3 days after contract acceptance. The seller should be ready to hand that to you along with the signed contract so same day as contract acceptance is not unreasonable at all. Again, the Seller’s Disclosure Form is available for free from the Colorado Division of Real Estate website.
Item 11: Within 3 days of contract acceptance. The seller should have this available immediately.
Item 12: Within 3 days of contract acceptance.
Item 13: Within 3-5 days of contract acceptance.
Item 14: 3-5 days after acceptance date if applicable or n/a.
Item 15: 3-5 days after acceptance date.
Item 16: This will virtually always be “n/a”. If it does apply, 3-5 days after acceptance date.
Item 17: This will virtually always be Another “n/a”. If applicable, 3 days after the date in Item 16.
Item 18: Likely n/a; however, if applicable, 4 weeks after acceptance date. Although an appraisal, survey and even a lender’s title policy may all be unnecessary, assumption approvals can still take significant time.
Item 19: 10-14 days after acceptance. If the seller is carrying back financing, read my article on the Cherry Creek Title Services, Inc. website entitled “Private Mortgages Post-TRID and Specific to Colorado.” It is best to involve an attorney to at least draft the loan documents even if the seller has done 3 or fewer loans in the last 12 months. I’m not a fan of laymen drafting loan documents and especially since 2008. Both Colorado and Federal laws impose strict restrictions on owner carries. Always consult an attorney knowledgeable regarding owner carry loans post Dodd-Frank and in compliance with all Federal and Colorado laws.
Item 20: Within two weeks of contract acceptance.
Item 21: Within 3 days of the date in Item 20 is reasonable.
Item 22: Within 3 days of the date in Item 21 is reasonable.
Item 23: Within 10-14 days of contract acceptance.
Item 24: Within 3 days of the date in Item 23 is reasonable.
Item 25: Within 3 days of the date in item 24 is reasonable.
Item 26: As with all the recommended dates for appraisal, survey or inspection deadlines, knowing how long these professionals will take to complete their tasks is obviously advantageous in filling out all of these dates. I am choosing dates that work in the majority of circumstances and certainly can be countered by the Seller or amended later. With that said, I’d expect the inspector to complete the inspection within 7 days of contract acceptance and provide the report within 2 days of completing the inspection at the most. So, choosing 10 days from contract acceptance for the inspection deadline would be reasonable.
Item 27: Within 3 days of the date in item 26 is reasonable.
Item 28: Within 3 days of the date in item 27 is reasonable.
Item 29: Within 5-7 days of contract acceptance.
Item 30: Within 5-7 days of contract acceptance.
Item 31: Within 3 days of the date in item 30 is reasonable.
Item 32: Within 3-5 days of the date in item 31 is reasonable.
Item 33: Entirely up to how long the seller is willing to wait for the buyer’s home to sell.
Item 34: Within 3 days of the date in item 11.
Item 35: Obviously negotiable. Typically, 4-6 weeks from contract acceptance.
Item 36: When I purchase, I like possession on the “date of delivery of deed”. I do a pre-closing walk through the day of the closing so I see what I’m actually getting, and I provide for such a walk-through to take place in the Additional Provisions paragraph (paragraph 30). Many times the seller needs something like “3 days after delivery of deed” to move out. They want to make sure the house actually closes before moving. However, many a buyer has been disappointed with the condition/cleanliness of homes delivered after the seller has received their money, and although it rarely happens, some sellers actually do not vacate timely and must be evicted.
Item 37: Entirely up to the parties. If possession is on the date of delivery of deed, I’m going to choose a time that’s an hour after the closing time.
Item 38: I usually preferred to not pressure people while not giving them so much time they can go use your offer as leverage with other potential Buyers. 1-2 days is common.
Item 39: 5:00 p.m. is a nice time to choose for this blank.
I realize filling out the preceeding 39 items was tedious, time consuming, and not much fun. Especially if you took the time to look at each paragraph referred to by the items. The good news is the contract moves much quicker from here forward.
Paragraph 4.1: These 2 columns will balance when completed correctly. Assumptions are extremely rare since they all basically require the Buyer to qualify since almost every loan has a due on sale clause enabling the existing lender to preclude assumptions without lender approval. There is rarely Private Financing that isn’t seller financing. This is due to the many state and federal laws that do apply to non-seller private lenders making such loans virtually unavailable unless the property is for investment purposes. Even parents cannot provide their own children with financing without complying with complex Colorado laws. See my article entitled “Private Mortgages Post-TRID and Specific to Colorado” on the Cherry Creek Title website.
Paragraph 4.2: Before I filled this blank in, I’d verify with the lender if buyer Credit/seller concessions are allowed with the buyer’s intended loan and the limits to such concessions.
Paragraph 4.3: It will typically be in the form of a “personal check” although we see wires more and more often these days. Some sellers are willing to accept earnest money promissory notes although they usually only do so if they come due within 24 hours of contract acceptance. See Paragraph 4.3.1. In the “held by” blank, insert the name of the title company you select. Cherry Creek Title Services, Inc. holds all such funds at no charge in a federally insured escrow account.
Paragraph 4.4.1: paraphrases the Colorado good funds law. Virtually all lender funds arrive via wire, and Buyers most often provide their funds to close via wires as many title companies will not accept anything but wires. However, the cashier’s check is still used and accepted at many title companies. If you use Cherry Creek Title Services and wish to use a cashier’s check, call to find out the procedure.
Paragraph 4.5.3: If the buyer is getting a new loan, the type of loan is checked here.
Paragraph 4.6: Assumptions are rare, but if one exists, the blanks are all self-evident and the answers obtainable from the lender holding the loan to be assumed. Like any paragraph that is inapplicable, you’ll normally just be drawing a diagonal line through that paragraph or interlineate each line. That still leaves the inapplicable language readable making it the preferred method of deleting inapplicable provisions since being able to read what was deleted can resolve a possible future ambiguity as discussed in the beginning of this article
Paragraph 4.7.1 applies when the seller is carrying back financing. Since I highly recommend utilizing a competent attorney to prepare any loan documents on behalf of the seller, I’d recommend they advise you on how to complete this paragraph.
Paragraphs 188.8.131.52 and 184.108.40.206: If applicable, each party has the right to terminate the contract based on dissatisfaction with the private loan terms as long it is done timely as provided in the contract.
Paragraph 6.4: Check the box who is paying for the appraisal. This is almost always paid for by the buyer, not the seller
Paragraph 8.1.1: I wouldn’t personally check this box.
Paragraph 8.1.2: I’d check this box electing to choose my own title insurance company, and of course I’d choose Cherry Creek Title Services. I wouldn’t let a seller pick my title insurer no more than I’d let them select my homeowner’s insurance. By reducing the offer price by the cost of the title policy, the seller is effectively paying for it via the price reduction, but the buyer is selecting who handles the closing and who is issuing the title policy of which they are the insured, not the seller. You wouldn’t let the car dealer pick your auto insurance, so why would you let the Seller or their agent pick out your title insurance? Title underwriters vary in strength, size, reserves and ratings. It does matter who issues your policy if you ever have a claim. At the time of writing this article, Cherry Creek Title is an authorized agent of the top two underwriters in the world, Fidelity (Commonwealth) and First American. We have been successfully helping “For Sale By Owner” sellers for decades and welcome their deals. The fees are absolutely no different than deals originated from real estate agents and no attorney opinion letter is required. Shop around and compare rates for closing fees and the cost of the owner and lender (if applicable) policies. Ask about whether a re-issue rate is available.
Paragraph 8.1.3: I’d check “Will”. I always obtain OEC for myself and recommend it for my clients. It covers many items that actually do result in claims and is inexpensive. In that paragraph you also select who will pay for OEC.
Paragraph 8.1.4: These documents are of public record and this paragraph is primarily definitional. All such documents are provided by Cherry Creek Title at no cost as long as they are of public record, which they virtually always are.
Paragraph 8.1.5: Copies of Title Documents: These are the documents referred to in 8.1.4, and Cherry Creek Title provides them at no cost.
Paragraph 8.1.6: This will virtually never apply. Abstracts are extremely rare. I would interlineate through the line so there is no ambiguity and all parties are aware the seller has no abstract to provide the buyer.
Paragraph 8.2 is self-explanatory. It summarizes the buyers right to review all title documents, commitments, endorsements, etc. and what happens when they aren’t provided timely and discusses termination and how the lack of the Buyer providing notice of termination is effectively an acceptance of the condition of the title.
Paragraph 8.3: This paragraph deals with off record items (not recorded so not discoverable by the title company). Sometimes parties enter into contracts during development or prior to construction knowing certain easement and other agreements will be recorded at the time of delivery of deed. Like 8.2, it provides that failing to object is effectively acceptance of any such items.
Paragraph 8.4 has been a mandatory disclosure in all capital letters for many years and many iterations of the Colorado licensed real estate agent mandated contract. It is a warning to the buyer to inquire whether the property they’re buying resides in a Special Taxing District. These Special Taxing Districts are vehicles used by the developer to finance such things as the cost of grading the land and the costs of building/installing streets, curb and gutter, utilities, drainage, and other improvements to the land. Sometimes there are off-site improvements as well. If you’re an early buyer in an area subject to such Special Taxes and the development fails to sell well, you could be paying extremely high taxes since there won’t be enough other owners to share the costs. I think it’s highly risky to buy in a new community subject to a Special Taxing District. I wouldn’t.
Paragraph 8.6: Rights of First Refusal are rare. Some had racist origins/motivations. Many years ago, some communities reserved rights of first refusal to the other property owners in the community to match the terms of any contract and thereby keep out people they didn’t want to live there. They are rarely if ever created anymore, and when they do exist, it is important to comply with the terms of such first rights of refusal. It typically involves notification of all the affected parties with a time deadline to match the contract. Thankfully, first rights of refusal are very rare these days.
Paragraphs 8.7.1 through 8.7.5 discuss oil, gas, water and minerals. In platted urban property, zoning isn’t going to allow someone with mineral rights to your home to construct an oil well. However, that may be the case in rural, industrial and some other residential property settings. And, horizontal drilling techniques have adversely impacted homeowners.
Paragraph 8.8: This advises all parties to consult an attorney. The need for an attorney increases with the complexity of the transaction; existence of title issues; oil and gas issues; owner carry financing; the existence of a special improvement district and many other possible circumstances.
Paragraph 9.1: In a typical residential transaction involving a new loan, the lender will require an ILC (Improvement Location Certificate). An ILC is a very basic “survey-like” document that shows the property boundaries and the location of the improvements, easements, and any encroachments. Suffice it to say that in a residential deal with the Buyer getting a new loan, you’ll be checking the ILC box.
Paragraph 9.1.1 and 9.1.2: Since it’s for the benefit of the buyer and specifically their lender, I’d check the boxes where the buyer orders the ILC and pays for it.
Paragraph 9.1.3 has a blank which may be n/a or to add other parties to whom are entitled to a copy of the ILC, survey etc. Examples are the buyer’s lender or attorney.
Paragraph 10.7 is where you’d insert the address of a property that the contract was conditioned upon its sale. So, if the Buyer was only obligated to purchase if successful in selling a property first, here’s where you’d list it.
Paragraph 10.8 is important. I prefer that the Seller readily has their Property Disclosure https://www.colorado.gov/pacific/dora/node/95951 (Colorado Real Estate Broker Mandatory Contracts and Forms/disclosure documents/ Sellers disclosure document (residential) available to the Buyer so the Buyer can check the box they’ve received a copy. Same advice for any Source of Water Addendum and the Well Disclosure when applicable.
Paragraph 10.10.1 and 10.10.2 require the seller to provide the buyer with a completed Lead-Based Paint Disclosure if the property being sold had its building permit issued prior to January 1, 1978 and gives the Buyer the right to conduct a risk assessment if appropriate. The Disclosure form is available at the Colorado Division of Real Estate website. The applicable federal law, Lead Disclosure Rule and compliance requirements can be found on the internet through HUD and the EPA. The applicable federal law, Lead Disclosure Rule and compliance requirements can be found at: http://portal.hud.gov/hudportal/HUD?src=/program_offices/healthy_homes/enforcement/disclosure.
To find out more information on by the EPA “Protect Your Family From Lead In Your Home”, Click Here.
Paragraph 12.2: I advise whoever prepares the contract to concurrently prepare the closing instructions which are also available through the Colorado Division of Real Estate website.
Paragraph 12.3: “Mutual Agreement of Buyer and Seller” is very common.
Paragraph 13: This blank requires the deed form to be selected. Almost all residential deals involve general warranty deeds. Virtually all commercial deals, builders, and often Sellers represented by attorneys choose special warranty deeds. If you choose any other type of deed such as a bargain and sale or a quit claim deed, you’ll very likely run into issues with the title company being hesitant or unwilling to insure anything less than a warranty deed, and the Buyer may not accept anything less than a general warranty deed since that is the ubiquitous deed for residential conveyances.
Paragraph 15.2: These blanks are obvious. Most common is One Half by each party.
Paragraph 15.3: These blanks are obvious as well. Most common is the Buyer paying these charges since they are for the Buyer’s benefit.
Paragraph 15.4: Many are misguided and believe this always applies to the very small doc fee charge by the assessor (1 penny per hundred dollars as of this writing). But, many resort towns like Vail and even Glendale imposes a local transfer tax on the sale of property. These taxes can be substantial so being aware of their existence and amount is crucial. Once known, the parties can choose how they’re paid. Sharing this expense equally between Buyer and Seller is very common.
Paragraph 15.5: The Buyer usually pays the Private Transfer Fee. A common example is the HOA transfer fee that basically every association charges (a few hundred dollars) to transfer their ownership records from the previous owner to the new one.
Paragraph 15.6: This needs to be investigated by the seller and buyer but rarely applies.
Paragraph 15.7: Sales and Use Tax is rare in a typical residential sale transaction thereby triggering the None box virtually every time. An accountant should be consulted if a transaction involves sales and use tax. I’d check the None box, and if there was a counter that disclosed such a tax existed, I’d get the advice of an accountant and require the Seller to pay any such Sales and Use taxes.
Paragraph 16.1: Taxes: For a typical transaction involving either vacant land or the sale of property with an improvement (e.g. house) that’s been there at least two years including any additions, alterations, modifications of any kind, I’d select the most recent mill levy and assessment. If the sale involves new construction or recent improvements were made to the property, I’d contact the county assessor to discuss the property. Here’s why: Typically, choosing the most recent mill levy and assessed value results in a fair proration and happy parties. Using last year’s taxes for proration purposes almost always ensures the new Buyer will not be given the seller’s fair share for the preceding year since taxes typically increase every year. Taxes are payable in arrears so 2018 taxes are payable in 2019. If you close late in the year, the amount becomes more significant. For instance, say you close at the end of November, and the seller gives the buyer a credit of 11 months of taxes based on the previous year to cover their part of the bill for the current tax year that won’t be due until the following year. Since residential tax settlements are virtually always final settlement, when the tax bill comes and the buyer sees they didn’t get the seller’s fair share of the 11 months they owned the property, they have no recourse. Using the most recent mill levy and assessed value is better since it will always be at least as current if not more so than the previous year’s taxes. There are special circumstances where it is worth making a more thorough inquiry regarding the taxes. See my article on the Cherry Creek Title website entitled “When Pro-Rating Property Taxes Using the Most Recent Mill Levy and Assessed Value is a Mistake & Important Contract Tip Regarding New Home Purchases. It discusses circumstances such as new construction and recent improvements made where it may be advisable to check the “other” box and choose a different solution to pro-rating property taxes.
Paragraph 16.2: The rent paragraph is obviously only applicable if the property comes with tenants. If so, the buyer and seller can mutually agree whether rents are based on rents received or using the accrual method. Typically, the buyer will want it based on rents received, and the seller would like to use the accrual method thereby getting credit for expected rents before they’ve actually been received.
Paragraph 16.4: This is a catch-all paragraph for anything being pro-rated besides water, sewer, propane or interest on a loan being assumed. It’s usually going to be “nothing else”, but there may be a storm sewer or other pro-ration item that may apply here.
Paragraph 16.5: All settlements of taxes, rents, security deposits, HOA fees and other Association related fees; water, sewer, assumption interest and anything else disclosed will be the Final Settlement of such pro-rations. If the property taxes end up being higher than expected months later when the county assesses the property for a higher amount and/or increases the mill levy, the new buyer cannot return to the seller and demand additional amounts if the seller ended up paying less than the seller’s proportional share of the previous year that the seller owned the property. The contractually agreed method to prorate taxes in a Residential transaction is Final Settlement.
Paragraph 17: This paragraph addresses possession. Most residential transactions do not involve buyer’s taking the property subject to existing tenancies, but some do. That is addressed here. What is also addressed is establishing a daily rental owed by the seller for failing to deliver the property to the buyer at the promised possession date and time. Obviously this amount is negotiable and also typically varies with the value of the property. The daily rent for failing to deliver payment on a million-dollar home might be double the rent for a property selling for ½ that amount. In this paragraph the buyer represents whether or not the buyer intends to occupy the property as the buyer’s principal residence. Additionally, there is a box that can be checked if the seller is going to rent the property back from the buyer in which case the parties agree to execute a Post-Closing Occupancy Agreement. There is a Post- Closing Occupancy Agreement available through the Colorado Division of Real Estate website.
Paragraph 21.1.1: If the Specific Performance box is checked, and the buyer defaults, the seller has the ability to not only retain the buyer’s earnest money, but may also sue to compel the buyer to perform. Most/all buyers would prefer this box is not checked so if they default, the damages are limited to forfeiture of the earnest money deposit. When the box is not checked, Paragraph 21.1.2 will apply which limits the seller’s remedy to retaining the earnest money in the event the Buyer defaults.
Paragraph 30: This is where terms unique to the transaction may be inserted. Attorneys, buyers and sellers have much more leeway here than licensed agents. Licensed agents are severely restricted in their ability to craft custom contract language.
Paragraph 31: Attachments that are part of the Contract such as Addenda.
Paragraph 31.1.1: This provides that a copy of the Post-Closing Occupancy, if applicable, is attached. And again, there is a Post-Closing Occupancy Agreement available through the Colorado Division of Real Estate website.
The remainder of the Contract including the signature portion is all self-explanatory and won’t be addressed in this article. If no licensed agents are involved, I would interlineate (draw lines through) everything after line 881.
This article is intended for educational purposes only and not as legal advice.