Colorado Contracts and Regulations
Introduction
Congratulations! You have accomplished much. You have reached the point of transition from the academic knowledge of the license law and Commission Rules and Position Statements and are now ready to apply this knowledge to the real world. You will now learn the process of completing Commission-approved listing/employment agreements – just as you will do for every transaction in which you are involved throughout your career.
There are six different varieties of listing (employment) contracts approved by the commission. Four are used to list properties for sale or rent. The remaining two are used to “list” either a buyer or a tenant for whom you will locate properties.
By the end of this unit, you will be able to:
· Recognize the six listing/employment agreements used in Colorado
· Describe the purpose of the Exclusive Right to Sell Contract, when it is used and explain the purpose of each of the paragraphs
· Differentiate between the Exclusive Right to Sell Contract and an Exclusive Brokerage Contract
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Property Listing Contracts
Here is a short summary description of all three; 1 listing agreement and two (2) listing addenda:
Exclusive Right-to-Sell: You will recall from the Law and Practice course that this is the most common and best protection for the broker. The broker will receive the agreed-upon commission if the property sells anytime during the contract period, no matter who sells it. Payment is also earned if the seller sells to anyone with whom the listing broker negotiated during the listing and whose name the listing broker submitted to the seller in writing before the listing expired.
Brokerage Addendum Exclusive: The licensee prepares the Exclusive Right to Sell Listing Agreement and attaches this addendum to that listing agreement so that it reserves to the seller the right to sell the property independently of the listing broker. If this occurs, the seller owes no commission to the broker. Functions the same as the Exclusive Right-to-Sell with respect to protection of commission against other competing brokerage firms.
Open Listing Addendum: The licensee prepares the Exclusive Right to Sell Listing Agreement and attaches this addendum to that listing agreement in which the seller agrees to pay a commission only to the broker that is the procuring cause of the sale. The seller may sell on his/her own, or through any number of other brokers with open listing agreements and owe no commission to the first listing broker.
Because they are the most commonly used forms, we will examine the Exclusive Right-to-Sell and Exclusive Right-to-Buy and then compare the addenda by exception. Because you must understand and be able to explain every paragraph in the contract, we will re-print every paragraph verbatim in its own screen regardless of length and then provide instructional comment if needed in italic font on the same screen. The addenda to the Exclusive Right to Sell Listing Agreement will follow by comparison at the end of the Exclusive Right-to-Sell.
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Exclusive Right-to-Sell
The printed portions of this form, except differentiated additions, have been approved by the Colorado Real Estate Commission. (LC50-6-19) (Mandatory 1-20)
This note is atop every Commission-approved form. Forms are numbered [in this case LC50, plus the month and date of its allowable use (1-20)]. The mandatory use date is also shown.
Exclusive Right-To-Sell: Preamble
THIS IS A BINDING CONTRACT. THIS FORM HAS IMPORTANT LEGAL CONSEQUENCES AND THE PARTIES SHOULD CONSULT LEGAL AND TAX OR OTHER COUNSEL BEFORE SIGNING.
Compensation charged by real estate brokerage firms is not set by law. Such charges are established by each real estate brokerage firm.
The bold all-caps warning implements Rule E-14, and Conway-Bogue case law. As to commission rates, make sure you only discuss your firm's rates and services, and avoid comparing your firm or yourself to any other practitioners. See also Paragraph 23.
DIFFERENT BROKERAGE RELATIONSHIPS ARE AVAILABLE WHICH INCLUDE BUYER AGENCY, SELLER AGENCY OR TRANSACTION-BROKERAGE.
Implements the license law (C.R.S.12-10-408(1)(c)). There really are only two types of brokerage relationships - agency (regardless of the principal) and transaction-brokerage (regardless of the principal).
Note also that all three of the above warnings are pre-printed above the title of the form. They are not technically part of the agreement between the principal and the broker that follows.
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Exclusive Right-to-Sell (continued)
EXCLUSIVE RIGHT-TO-SELL LISTING CONTRACT
____SELLER AGENCY ____TRANSACTION-BROKERAGE
Date:
One of these boxes must be checked in accordance with the a.) desires of the seller and b.) your employing broker’s written office policy. If there is a conflict, consult your employing broker before proceeding. The date should be the date the contract is prepared. Each party also dates his or her signature at the end of the contract as of the date signed.
1. AGREEMENT. Seller and Brokerage Firm enter into this exclusive, irrevocable contract (Seller Listing Contract) and agree to its provisions. Broker, on behalf of Brokerage Firm, agrees to provide brokerage services to Seller. Seller agrees to pay Brokerage Firm as set forth in this Seller Listing Contract. IMPORTANT NOTE: The listing is between Seller and Brokerage Firm. While you are the only member of the firm in the brokerage relationship (agency or T-B) under Colorado’s designated brokerage law, the FIRM owns the listing.
2. BROKER AND BROKERAGE FIRM.
· ___ 2.1 Multiple-Person Firm. If this box is checked, the individual designated by Brokerage Firm to serve as the broker of Seller and to perform the services for Seller required by this Seller Listing Contract is called Broker. If more than one individual is so designated, then references in this Seller Listing Contract to Broker shall include all persons so designated, including substitute or additional brokers. The brokerage relationship exists only with Broker and does not extend to the employing broker, Brokerage Firm, or to any other brokers employed or engaged by Brokerage Firm who are not so designated.
· ___ 2.2 One-Person Firm. If this box is checked, Broker is a real estate brokerage firm with only one licensed natural person. References in this Seller Listing Contract to Broker or Brokerage Firm mean both the licensed natural person and brokerage firm who shall serve as the broker of Seller and perform the services for Seller required by this Seller Listing Contract.
Designated brokerage applies only to multiple-person firms. Paragraph 2.1. allows for designating more than one person (teams) and for the employing broker to substitute or add other brokers later.
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§3 Defined Terms
· 3.1 Seller:
· 3.2 Brokerage Firm:
· 3.3 Broker:
· 3.4 Property. The Property is the following legally described real estate in the County of………………………., Colorado: known as No. ............ Street Address City State Zip together with the interests, easements, rights, benefits, improvements and attached fixtures appurtenant thereto, and all interest of Seller in vacated streets and alleys adjacent thereto, except as herein excluded.
3.1 This is where you begin to insure a continuing clear chain of title by entering the Seller’(s) name(s) exactly as they appear on the Seller’s deed. The deed is also the best place to obtain the legal description.
· 3.5 Sale; Lease
· 3.5.1 A Sale is the voluntary transfer or exchange of any interest in the Property or the voluntary creation of the obligation to convey any interest in the Property, including a contract or lease. It also includes an agreement to transfer any ownership interest in an entity which owns the Property.
· 3.5.2. _____If this box is checked Seller authorizes Broker to negotiate leasing the Property. Lease of the Property or Lease means any lease of any agreement between the Seller and a tenant to create a tenancy or leasehold interest in the Property.
· 3.6 Listing Period. The Listing Period of this Seller Listing Contract shall begin on _____, and shall continue through the earlier of (1) completion of the Sale of the Property______________ or (2)____________, and any written extensions (Listing Period). Broker must continue to assist in the completion of any sale or lease for which compensation is payable to Brokerage Firm under § 7 (Compensation/Holdover) of this Seller Listing contract.
· 3.7 Applicability of Terms. A check or similar mark in a box means that such provision is applicable. The abbreviation “N/A” or the word “Deleted” means not applicable. The abbreviation “MEC” (mutual execution of this contract) means the latest date upon which both parties have signed this Seller Listing Contract.
· 3.8 Day; Computation of Period of Days, Deadline.
· 3.8.1 Day.As used in this Seller Listing Contract, the term “day” shall mean the entire day ending at 11:59 p.m., United States Mountain Time (Standard or Daylight Savings as applicable).
· 3.8.2 Computation of Period of Days, Deadline. In computing a period of days, when the ending date is not specified, the first day is excluded and the last day is included, e.g. three days after MEC. If any deadline falls on a Saturday, Sunday or federal or Colorado state holiday (Holiday), such deadline ___ Will___ Will Not to the next day that is not a Saturday, Sunday or Holiday. Should neither box be checked, the deadline will not be extended.
3.5 Note the inclusion of less than a sale of the total property (any interest or an installment land contract or lease) as being defined in the sale definition – and therefore generating a commission to broker.)
3.7 MEC: The latest date upon which the parties have signed is actually the date signed by the seller, or if countered by the seller, it will be the date signed by the buyer upon acceptance of the counterproposal.
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§4 Brokerage Relationship
· 4.1. If the Seller Agency box at the top of page 1 is checked, Broker represents Seller as Seller's limited agent (Seller's Agent). If the Transaction-Brokerage box at the top of page 1 is checked, Broker acts as a Transaction-Broker.
· 4.2. In-Company Transaction - Different Brokers. When Seller and buyer in a transaction are working with different brokers, those brokers continue to conduct themselves consistent with the brokerage relationships they have established. Seller acknowledges that Brokerage Firm is allowed to offer and pay compensation to brokers within Brokerage Firm working with a buyer.
· 4.3. In-Company Transaction - One Broker. If Seller and buyer are both working with the same broker, Broker shall function as:
· 4.3.1. Seller's Agent. If the Seller Agency box at the top of page 1 is checked, the parties agree the following applies:
· 4.3.1.1. Seller Agency Only. Unless the box in § 4.3.1.2 (Seller Agency Unless Brokerage Relationship with Both) is checked, Broker shall represent Seller as Seller's Agent and must treat the buyer as a customer. A customer is a party to a transaction with whom Broker has no brokerage relationship. Broker must disclose to such customer Broker's relationship with Seller.
· 4.3.1.2. Seller Agency Unless Brokerage Relationship with Both. If this box is checked, Broker represents Seller as Seller's Agent and must treat the buyer as a customer, unless Broker currently has or enters into an agency or Transaction-Brokerage relationship with the buyer, in which case Broker must act as a Transaction-Broker.
· 4.3.2. Transaction-Broker. If the Transaction-Brokerage box at the top of page 1 is checked, or in the event neither box is checked, Broker must work with Seller as a Transaction-Broker. A Transaction-Broker must perform the duties described in § 5 and facilitate sales transactions without being an advocate or agent for either party. If Seller and buyer are working with the same broker, Broker must continue to function as a Transaction-Broker.
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§5 Brokerage Duties
Brokerage Firm, acting through Broker, as either a Transaction-Broker or a Seller's Agent, must perform the following Uniform Duties when working with Seller:
· 5.1. Broker shall exercise reasonable skill and care for Seller, including, but not limited to the following:
· 5.1.1. Performing the terms of any written or oral agreement with Seller;
· 5.1.2. Presenting all offers to and from Seller in a timely manner regardless of whether the Property is subject to a contract for Sale;
· 5.1.3. Disclosing to Seller adverse material facts actually known by Broker;
· 5.1.4. Advising Seller regarding the transaction and advising Seller to obtain expert advice as to material matters about which Broker knows but the specifics of which are beyond the expertise of Broker;
· 5.1.5. Accounting in a timely manner for all money and property received; and
· 5.1.6. Keeping Seller fully informed regarding the transaction.
(Instructor's Note 5.1: The above 'Uniform Duties" are exactly the same as the license law (C.R.S. 1-61-804) and apply regardless of whether the type of brokerage relationship is agent or transaction brokerage.)
· 5.2. Broker must not disclose the following information without the informed consent of Seller:
· 5.2.1. That Seller is willing to accept less than the asking price for the Property;
· 5.2.2. What the motivating factors are for Seller to sell the Property;
· 5.2.3. That Seller will agree to financing terms other than those offered;
· 5.2.4. Any material information about Seller unless disclosure is required by law or failure to disclose such information would constitute fraud or dishonest dealing; or
· 5.2.5. Any facts or suspicions regarding circumstances that could psychologically impact or stigmatize the Property.
(Note 5.2. Likewise, these client confidential items apply regardless of whether the Broker is an agent or T-B.)
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§5 Brokerage Duties (continued)
· 5.3. Seller consents to Broker's disclosure of Seller's confidential information to the supervising broker or designee for the purpose of proper supervision, provided such supervising broker or designee does not further disclose such information without consent of Seller, or use such information to the detriment of Seller.
(Note 5.3: Implements Rule E-45 previously covered.)
· 5.4. Brokerage Firm may have agreements with other sellers to market and sell their property. Broker may show alternative properties not owned by Seller to other prospective buyers and list competing properties for sale.
· 5.5. Broker shall not be obligated to seek additional offers to purchase the Property while the Property is subject to a contract for Sale.
· 5.6. Broker has no duty to conduct an independent inspection of the Property for the benefit of a buyer and has no duty to independently verify the accuracy or completeness of statements made by Seller or independent inspectors. Broker has no duty to conduct an independent investigation of a buyer's financial condition or to verify the accuracy or completeness of any statement made by a buyer.
(Note 5.6. "Having no duty" is not the same as withholding material facts actually known. You must disclose any of these items if you know of (or even suspect) adverse impact.)
· 5.7. Seller understands that Seller is not be liable for Broker's acts or omissions that have not been approved, directed, or ratified by Seller.
· 5.8. When asked, Broker ___ Will ___Will Not disclose to prospective buyers and cooperating brokers the existence of offers on the Property and whether the offers were obtained by Broker, a broker within Brokerage Firm or by another broker.
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§6 Additional Duties of Seller's Agent
If the Seller Agency box at the top of page 1 is checked, Broker is Seller's Agent, with the following additional duties:
· 6.1. Promoting the interests of Seller with the utmost good faith, loyalty and fidelity.
· 6.2. Seeking a price and terms that are set forth in this Seller Listing Contract.
· 6.3. Counseling Seller as to any material benefits or risks of a transaction that are actually known by Broker.
These 3 duties are the essential difference between a transaction broker and an AGENT and are owed by every agent to his or her client. These three duties are specifically not owed (nor expected) of a licensee acting as a transaction-broker.
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§7 Compensation to Brokerage Firm; Compensation to Cooperative Broker
Seller agrees that any Brokerage Firm compensation that is conditioned upon the Sale of the Property will be earned by Brokerage Firm as set forth herein without any discount or allowance for any efforts made by Seller or by any other person in connection with the Sale of the Property.
(NOTE 7: This is what makes your listing an exclusive right-to-sell!)
· 7.1. Amount. In consideration of the services to be performed by Broker, Seller agrees to pay Brokerage Firm as follows:
· 7.1.1. Sale Commission. (1) ____% of the gross purchase price or (2) $_______, in U.S. dollars.
· 7.1.2. Lease Commission. If the box in § 3.5.2 is checked, Brokerage Firm will be paid a fee equal to (1) ______% of the gross rent under the lease, or (2) $_______ , in U.S. dollars, payable as follows:
· 7.1.3. Other Compensation. ________.
· 7.2. Cooperative Broker Compensation. Brokerage Firm offers compensation to outside brokerage firms, whose brokers are acting as:
· _____ Buyer Agents: _____ % of the gross sales price or _____, in U.S. dollars.
· _____ Transaction-Brokers:_____ % of the gross sales price or _____, in U.S. dollars.
· 7.3. When Earned. Such commission shall be earned upon the occurrence of any of the following:
· 7.3.1. Any Sale of the Property within the Listing Period by Seller, by Broker or by any other person; Note 7.3.1: This reinforces exclusive right-to-sell.
· 7.3.2. Broker finding a buyer who is ready, willing and able to complete the sale or lease as specified in this Seller Listing Contract; or You will have earned a commission here – even if the Seller rejects a full price, exact terms offer. You’ll have to sue to get it, but you earned it by performing your end of the agreement.
· 7.3.3. Any Sale (or Lease if § 3.5.2 is checked) of the Property within _____ calendar days after the expiration of the Listing Period expires (Holdover Period) 1) to anyone with whom Broker negotiated and 2) whose name was submitted, in writing, to Seller by Broker during the Listing Period (submitted Prospect), however, Seller ___ Will ___ Will Not owe the commission to Brokerage Firm under this § 7.3.3 if a commission is earned by another licensed real estate brokerage firm acting pursuant to an exclusive agreement entered into during the Holdover Period and a Sale or Lease to a Submitted Prospect is consummated. If no box is checked above in this § 7.3.3, then Seller does not owe the commission to Brokerage Firm.
· 7.4. When Applicable and Payable. The commission obligation shall applies to a Sale made during the Listing Period or any extension of such original or extended term. The commission described in § 7.1.1 is payable at the time of the closing of the Sale, or, if there is no closing (due to the refusal or neglect of Seller) then on the contracted date of closing, as contemplated by § 7.3.1 or § 7.3.3, or upon fulfillment of § 7.3.2 where the offer made by such buyer is not accepted by Seller.
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§8 Limitation on Third-Party Compensation
Neither Broker nor the Brokerage Firm, except as set forth in § 7, will accept compensation from any other person or entity in connection with the Property without the written consent of Seller. Additionally, neither Broker nor Brokerage Firm is permitted to assess or receive mark-ups or other compensation for services performed by any third party or affiliated business entity unless Seller signs a separate written consent for such services.
(You will have a much more pleasant career if you are happy with the commission you earn. Nickel-and-Diming clients for miscellaneous fees is annoying to the client, and in some eyes, unprofessional.)
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§9 Other Brokers' Assistance, Multiple Listing Services (MLS) and Marketing
Seller has been advised by Broker of the advantages and disadvantages of various marketing methods, including advertising and the use of Multiple Listing Services (MLS) and various methods of making the Property accessible by other brokerage firms (e.g., using lock boxes, by-appointment-only showings, etc.), and whether some methods may limit the ability of another broker to show the Property. After having been so advised, Seller has chosen the following (check all that apply):
· 9.1. MLS/Information Exchange.
· 9.1.1. The Property ___ Will ___ Will Not be submitted to one or more multiple listing services and ___ Will ___ Will Not be submitted to one or more property information exchanges. If submitted, Seller authorizes Broker to provide timely notice of any status change to such MLS and information exchanges. Upon transfer of deed from Seller to buyer, Seller authorizes Broker to provide sales information to such MLS and information exchanges.
· 9.1.2. Seller authorizes the use of electronic and all other marketing methods except: _______________.
· 9.1.3. Seller further authorizes use of the data by MLS and property information exchanges, if any.
· 9.1.4. The Property Address ___ Will ___ Will Not be displayed on the Internet.
· 9.1.5. The Property Listing ___ Will ___ Will Not be displayed on the internet.
· 9.2. Property Access .Access to the Property may be by: ___ Lock Box ___ __________________ Other instructions: __________________
· 9.3. Broker Marketing. The following specific marketing tasks shall be performed by Broker:
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§10 Seller's Obligations to Broker; Disclosures and Consent
·
· 10.2. Advertising. Seller agrees that any advertising of the Property by Seller (e.g., Internet, print and signage) must first be approved by Broker.
· 10.3. No Existing Listing Agreement. Seller represents that Seller ___ Is ___ Is Not currently a party to any listing agreement with any other broker to sell the Property.
· 10.4. Ownership of Materials and Consent. Seller represents that all materials (including all photographs, renderings, images or other creative items) supplied to Broker by or on behalf of Seller are owned by Seller, except as Seller has disclosed in writing to Broker. Seller is authorized to and grants to Broker, Brokerage Firm and any MLS (that Broker submits the Property to) a nonexclusive irrevocable, royalty-free license to use such material for marketing of the Property, reporting as required and the publishing, display and reproduction of such material, compilation and data. This license shall survive the termination of this Seller Listing Contract.
· 10.5. Colorado Foreclosure Protection Act. The Colorado Foreclosure Protection Act (Act) generally applies if: (1) the Property is residential, (2) Seller resides in the Property as Seller’s principal residence (3) Buyer’s purpose in purchase of the Property is not to use the property as Buyer’s personal residence and (4) the Property is in foreclosure or Buyer has notice that any loan secured by the Property is as least thirty days delinquent or in default. If all requirements 1, 2, 3 and 4 are met and the Act otherwise applies, then a contract, between Buyer and Seller for the sale of the Property, that complies with the provisions of the Act is required. If the transaction is a Short Sale transaction and a Short Sale Addendum is part of the Contract between Seller and Buyer, the Act does not apply. It is recommended that Seller consult with an attorney.
(Note 10.1: This emphasizes the exclusive nature of your employment, and you may want to highlight it in a very loud color in your listing presentation.)
(Note 10.5: Foreclosures are complex, both in the property and in terms of the Colorado Foreclosure Protection Act. Unlike a normal Buy/Sell contract, the Seller has a 3-day right to cancel on a whim. Notice of this and other requirements must be given to the Seller. An attorney’s expertise, paid for by Seller is prudent, but if there is any possibility of this occurring make sure the seller has this obligation clearly understood at the time of listing.)
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§11 Price and Terms
The following Price and Terms are acceptable to Seller:
· 11.1. Price. U.S. $ ___________________________
(Note 11.1: Remember this price and any subsequent changes thereto is set by the seller, not the broker - although the broker may certainly consult and assist in estimating the value.)
· 11.2. Terms. ___ Cash ___ Conventional ___ FHA ___ VA
· ___ Other:
· 11.3. Loan Discount Points. _________________
· 11.4. Buyer's Closing Costs (FHA/VA). Seller must pay closing costs and fees, not to exceed $ _______, that Buyer is not allowed by law to pay, for tax service and __________________.
· 11.5. Earnest Money. Minimum amount of earnest money deposit U.S. $____________ in the form of ________________.
· 11.6. Seller Proceeds. Seller will receive net proceeds of closing as indicated: ___ Cashier's Check at Seller's expense; ___ Funds Electronically Transferred (Wire Transfer) to an account specified by Seller, at Seller's expense; or ___ Closing Company's Trust Account Check.
· 11.7. Advisory: Tax Withholding. The Internal Revenue Service and the Colorado Department of Revenue may require closing company to withhold a substantial portion of the proceeds of this Sale when Seller either (1) is a foreign person or (2) will not be a Colorado resident after closing. Seller should inquire of Seller's tax advisor to determine if withholding applies or if an exemption exists.
(Note 11.7: C.R.S.39-22-604.5 mandates withholding the lesser of 2% of the sale price or the entire net proceeds of the sale when it is not certain that the Seller will remain in Colorado after the sale. This law does not apply to sales of less than $100,000, for foreclosure sales or if the seller provides the closer with a written affirmation of residency/permanent residence/permanent place of business or that no tax is expected to be owed.)
§12 Deposits
Brokerage Firm is authorized to accept earnest money deposits received by Broker pursuant to a proposed Sale contract. Brokerage Firm is authorized to deliver the earnest money deposit to the closing agent, if any, at or before the closing of the Sale contract.
§13 Inclusions and Exclusions
· 13.1. Inclusions. The Purchase Price includes the following items (Inclusions):
· 13.1.1. Fixtures. The following items are included if attached to the Property on the date of this Seller Listing Contract unless excluded under Exclusions (Section 13.2):, lighting, heating, plumbing, ventilating, and air conditioning fixtures, TV antennas, inside telephone, network and coaxial (cable) wiring and connecting blocks/jacks, plants, mirrors, floor coverings, intercom systems, built-in kitchen appliances, sprinkler systems and controls, built-in vacuum systems (including accessories), garage door openers including ________remote controls.
Other Fixtures: _____
· If any fixtures are attached to the Property after the date of this Seller Listing Contract, such additional fixtures are also included in the Purchase Price.
· 13.1.2. Personal Property. The following items are included if on the Property whether attached or not on the date of this Seller Listing Contract: storm windows, storm doors, window and porch shades, awnings, blinds, screens, window coverings, curtain rods, drapery rods, fireplace inserts, fireplace screens, fireplace grates, heating stoves, storage sheds, and all keys. If checked, the following are included: ___ Water Softeners___ Smoke/Fire Detectors___ Carbon Monoxide Alarms ___ Security Systems ___ Satellite Systems (including satellite dishes); and The Personal Property to be conveyed at closing shall be conveyed by Seller free and clear of all taxes (except personal property taxes for the year of closing), liens and encumbrances, except _______________. Conveyance will be by bill of sale or other applicable legal instrument.
· 13.1.3. Trade Fixtures. The following trade fixtures are included: __________________________. The Trade Fixtures to be conveyed at closing must be conveyed by Seller, free and clear of all taxes (except personal property taxes for the year of closing), liens and encumbrances, except ________________. Conveyance will be by bill of sale or other applicable legal instrument.
· 13.1.4. Parking and Storage Facilities. ___ Use Only ___ Ownership of the following parking facilities:___________;
· 13.1.5. Water Rights. The following legally described water rights: Any water rights shall be conveyed by _______ deed or other applicable legal instrument. The Well Permit # is _________________ . (Note 13.1.5:There will not be a better time to get a copy of the actual well permit, if applicable.)
· 13.1.6. Growing Crops. The following growing crops:
· 13.2. Exclusions. The following are excluded (Exclusions): (Note 13.1 and 13.2: Go over these items carefully during your listing presentation and again at the time of presenting an offer. You may be liable for buying:
a. Something the buyer thinks is included; or
b. Something the Seller thought was excluded if this is not 100% clear to all parties.)
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§14 Title and Encumbrances
Seller represents to Broker that title to the Property is solely in Seller's name. Seller must deliver to Broker true copies of all relevant title materials, leases, improvement location certificates and surveys in Seller's possession and shall disclose to Broker all easements, liens and other encumbrances, if any, on the Property, of which Seller has knowledge. Seller authorizes the holder of any obligation secured by an encumbrance on the Property to disclose to Broker the amount owing on said encumbrance and the terms thereof.
( NOTE: This is your authority to obtain loan payoff figures from the lender, although the lender may likely require a separate letter signed by the borrower/Seller.)
In case of Sale, Seller agrees to convey, by a _________________deed, only that title Seller has in the Property. Property must be conveyed free and clear of all taxes, except the general taxes for the year of closing.
All monetary encumbrances (such as mortgages, deeds of trust, liens, financing statements) must be paid by Seller and released except as Seller and buyer may otherwise agree. Existing monetary encumbrances are as follows:___________
( NOTE: This is where you ask the Seller for a copy of the latest loan statement and include the data on this form.)
NOTE: The Property is subject to the following leases and tenancies: ______________________________________.
(Red Flag: A lease survives a sale unless the lease states otherwise.)
If the Property has been or will be subject to any governmental liens for special improvements installed at the time of signing a Sale contract, Seller is responsible for payment of same, unless otherwise agreed.
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§15 Evidence of Title
Seller agrees to furnish buyer, at Seller's expense, unless the parties agree in writing to a different arrangement, a current commitment and an owner's title insurance policy in an amount equal to the Purchase Price as specified in the Sale contract, or if this box is checked, ___ An Abstract of Title certified to a current date.
Single-line strike-through of the abstract box/option if not applicable (almost always). If a Torrens Certificate will be used (almost never) strike all after the word "buyer" and insert "a Torrens Certificate" - (for which there is no cost to either party.)
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§16 Association Assessments
Seller represents that the amount of the regular owners' association assessment is currently payable at approximately $__________ per_______ and that there are no unpaid regular or special assessments against the Property except the current regular assessments and except _________. Seller agrees to promptly request the owners' association to deliver to buyer before date of closing a current statement of assessments against the Property.
( NOTE: If there is a homeowners' association, always check its Website and/or call to nail this down accurately.)
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§17 Possession
Possession of the Property shall be delivered to buyer as follows: _____________________________________, subject to leases and tenancies as described in § 14.
( NOTE 17: ...but only if the loan is approved and all contingencies are met. As the Seller's broker, you want to avoid having the Seller in mid-move if the deal falls through. In some areas, possession is customarily a few days after closing to allow for moving out and cleaning up. If possession is any longer than that, some rent back provision should be negotiated to protect the purchaser.)
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§18 Material Defects, Disclosures and Inspection and §19 Right of Parties to Cancel
· 18.1. Broker's Obligations. Colorado law requires a broker to disclose to any prospective buyer all adverse material facts actually known by such broker including but not limited to adverse material facts pertaining to the title to the Property and the physical condition of the Property, any material defects in the Property, and any environmental hazards affecting the Property which are required by law to be disclosed. These types of disclosures may include such matters as structural defects, soil conditions, violations of health, zoning or building laws, and nonconforming uses and zoning variances. Seller agrees that any buyer may have the Property and Inclusions inspected and authorizes Broker to disclose any facts actually known by Broker about the Property.
· 18.2. Seller's Obligations.
· 18.2.1. Seller's Property Disclosure Form Disclosure of known material latent (not obvious) defects is required by law. Seller ___ Agrees ___ Does Not Agree to provide a Seller's Property Disclosure form completed to the best of Seller's current, actual knowledge.
· 18.2.2. Lead-Based Paint. Unless exempt, if the improvements on the Property include one or more residential dwellings for which a building permit was issued prior to January 1, 1978, a completed Lead-Based Paint Disclosure (Sales) form must be signed by Seller and the real estate licensees, and given to any potential buyer in a timely manner.
· 18.2.3. Carbon Monoxide Alarms. Note: If the improvements on the Property have a fuel-fired heater or appliance, a fireplace, or an attached garage and one or more rooms lawfully used for sleeping purposes (Bedroom), Seller understands that Colorado law requires that Seller assure the Property has an operational carbon monoxide alarm installed within fifteen feet of the entrance to each Bedroom or in a location as required by the applicable building code, prior to offering the Property for sale or lease.
· 18.2.4. Condition of Property. The Property will be conveyed in the condition existing as of the date of the sales contract or lease, ordinary wear and tear excepted, unless Seller, at Seller’s sole option, agrees in writing to any repairs or other work to be performed by Seller.
19. RIGHT OF PARTIES TO CANCEL.
· 19.1. Right of Seller to Cancel. In the event Broker defaults under this Seller Listing Contract, Seller has the right to cancel this Seller Listing Contract, including all rights of Brokerage Firm to any compensation if the Seller Agency box is checked. Examples of a Broker default include, but are not limited to (1) abandonment of Seller, (2) failure to fulfill all material obligations of Broker and (3) failure to fulfill all material Uniform Duties (§ 5) or, if the Seller Agency box at the top of page 1 is checked, the failure to fulfill all material Additional Duties Of Seller’s Agent (§ 6). Any rights of Seller that accrued prior to cancellation will survive such cancellation.
· 19.2. Right of Broker to Cancel. Brokerage Firm may cancel this Seller Listing Contract upon written notice to Seller that title is not satisfactory to Brokerage Firm. Although Broker has no obligation to investigate or inspect the Property, and no duty to verify statements made, Brokerage Firm has the right to cancel this Seller Listing Contract if any of the following are unsatisfactory (1) the physical condition of the Property or Inclusions, (2) any proposed or existing transportation project, road, street or highway, (3) any other activity, odor or noise (whether on or off the Property) and its effect or expected effect on the Property or its occupants, or (4) any facts or suspicions regarding circumstances that could psychologically impact or stigmatize the Property. Additionally, Brokerage Firm has the right to cancel this Seller Listing Contract if Seller or occupant of the Property fails to reasonably cooperate with Broker or Seller defaults under this Seller Listing Contract. Any rights of Brokerage Firm that accrued prior to cancellation will survive such cancellation.
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§20 Forfeiture of Payments
In the event of a forfeiture of payments made by a buyer, the sums received will be: (1) 100% will be paid to Seller; (2) divided between Brokerage Firm and Seller, one-half to Brokerage Firm but not to exceed the Brokerage Firm compensation agreed upon herein, and the balance to Seller; (3) Other: If no box is checked in this Section, choice (1), 100 % paid to Seller, applies. Any forfeiture of payment under this section will not reduce any Brokerage Firm compensation owed, earned and payable under § 7.
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§21 Cost of Services and Reimbursement
Unless otherwise agreed upon in writing, Brokerage Firm must bear all expenses incurred by Brokerage Firm, if any, to market the Property and to compensate cooperating brokerage firms, if any. Neither Broker nor Brokerage Firm shall obtain or order any other products or services unless Seller agrees in writing to pay for them promptly when due (examples: surveys, radon tests, soil tests, title reports, engineering studies, property inspections). Unless otherwise agreed, neither Broker nor Brokerage Firm shall be obligated to advance funds for the benefit of Seller in order to complete a closing. Seller must reimburse Brokerage Firm for payments made by Brokerage Firm for such products or services authorized by Seller.
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§22 Disclosure of Settlement Costs
Seller acknowledges that costs, quality, and extent of service vary between different settlement service providers (e.g., attorneys, lenders, inspectors and title companies).
( NOTE 21: Remember the Seller is the one paying the most for closing services by agreeing to provide title insurance for the buyer. The choice of title insurance company belongs to the Seller, not the broker.)
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§23 Maintenance of the Property
Neither Broker nor Brokerage Firm shall be responsible for maintenance of the Property nor shall they be liable for damage of any kind occurring to the Property, unless such damage shall be caused by their negligence or intentional misconduct.
( NOTE 22: Be especially cautious here if the property will be vacant. Some Sellers have been known to consider the broker to be a free interim property maintenance person.)
§24 Nondiscrimination
The parties agree not to discriminate unlawfully against any prospective buyer because of the race, creed, color, sex, sexual orientation, marital status, familial status, physical or mental disability, handicap, religion, national origin or ancestry of such person.
( NOTE 23: Again, Red Flag. If the Seller hesitates here, find out why and consult your employing broker before proceeding. This isn't a matter of preference for you or the Seller. It is the law!)
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§25 Recommendation of Legal and Tax Counsel
By signing this document, Seller acknowledges that Broker has advised that this document has important legal consequences and has recommended consultation with legal and tax or other counsel before signing this Seller Listing Contract.
( NOTE 24: You warned the Seller in the Preamble. Now you're advising the Seller again.)
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§26 Mediation
If a dispute arises relating to this Seller Listing Contract, prior to or after closing, and is not resolved, the parties must first proceed in good faith to submit the matter to mediation. Mediation is a process in which the parties meet with an impartial person who helps to resolve the dispute informally and confidentially. Mediators cannot impose binding decisions. The parties to the dispute must agree, in writing, before any settlement is binding. The parties will jointly appoint an acceptable mediator and will share equally in the cost of such mediation. The mediation, unless otherwise agreed, shall terminate in the event the entire dispute is not resolved within 30 calendar days of the date written notice requesting mediation is delivered by one party to the other at the party's last known address.
( NOTE 25: You hope it never comes to this, but if you have a dispute, mediation is an efficient, low-cost way to resolve the issue. It is generally non-binding (unlike arbitration or a court order). Have a couple of good mediators identified way before the need arises and consult your employing broker if this prospect appears imminent.)
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§27 Attorney Fees
In the event of any arbitration or litigation relating to this Seller Listing Contract, the arbitrator or court must award to the prevailing party all reasonable costs and expenses, including attorney and legal fees.
In fact, some judges do not feel bound by this restriction. And rightly so, since the judge is not a party to the contract. But is does serve as the general rule.
§28 Additional Provisions
(The following additional provisions have not been approved by the Colorado Real Estate Commission.)
( NOTE 27: This space may expand or contract to fit whatever you and the Seller feel needs to go here. Remember, since you and your firm are one of the parties to the listing, you are free to negotiate here. Not so with the Buy/Sell contract.)
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§29 Attachments and §30 No Other Party or Intended Beneficiaries
29. ATTACHMENTS. The following are a part of this Seller Listing Contract:
30. NO OTHER PARTY OR INTENDED BENEFICIARIES. Nothing in this Seller Listing Contract is deemed to inure to the benefit of any person other than Seller, Broker and Brokerage Firm.
( NOTE 29: Real Estate listing/employment contract are categorized as personal service contracts - meaning should the Seller die before going under contract, so does the listing. A buy/sell contract would continue in effect and "inure" to the benefit of the surviving heirs.)
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§31 Notice, Delivery and Choice of Law
· 31.1. Physical Delivery. All notices must be in writing, except as provided in § 31.2. Any document, including a signed document or notice, delivered to the other party to this Seller Listing Contract, is effective upon physical receipt. Delivery to Seller is effective when physically received by Seller, any signator on behalf of Seller, any named individual of Seller or representative of Seller.
· 31.2. Electronic Delivery. As an alternative to physical delivery, any document, including any signed document or written notice may be delivered in electronic form only by the following indicated methods: ___ Facsimile ___Email ___Internet. Documents with original signatures will be provided upon request of any party.
· 31.3. Choice of Law. This Seller Listing Contract and all disputes arising hereunder are governed by and construed in accordance with the laws of the State of Colorado that would be applicable to Colorado residents who sign a contract in this state for property located in Colorado.
( NOTE 30: These items are designed to preclude or minimize any later dispute as to who did what to whom and how/when they did it.)
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§32 Modification of This Seller Listing Contract
No subsequent modification of any of the terms of this Seller Listing Contract shall be valid, binding upon the parties, or enforceable unless made in writing and signed by the parties.
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§33 Counterparts
This Seller Listing Contract may be executed by each of the parties, separately, and when so executed by all the parties, such copies taken together are deemed to be a full and complete contract between the parties.
( NOTE 32: This comes in handy when one Seller is on an extended stay out-of-state and the other one(s) are here. They may sign separate copies which, when stapled together, become one contract. Saves much time.)
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§34 Entire Agreement
This agreement constitutes the entire contract between the parties, and any prior agreements, whether oral or written, have been merged and integrated into this Seller Listing Contract.
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§35 Copy of Contract, Authorization Line and Signature Blocks
35. COPY OF CONTRACT. Seller acknowledges receipt of a copy of this Seller Listing Contract signed by Broker, including all attachments.
Brokerage Firm authorizes Broker to execute this Seller Listing Contract on behalf of Brokerage Firm.
One more time...you take the listing for your firm who owns it! Not to be confused with you being alone (no firm, no other brokers) with the client in the brokerage relationship.
The contract ends with 4 signature blocks; two are for Seller, one for you and one for you to fill in with your firm's information.
You’ve now reviewed line-by-line the Exclusive Right-to-Sell Contract. You will use this contract more than most others in residential real estate brokerage. Not all listings conclude with a successful closing, so it stands to reason that you will complete more listing contracts than Buy/Sell contracts.
The Real Estate Commission course outline requires that you actually prepare each one of the different types of listing contracts and related forms. Keep in mind that your employing broker may have some preferences as to how you word contract entries when taking a listing. Expect a high level of supervision for the first real-world listings you take (Commission Rule E-32). For this exercise, you will use the guidelines and explanations pertaining to the specific contract in this Chapter 5.
Click here to open a blank Exclusive Right-to-Sell Listing Contract.
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Summary
This concludes Chapter 5. Below is a brief summary which you can review before taking your quiz.
Exclusive Right-to-Sell: The broker will receive the agreed-upon commission if the property sells anytime during the contract period, no matter who sells it.
· Binding contract. Parties should consult legal counsel.
· Brokerage relationships include buyer/seller agency and transaction-brokerage.
Brokerage Addendum Exclusive: Reserves to the seller the right to sell the property independently of the listing broker.
Open Listing Addendum: The seller agrees to pay a commission only to the broker that is the procuring cause of the sale.
Uniform Duties when working with Seller:
· Broker shall exercise reasonable skill and care for Seller.
· Broker shall not disclose information without the informed consent.
· Seller consents to Broker's disclosure of Seller's confidential information to the supervising broker.
· Broker has no duty to conduct an independent inspection of the Property for the benefit of a buyer.
Seller agrees to pay Brokerage Firm the Sale and Lease Commission.
The commission obligation shall apply to a Sale made during the Listing Period or any extension of such original or extended term.
Seller agrees:
· To conduct all negotiations for the Sale of the Property only through Broker.
· That any advertising of the Property by Seller shall first be approved by Broker.
The Colorado Foreclosure Protection Act requires:
· The Property is residential.
· Seller resides in the Property as Seller’s principal residence.
· Buyer’s purpose in purchase of the Property is not to use the property as Buyer’s personal residence.
· The Property is in foreclosure or Buyer has notice that any loan secured by the Property is as least thirty days delinquent or in default.
The following Price and Terms are acceptable to Seller:
· Loan Discount Points
· Buyer's Closing Costs (FHA/VA)
· Earnest Money
· Seller Proceeds
· Tax Withholding
Inclusions
· Fixtures
· Personal Property
· Parking and Storage Facilities
· Growing Crops
Title to the Property is solely in Seller's name.
Seller authorizes the holder of any obligation secured by an encumbrance on the Property to disclose to Broker the amount owing and the terms.
Red Flag: A lease survives a sale unless the lease states otherwise.
Colorado law requires a broker to disclose all known adverse material facts.
A seller is not required to provide a written disclosure of adverse matters regarding the Property. Disclosure of known material latent (not obvious) defects is required by law.
Right of Broker to Terminate if the overall condition is unsatisfactory to Broker.
Forfeiture of payments - the sums received shall be divided between Brokerage Firm and Seller.
Seller shall reimburse Brokerage Firm for payments made by Brokerage Firm for products or services authorized by Seller.
Neither Broker nor Brokerage Firm shall be responsible for maintenance of the Property nor shall they be liable for damage of any kind occurring to the Property.
Nothing in the Seller Listing Contract shall be deemed to inure to the benefit of any person other than Seller, Broker and Brokerage Firm.
Click here if you would like to open this summary as a pdf, which you can then print or save to your device: Chapter 5 Summary
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