Colorado Contracts and Regulations

Exclusive Right-to-Buy

A contract to employ a broker may be to list property for sale/lease or to “list” a buyer for whom to locate a property to buy or lease. Perhaps in the future we will come to label these both as employment contracts to avoid the confusion. 

We will now review thoroughly the Exclusive Right-to-Buy Contract in much the same detail as the Exclusive Right-to-Sell. You will notice many similarities. When finished, we will contrast the Exclusive Tenant employment agreement with this form.

By the end of this unit, you will be able to: 

· Explain the purpose of the Exclusive Right to Buy Contract

· Describe each paragraph encountered when completing an Exclusive Right to Buy contract

· Recognize the purpose of the various Brokerage Disclosure Forms and describe when they would be used

Let's get started!

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Right-to-Buy Preamble

The printed portions of this form, except differentiated additions, have been approved by the Colorado Real Estate Commission. (BC60-6-19) ( Mandatory 1-20)

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 firms. 

DIFFERENT BROKERAGE RELATIONSHIPS ARE AVAILABLE WHICH INCLUDE BUYER AGENCY, SELLER AGENCY OR TRANSACTION-BROKERAGE.

You have noticed that there is no difference in the preamble warnings between this people listing and the former property listings.

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Right-to-Buy §1 and §2

EXCLUSIVE RIGHT-TO-BUY CONTRACT   _____BUYER AGENCY _____TRANSACTION-BROKERAGE  Date:

 

1. AGREEMENT. Buyer and Brokerage Firm enter into this exclusive, irrevocable contract as of the date set forth above (Buyer Listing Contract) and agree to its provisions. Broker, on behalf of Brokerage Firm, agrees to provide brokerage services to Buyer. Brokerage Firm will receive compensation as set forth in this Buyer Listing Contract.

Buyer and Firm in the contract; Buyer and individual licensee in the brokerage relationship.

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 Buyer and to perform the services for Buyer required by this contract is called Broker. If more than one individual is so designated, then references in this Buyer Listing Contract to Broker shall includes 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 Buyer Listing Contract to Broker or Brokerage Firm mean both the licensed natural person and brokerage firm, who serve as the broker of Buyer and perform the services for Buyer required by this contract.

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Right-to-Buy §3 Defined Terms

3.1. Buyer: (Insert Buyer(s) Names here)

and any other person or entity on whose behalf the named party acts, directly or indirectly, to Purchase the Property.

Notice that this allows a substitution of the client. A Seller listing has no such substitution allowed, but a buyer may have someone else purchase the property for him or her.

3.2. Brokerage Firm: (Insert Brokerage Firm Name here)

3.3. Broker:  (Insert name of Designated Broker here)    

3.4  Property. Property means real estate which substantially meets the following requirements or similar real estate acceptable to Buyer: 

This is a tricky one. You want to be thorough enough as to indicate what the buyer really wants, but not so detailed that very few homes will ever meet the buyer’s needs. You might fill this is in with something generic, such as: “A home suitable for a family of 4 within the (XX) Association of REALTORS© marketing area.” If the buyer really has a firm requirement, e.g. preferably not on a major arterial street, make sure it gets written down and used in your property screening.

Also note that this definition does NOT say “real estate listed in the MLS.” Performing properly as a buyer broker means finding that property whether it is in foreclosure, is a For Sale By Owner, or a property not even known to the market (i.e. identifying the perfect property and trying to convince an owner to become a seller). Real buyer brokerage is not for sissies.   

3.5. Purchase; Lease.

· 3.5.1 Purchase means the acquisition of any interest in the Property or the creation of the right to acquire any interest in the Property (including a contract or lease). It also includes an agreement to acquire any ownership interest in an entity that owns the Property.

· _____3.5.2  If this box is checked, Buyer authorizes Broker to negotiate a lease of the property.  Lease of the property or Lease means any agreement between a landlord and the Buyer to create a tenancy or leasehold interest in the Property.

Notice that an installment land contract or lease also qualifies as successful performance on your part.

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Right-to-Buy §3 Defined Terms (continued)

3.6. Listing Period. The Listing period of the Buyer Listing Contract begins on ____, and continues through the earlier of (1) completion of the Purchase of the Property or Lease of the Property or (2) ____. Broker will continue to assist in the completion of any purchase or lease for which compensation is payable to Brokerage Firm under § 7 of this Buyer 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 date upon which both parties have signed this Buyer 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” means 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 be extended to the next day that is not a Saturday, Sunday or Holiday. Should neither box be checked, the deadline will not be extended.

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Right-to-Buy §4 Brokerage Relationship

4.1. If the Buyer Agency box at the top of page 1 is checked, Broker represents Buyer as a Buyer's Limited Agent. If the Transaction-Brokerage box at the top of page 1 is checked, Broker shall act as a Transaction-Broker. 

4.2. In-Company Transaction – Different Brokers. When the 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. Buyer acknowledges that Brokerage Firm is allowed to offer and pay compensation to brokers within Brokerage Firm working with a seller. 

4.3. In-Company Transaction – One Broker. If the seller and Buyer are both working with the same broker, Broker shall function as:

· 4.3.1. Buyer’s Agent. If the Buyer Agency box at the top of page 1 is checked, the parties agree the following applies:  Check One Box Only

· 4.3.1.1. Buyer Agency Only. Unless the box in Section 4.3.1.2 (Buyer Agency Unless Brokerage Relationship With Both is checked, Broker represents Buyer as Buyer's Agent and must treat the seller 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 Buyer.

· 4.3.1.2.___ Buyer Agency Unless Brokerage Relationship with Both. If this box is checked, Broker represents Buyer as Buyer's Agent and must treat the seller as a customer, unless Broker currently has or enters into an agency or Transaction-Brokerage relationship with the seller, in which case Broker must act as a Transaction-Broker. This compromise box allows you to champion your buyer as an agent, and use a Change-of-Status form to become a T-B if/when your buyer wishes to make an offer on one of your personal listed properties. Again, any of the choices at the top of the contract and in this Section 6 are subject to 1.) Your employing broker’s written office policy on brokerage relationships offered to the public, and 2.) Your buyer’s preference.

· 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 Buyer as a Transaction-Broker.  A Transaction-Broker must perform the duties described in § 5 and facilitate purchase transactions without being an advocate or agent for either party . If the seller and Buyer are working with the same broker, Broker shall continue to function as a Transaction-Broker.

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Right-to-Buy §5 Brokerage Duties

Brokerage Firm, acting through Broker ,  as either a Transaction-Broker or a Buyer’s Agent, must perform the following  Uniform Duties when working with Buyer:

5.1. Broker must exercise reasonable skill and care for Buyer, including but not limited, to the following:

· 5.1.1. Performing the terms of any written or oral agreement with Buyer;

· 5.1.2. Presenting all offers to and from Buyer in a timely manner regardless of whether Buyer is already a party to a contract to Purchase the Property;

· 5.1.3. Disclosing to Buyer adverse material facts actually known by Broker;

· 5.1.4. Advising Buyer regarding the transaction and advising Buyer 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 Buyer fully informed regarding the transaction. 

5.2. Broker shall not disclose the following information without the informed consent of Buyer:

· 5.2.1. That Buyer is willing to pay more than the purchase price offered for the Property;

· 5.2.2. What Buyer's motivating factors are;

· 5.2.3. That Buyer will agree to financing terms other than those offered; or

· 5.2.4. Any material information about Buyer unless disclosure is required by law or failure to disclose such information would constitute fraud or dishonest dealing

· 5.2.5. Any facts or suspicions regarding circumstances that could psychologically impact or stigmatize the Property.

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Right-to-Buy §5 Brokerage Duties (continued)

5.3. Buyer consents to Broker’s disclosure of Buyer’s confidential information to the supervising broker or designee for the purpose of proper supervision, provided such supervising broker or designee shall not further disclose such information without consent of Buyer, or use such information to the detriment of Buyer.  

5.4. Broker may show properties in which the Buyer is interested to other prospective buyers without breaching any duty or obligation to such Buyer. Broker is not prohibited from showing competing buyers the same property and from assisting competing buyers in attempting to purchase a particular property.  

5.5. Broker shall not be obligated to seek other properties while Buyer is already a party to a contract to purchase property.  

5.6. Broker has no duty to conduct an independent inspection of the Property for the benefit of Buyer and has no duty to independently verify the accuracy or completeness of statements made by a seller or independent inspectors. Broker has no duty to conduct an independent investigation of Buyer's financial condition or to verify the accuracy or completeness of any statement made by Buyer. 

5.7. Broker shall disclose to any prospective seller all adverse material facts actually known by Broker, including but not limited to adverse material facts concerning Buyer's financial ability to perform the terms of the transaction and whether Buyer intends to occupy the Property as a principal residence.

Be careful here. If acting as an agent, you have a fiduciary to your buyer; but you must still disclose to the Seller when writing an offer if your buyer has credit issues. This type of disclosure does not violate your fiduciary. In fact, it protects the public from nuisance offers. All the more reason for you to be involved with a full understanding of your buyer’s financial resources/loan qualifications. 

5.8. Buyer understands that Buyer shall not be liable for Broker’s acts or omissions that have not been approved, directed, or ratified by Buyer.

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Right-to-Buy §6 Additional Duties of Buyer's Agent

If the Buyer Agency box at the top of page 1 is checked, Broker is Buyer's Agent, with the following additional duties:

6.1. Promoting the interests of Buyer with the utmost good faith, loyalty and fidelity.

6.2. Seeking a price and terms that are acceptable to Buyer.

6.3. Counseling Buyer as to any material benefits or risks of a transaction that are actually known by Broker.

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Right-to-Buy §7 Compensation to Brokerage Firm

In consideration of the services to be performed by Broker, Brokerage Firm will be paid as set forth in this section,   with no discount or allowance for any efforts made by Buyer or any other person. Brokerage Firm is entitled to receive additional compensation, bonuses, and incentives paid by listing brokerage firm or seller. Broker will inform Buyer of the fee to be paid to Brokerage Firm and, if there is a written agreement, Broker will supply a copy to Buyer, upon written request of Buyer.

7.1. Brokerage Firm’s Fee - Purchase

Check Compensation Arrangement:

· _____ 7.1.1. Success Fee.  Brokerage Firm will be paid as follows:

· _____ 7.2.1.2. Amount.  A fee equal to ______  % of the purchase price,   but not less than $ ________,as provided in § 7.1.1.2.

· _____ 7.1.1.2. Adjusted Amount.  See Section 19 Additional Provisions or _________ Other

· _____ 7.1.1.3. When Earned; When Payable - Purchase.  The Success Fee is earned by the Brokerage Firm upon the Purchase of the Property and is payable upon closing of the transaction. If any transaction fails to close as a result of the seller’s default, with no fault on the part of Buyer, the Success Fee will be waived. If any transaction fails to close as a result of Buyer’s default, in whole or in part, the Success Fee will not be waived; such fee is payable upon Buyer’s default, but in any event not later than the date that the closing of the transaction was to have occurred.

· _____ 7.1.2. Hourly Fee.  Brokerage Firm will be paid $____ per hour for time spent by Broker pursuant to this Buyer Listing Contract, up to a maximum total fee of $______.  This hourly fee is payable to Brokerage Firm upon receipt of an invoice from Brokerage Firm.

· _____ 7.1.3. Retainer Fee.  Buyer will pay Brokerage Firm a nonrefundable retainer fee of $_________  due and payable  upon signing of this Buyer Listing Contract. This amount ___   Will ___  Will Not be credited against other fees payable to Brokerage Firm under this section.

· _____  7.1.4. Other Compensation. ____________________________________

7.2 Brokerage Firm’s Fee - Lease.   If the box in § 3.5.2 is checked Brokerage Firm will be paid  a fee as follows, less any amounts paid by  the listing brokerage firm or landlord:

· _____ 7.2.1. Amount. $__________  Per Square Foot per________or_________,except as provided in Section 7.2.2

· _____ 7.2.2. Adjusted Amount.  ___ See Section 19. Additional Provisions or ____  Other __________________.

· _____ 7.2.3. Other_________________________________________________.

· _____ 7.2.4. When Earned; When Payable - Lease.  This lease fee is earned upon the mutual execution of the Lease. One-half of this lease fee is paid upon mutual execution of the Lease and one-half upon possession of the premises by tenant or as follows: ___________________________. If the Lease, executed after the date of this Buyer Listing Contract, contains an option to extend or  renew, or if Buyer expands into additional space within the building or complex where the Property is located, Brokerage Firm ___  Will   ____Will Not be paid a fee upon exercise of such extension, renewal option or expansion. If Brokerage Firm is to be paid a fee for such extension, renewal or expansion, the amount of such fee and its payment are as follows:_________________________________________________________________.

7.3.  Who Will Pay Brokerage Firm’s Fee.

· ______ 7.3.1. Listing Brokerage Firm or Seller May Pay. Buyer IS Obligated to Pay.  Broker is authorized and instructed to request payment of the Brokerage Firm’s fee from the listing brokerage firm or seller. Buyer is obligated to pay any portion of Brokerage Firm’s fee which is not paid by the listing brokerage firm or seller.

· _____  7.3.2. Buyer Will Pay.  Buyer is be obligated to pay the Brokerage Firm’s fee. This option is for those who will pay their buyer broker separately from any commission split offered by the seller’s broker. If you really do your job well, this should be able to save the buyer more than the value of your commission.

· 7.3.3 Listing Brokerage Firm or Seller May Pay. Buyer is NOT Obligated to Pay.  Broker is authorized to obtain payment of the Brokerage Firm’s fee from the listing brokerage firm or seller.  Provided Buyer has fulfilled Buyer’s obligations in this Buyer Listing Contract, Buyer is  not be obligated to pay Brokerage Firm’s fee. If no box is checked above, then § 7.3.3  (Buyer is NOT Obligated to Pay) will apply.

The three paragraphs above offer you multiple ways to structure your compensation, remembering that as an associate you must follow the employing broker’s fee policy for the company. 

The above sections (7.3.1) and (7.3.3) appear to contradict each other. You will always want to check (7.3.1) requiring that the buyer make up any difference between your fees and the split offered by the Seller’s broker. A savvy buyer will always want to check (7.3.3) indicating the broker will be perfectly satisfied with the Seller’s broker’s commission split as offered in the MLS.

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Right-to-Buy § 7 Compensation to Brokerage Firm (continued)

_____ 7.4. Holdover Period.  Brokerage Firm’s fee shall apply to Property contracted for (or leased if § 3.5.2 is checked) during  the Term of this Buyer Listing Contract or any extensions and also applies to Property contracted for or leased within___________ calendar days after the Buyer Listing Period expires (Holdover Period) (1) if the Property is one on which Broker negotiated and (2) if Broker submitted its address or other description in writing to Buyer during the Listing Period Term, (Submitted  Property). Provided, however, Buyer ___    Will____  Will Not owe the compensation under §§ 7.1,7.2,7.3.1 and 7.3.2, if a commission is earned by another real estate brokerage firm acting pursuant to an exclusive agreement with Buyer entered into during the Holdover Period, and a Sale or Lease of the Submitted Property is consummated. If no box is checked above in this § 7.4, then Buyer shall not owe the commission to Brokerage Firm.

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Right-to-Buy §8 and §9 and §10

8. LIMITATIONS ON THIRD-PARTY COMPENSATION. Neither Broker nor 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 Buyer. Additionally, neither Broker nor Brokerage Firm is permitted to assess and receive mark-ups or other compensation for services performed by any third party or affiliated business entity unless Buyer signs a separate written consent for such services.

9. BUYER’S OBLIGATIONS TO BROKER. Buyer agrees to conduct all negotiations for the Property only through Broker, and to refer to Broker all communications received in any form from real estate brokers, prospective sellers, or any other source during the Term of this Buyer Listing Contract. Buyer represents that Buyer ___  Is ___ Is Not currently a party to any agreement with any other broker to represent or assist Buyer in the location or purchase of property.

Buyers have a tendency, because they have more opportunity, to forget the exclusivity of this contract. You may need to point out that when they are looking for properties on the Internet or cruising open houses on the weekend, any inquiries or negotiations go through you. 

10. RIGHT OF PARTIES TO CANCEL.

· 10.1. Right of Buyer to Cancel. In the event Broker defaults under this Buyer Listing Contract, Buyer has the right to cancel this Buyer Listing Contract, including all rights of Brokerage Firm to any compensation if the Buyer Agency box at the top of page 1 is checked. Examples of a Broker default include, but are not limited to (1) abandonment of Buyer, (2) failure to fulfill all material obligations of Broker and (3) failure to fulfill all material Uniform Duties (§ 5) or, if the Buyer Agency box at the top of page 1 is checked, the failure to fulfill all material Additional Duties Of Buyer’s Agent (§ 6). Any rights of Buyer that accrued prior to cancellation will survive such cancellation.

· 10.2. Right of Broker to Cancel. Brokerage Firm may cancel this Buyer Listing Contract upon written notice to Buyer if Buyer fails to reasonably cooperate with Broker or Buyer defaults under this Buyer Listing Contract. Any rights of Brokerage Firm that accrued prior to cancellation will survive such cancellation.

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Right-to-Buy §11 Costs of Services or Products Obtained from Outside Sources

Broker will not obtain or order products or services from outside sources unless Buyer has agreed to pay for them promptly when due (examples: surveys, radon tests, soil tests, title reports, engineering studies, property inspections). Neither Broker nor Brokerage Firm shall be obligated to advance funds for Buyer. Buyer must reimburse Brokerage Firm for payments made by Brokerage Firm for such products or services authorized by Buyer.

Another one of those “slow down and make sure the buyer really understands this” paragraphs. A buyer is more likely to want these kinds of additional services or data than a Seller is. When the time comes to help arrange or order products or services, the buyer’s okay in writing, electronically, or on paper should precede the order.

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Right-to-Buy §12 Brokerage Services: Showing Properties

12. BROKERAGE SERVICES; SHOWING PROPERTIES

· 12.1. Brokerage Services:    The following additional tasks shall be performed by Broker:

· 12.2. Showing Properties. Buyer acknowledges that Broker has explained the possible methods used by listing brokers and sellers to show properties, and the limitations (if any) on Buyer and Broker being able to access properties due to such methods. Broker's limitations on accessing properties are as follows: ___________. Broker, through Brokerage Firm, has access to the following multiple listing services and property information services: _________________.

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Right-to-Buy §13 Disclosure of Buyer's Identity

13. Broker ___  Does ___ Does Not have Buyer's permission to disclose Buyer's identity to third parties without prior written consent of Buyer.

You won’t find this paragraph in the Exclusive Right-to-Sell contract. The Seller’s name is a matter of public record. There are some situations (celebrity for instance) where the buyer may feel his or her name may adversely affect negotiations for the property. If your buyers don’t want their names revealed, make sure you understand why and abide by their wishes.

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Right-to-Buy §14, §15 §16 and §17

14. DISCLOSURE OF SETTLEMENT SERVICE COSTS. Buyer acknowledges that costs, quality, and extent of service vary between different settlement service providers (e.g., attorneys, lenders, inspectors, and title companies).

15. NONDISCRIMINATION. The parties agree not to discriminate unlawfully against any prospective seller 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. 

16. RECOMMENDATION OF LEGAL AND TAX COUNSEL. By signing this document, Buyer 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 Buyer Listing Contract. 

17. MEDIATION. If a dispute arises relating to this Buyer Listing Contract, prior to or after closing, and is not resolved, the parties shall 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, will terminate in the event the entire dispute is not resolved within 30 calendar days of the date of written notice requesting mediation is delivered by one party to the other at the party’s last known address.

After which the options are arbitration (in which the arbitrator’s finding is binding) or civil lawsuit.

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Right-to-Buy §18, §19 and §20

18. ATTORNEY FEES. In the event of any arbitration or litigation relating to this Buyer Listing Contract, the arbitrator or court shall award to the prevailing party all reasonable costs and expenses, including attorney and legal fees.

Again, If the judge feels like it. The courts are not bound by your contract with a client.

19. ADDITIONAL PROVISIONS. (The following additional provisions have not been approved by the Colorado Real Estate Commission.)

Again, your firm is a party to this contract. Your broker may direct standard insertions here or there or may be some other essential items negotiated between you and the buyer.

20. ATTACHMENTS. The following are a part of this Buyer Listing Contract:_________________________________. 

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Right-to-Buy §21 Notice, Delivery, and Choice of Law

21.1. Physical Delivery. All notices must be in writing, except as provided in § 21.2. Any document, including a signed document or notice, delivered to the other party to this Buyer Listing Contract, is effective upon physical receipt. Delivery to Buyer is effective when physically received by Buyer, any signator on behalf of Buyer, any named individual of Buyer or representative of Buyer.

21.2. Electronic Delivery. As an alternative to physical delivery, any document, including a signed document and written notice may be delivered in electronic form only by the following indicated methods only:  ___  Facsimile ___E-mail _____Internet.  If no box is checked, this § 21.2 is not applicable and § 21.1 governs notice and delivery. Documents with original signatures shall be provided upon request of any party. 

21.3. Choice of Law. This Buyer 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.

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Right-to-Buy §22, §23, §24 and §25

22. MODIFICATION OF THIS CONTRACT. No subsequent modification of any of the terms of this Buyer Listing Contract is valid, binding upon the parties, or enforceable unless in writing and signed by the parties.  

23. COUNTERPARTS. This Buyer 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.  

24. 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 Buyer Listing Contract.  

25. COPY OF CONTRACT. Buyer acknowledges receipt of a copy of this Buyer Listing Contract signed by Broker, including all attachments.

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Right-to-Buy §26 Megan's Law and the End

26. MEGAN’S LAW. If the presence of a registered sex offender is a matter of concern to Buyer, Buyer understands that Buyer must contact local law enforcement officials regarding obtaining such information.

Although not a pleasant topic, it is much better to ask about this right now, than to find out about your buyer’s extreme sensitivity later on. Remember you can help identify the sources of this kind of information, but the client must be the one to review the actual data.

Brokerage Firm authorizes Broker to execute this contract on behalf of Brokerage Firm.

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Exclusive

As you learned with the Exclusive Right-to-Sell vs. the Exclusive Right-to-Lease, the Commission has designed very parallel forms. The same is true for the differences between the Exclusive Right-to-Buy you’ve just studied above and the Exclusive Tenant Contract.

Other than changing “Buyer” to “Tenant,” and the pro-forma substitutions necessary to fit the rental/leasing situation, the contract protections and provisions are essentially identical. The contract provides for a commission upon purchase, if the client changes his or her mind about renting, and the compensation paragraph permits you to negotiate a fee for future lease renewals.

 

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Related Forms

Before moving on to Sales contracts, there are a number of Commission-approved forms that are required Disclosures before or in lieu of a listing contract or Addenda to a listing.

BROKERAGE DISCLOSURE TO BUYER/TENANT

A buyer is often not eager to enter a brokerage relationship at your first meeting. He or she is usually seeking information at an open house or when walking in to your office. For those situations where the buyer is not willing to sign an exclusive agreement, the Commission has approved this disclosure form.

Rule # 1 for all disclosure forms: If a prospective buyer (or seller for other forms) refuses to even sign a disclosure form, you simply note that fact on a copy of the disclosure and keep it in your transaction file.

In addition to the current Buyer disclosure the Commission has approved a specific Brokerage Disclosure to Tenant form to be used by those who do extensive tenant leasing (either commercial or residential). This form mirrors the Brokerage Disclosure to Buyer/Tenant. (TD20-10-19). 

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Broker Disclosure to Buyer - Definitions of Working Relationships

The printed portions of this form, except differentiated additions, have been approved by the Colorado Real 1 Estate Commission. (BD24-10-19) (Mandatory 1-20) 

DIFFERENT BROKERAGE RELATIONSHIPS ARE AVAILABLE WHICH INCLUDE SELLER AGENCY, BUYER AGENCY OR TRANSACTION-BROKERAGE.

BROKERAGE DISCLOSURE TO   BUYER  DEFINITIONS OF WORKING RELATIONSHIPS

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Broker Disclosure to Buyer - Definitions of Working Relationships (continued)

Seller’s Agent: A seller’s agent works solely on behalf of the seller to promote the interests of the seller with the utmost good faith, loyalty and fidelity. The agent negotiates on behalf of and acts as an advocate for the seller. The seller’s agent must disclose to potential buyers all adverse material facts actually known by the seller’s agent about the property. A separate written listing agreement is required, which sets forth the duties and obligations of the broker and the seller. 

Buyer's Agent: A buyer’s agent works solely on behalf of the buyer to promote the interests of the buyer with the utmost good faith, loyalty and fidelity. The agent negotiates on behalf of and acts as an advocate for the buyer. The buyer’s agent must disclose to potential sellers all adverse material facts actually known by the buyer’s agent, including the buyer’s financial ability to perform the terms of the transaction and, if a residential property, whether the buyer intends to occupy the property. A separate written buyer agency agreement is required, which sets forth the duties and obligations of the broker and the buyer. 

Transaction-Broker: A transaction-broker assists the buyer or seller or both throughout a real estate transaction by performing terms of any written or oral agreement, fully informing the parties, presenting all offers and assisting the parties with any contracts, including the closing of the transaction, without being an agent or advocate for any of the parties. A transaction-broker must use reasonable skill and care in the performance of any oral or written agreement, and must make the same disclosures as agents about all adverse material facts actually known by the transaction-broker concerning a property or a buyer’s financial ability to perform the terms of a transaction and, if a residential property, whether the buyer intends to occupy the property. No written agreement is required.

Customer: A customer is a party to a real estate transaction with whom the broker has no brokerage relationship because such party has not engaged or employed the broker, either as the party’s agent or as the party’s transaction-broker.

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Broker Disclosure to Buyer - Definitions of Working Relationships (continued)

RELATIONSHIP BETWEEN BROKER AND BUYER

Broker and Buyer referenced below have NOT entered into a buyer agency agreement. The working relationship specified below is for a specific property described as: _______________________________________________________ or real estate which substantially meets the following requirements:

Buyer understands that Buyer shall not be liable for Broker’s acts or omissions that have not been approved, directed or ratified by the Buyer.

CHECK ONE BOX ONLY:

___  Multiple-Person Firm. Broker, referenced below, is designated by Brokerage Firm to serve as Broker. If more than one individual is so designated, then references in this document 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.

___  One-Person Firm. If Broker is a real estate brokerage firm with only one licensed natural person, then any references to Broker or Brokerage Firm mean both the licensed natural person and brokerage firm who shall serve as Broker.

CHECK ONE BOX ONLY: 

___  Customer: Broker is the seller’s agent and Buyer is a customer. Broker as seller’s agent, intends to perform the following list of tasks:  ___ Show a property ___ Prepare and Convey written offers, counteroffers and agreements to amend or extend the contract.  Broker is not the agent of Buyer. 

___  Customer for Broker’s Listings – Transaction-Brokerage for Other Properties: When Broker is the seller’s agent, Buyer is a customer. When Broker is not the seller's agent, Broker is a transaction-broker assisting in the transaction. Broker is not the agent of Buyer.

___  Transaction-Brokerage Only: Broker is a transaction-broker assisting in the transaction. Broker is not the agent of Buyer.

Buyer consents to Broker’s disclosure of Buyer’s confidential information to the supervising broker or designee for the purpose of proper supervision, provided such supervising broker or designee shall not further disclose such information without consent of Buyer, or use such information to the detriment of Buyer.

DISCLOSURE OF SETTLEMENT SERVICE COSTS.  Buyer acknowledges that costs, quality, and extent of service vary between different settlement service providers (e.g., attorneys, lenders, inspectors and title companies).

 

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Broker Disclosure to Buyer - Definitions of Working Relationships

THIS IS NOT A CONTRACT.  IT IS BROKER’S DISCLOSURE OF BROKER’S WORKING RELATIONSHIP.

If this is a residential transaction, the following provisions shall apply:

MEGAN’S LAW. If the presence of a registered sex offender is a matter of concern to Buyer, Buyer understands that Buyer must contact local law enforcement officials regarding obtaining such information.

BUYER ACKNOWLEDGEMENT: 

Buyer acknowledges receipt of this document:

On _____________________,

BUYER ACKNOWLEDGEMENT:

The Buyer acknowledges receipt of this document on ______________.

Buyer:___________________________________Date:__________________

BROKER ACKNOWLEDGEMENT:

On ___________________________________, Broker provided__________________ (Buyer) with this document via ____________________________________________ and retained a copy for Broker’s records.

Brokerage Firm Name:

Broker:

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Definitions of Working Relationships (DD25-5-09)

This form contains the exact verbatim definitions from the above Broker Disclosure to Buyer/Tenant. The license law states it is to be used when a member of the public asks questions concerning brokerage relationships  not offered under the broker’s written office policy. It is a commission approved form, but is mandatory only in the above case.

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Brokerage Disclosure to Seller (FSBO) (SD16-10-19)

When reviewing the Exclusive Right-to-Buy Contract, we cautioned you that your job was to find your buyer the desired property without regard to whether it was listed by another broker and entered in the MLS. If the buyer’s perfect home is a “For Sale By Owner” (FSBO), you would use this form to notify the seller of your existing relationship with the buyer.

The form follows the exact format of the Broker Disclosure to Buyer/Tenant above with the relationship options worded for applicability to Sellers.

 

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Brokerage Duties Disclosure to Seller (BDD56-5-09)

REO and Non-CREC Approved Listings 

On rare occasions you may find yourself brokering properties for a lending institution or a government agency. In these cases, the listing contract will most likely be one drafted and insisted upon for universal use by the lender or agency. In such a case, you must prepare and submit this mini-listing addendum disclosing the duties and relationships that will apply under Colorado license law. 

REO is short hand for Real Estate Owned, something the lender does not want. 

This hybrid disclosure form contains verbatim extracts from the Commission approved listing contracts such as:

· Section 1,  Broker and Brokerage Firm: Multi-person Firm and One Person Firm.

· Section 2,  Defined Terms: Seller, Broker and Brokerage Firm.

· Section 3,  Brokerage Relationship: In-company transaction-different brokers and In-Company Transaction-One Broker.

· Section 4 and 5, Brokerage Services and Duties (Uniform Duties) of T-B and the additional 3 as Agent (Section 5).

· Section 6,  Material Defects, Disclosure and Inspection.

 

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Brokerage Duties Addendum to Property Management Agreement (BDA55-05-09)

Similarly, property management agreements for large commercial buildings may consist of standardized forms used nationally. When such is a case, this form lays out the Colorado license law with respect to brokerage relationships and uniform duties owed to the client.

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Change of Status (CS23-10-06)

This form is not so much a disclosure as it is a reminder. When the broker first entered into a brokerage relationship as an agent, the client was given a choice to check whether the agency would last forever  “until death do us part ” (or the end of the transaction) OR the agency would last until the broker got lucky and scored working with the other party to the transaction. If that happens, this form reminds the former agency client that the agreement he or she selected way back when is now in effect and the broker is now the Transaction-Broker for both sides.

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Disclosures - Non-Brokerage Relationships

There are five more forms not related to brokerage relationships, but disclosing some aspect of listing contracts. They are:

· Seller’s Property Disclosure (Residential) SPD29-10-11 and (All Types Properties) SPD19-10-11.

· Lead-Based Paint Disclosures (Sales) LP45-10-12 and (Rentals) LP46-10-12.

· Square Footage Disclosure SF94-05-04.

· Agreement to Amend/Extend Contract with Broker AE42-6-19.

· Listing Firm’s Well Checklist. 

· Seller's Property Disclosure Residential-SPD29-10-11 or All Types Properties SPD19-10-11

· This form should be presented as part of every listing presentation. It is to be filled out by the Seller (not the broker) and is correct to Seller’s current actual knowledge. In order to be sure it is as thorough as possible, it should be left for the Seller to complete and return in a day or two. If the Seller balks at filling this out or marks “Do Not Know” through all pages, there is a red flag for the broker to investigate.  In the Exclusive Right To Sell  Listing Contract the Seller is given the option to provide or not provide the Seller Property Disclosure, but even if not provided Seller is still required to disclose by statue any material defect of which the Seller is actually aware.

· Sellers seldom know everything about their property. An occasional “Do Not Know” entry serves to alert the buyer to the need for thorough investigation. Once completed, copies should be left in the property for prospective buyer or their brokers to access during showings.

· The disclosure is extremely detailed and covers improvements, general information (zoning, environmental, etc.), and land. It is far too detailed to be reproduced here, but should be accessed at the CREC Website for your own benefit. 

· Click here to open the  Seller's Property Disclosure  form.

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Seller's Property Disclosure

Here are the strong disclaimers at the end of the form:

Seller and Buyer understand that the real estate brokers do not warrant or guarantee the above information on the Property. Property inspection services may be purchased and are advisable. This form is  not intended as a substitute for an inspection of the Property.

ADVISORY TO SELLER:

Failure to disclose a known material defect may result in legal liability.

The information contained in this Disclosure has been furnished by Seller, who certifies to the truth thereof based on Seller’s CURRENT ACTUAL KNOWLEDGE.

ADVISORY TO BUYER:

1. Even though Seller has answered the above questions to Seller’s current actual knowledge, Buyer should thoroughly inspect the    Property and obtain expert assistance to accurately and fully evaluate the Property to confirm the status of the following matters:

a. the physical condition of the Property;

b. the presence of mold or other biological hazards;

c. the presence of rodents, insects and vermin including termites;

d. the legal use of the Property and legal access to the Property;

e. the availability and source of water, sewer, and utilities;

f. the environmental and geological condition of the Property;

g. the presence of noxious weeds; and

h. any other matters that may affect Buyer’s use and ownership of the Property that are important to Buyer as Buyer decides whether to purchase the Property.

2. Seller states that the information is correct to “Seller’s current actual knowledge” as of the date of this form. The term “current actual knowledge” is intended to limit Seller’s disclosure only to facts actually known by the Seller and does not include “constructive knowledge” or “common knowledge” or what Seller “should have known” about the Property. The Seller has no duty to inspect the Property when this Disclosure is filled in and signed.

3. Valuable information may be obtained from various local/state/federal agencies, and other experts may assist Buyer by performing more specific evaluations and inspections of the Property.

4. Boundaries, location and ownership of fences, driveways, hedges, and similar features of the Property may become the subjects of a dispute between a property owner and a neighbor. A survey may be used to determine the likelihood of such problems.

5. Whether any item is included or excluded is determined by the contract between Buyer and Seller and not this Seller’s Property Disclosure.

6. Buyer acknowledges that Seller does not warrant that the Property is fit for Buyer’s intended purposes or use of the Property. Buyer acknowledges that Seller’s indication that an item is “working” is not to be construed as a warranty of its continued operability or as a representation or warranty that such item is fit for Buyer’s intended purposes.

7. Buyer hereby receipts for a copy of this Disclosure. 

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Lead-Based Paint Disclosures Sales- LP45-10-12 or Rentals- LP46-10-12

If a residential property was built (building permit issued) prior to January 1, 1978, no contract is valid for its sale unless the buyer was given and signed a notice of lead based paint condition, an EPA booklet entitled: “Protect Your Family from Lead in Your Home” and a 10-day right to inspect and cancel any considered sale.

There is a separate form for sales and rentals.

In addition to these mandatory forms entitled “Lead Based Paint Disclosures,” the Commission also has developed a form for optional use entitled “Lead-Based Paint Obligations of Seller” (Landlord).

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Square Footage Disclosure SF94-05-04

Real Estate brokers do not measure property square footage! This is a job for builders, remodelers, architects, appraisers, assessors, and anyone  except a real estate broker. However, because brokers are often overcome by weakness or curiosity, and because they do such a poor job when they do measure, the Commission has prepared a form to disclose:

1. Whether a square footage measurement was made.

2. If so, what standard was used and when it was measured.

3. If not, what was the source and date of the square footage represented?

4. That if the buyer has any concern, the property should be measured independently by an expert of their choosing.

Rule of thumb: See above: Real Estate Brokers do not measure square footage! If the buyer (or someone else) wants to measure, the broker should hold the zero end of the tape measure and let the concerned party do the calculations.

 

Agreement to Amend/Extend Contract with Broker AE42-6-19

There are two forms used to extend contracts. One is used for listings/employment agreements and the other is for use with the Contract to Buy and Sell Real Estate. Be careful as the only difference in title is the added words “with Broker” in the form used to extend a listing. This form is used for both Buyer and Seller listings.

This form should be used for any changes during the term of the listing, for instance, a change in list price (for which there should always be a written source document showing the Seller’s authorization). 

If the original listing or employment was for an extended period, one may use this form or begin with a new listing contract rather than use this form to renew for another listing period.

Listing and selling urban (city) real estate is pretty simple. The problems associated with land measurement and water usage on rural property introduce complexities for which special expertise is needed. 

Because many brokers were clueless concerning some aspects of water rights and their transfer, the Commission developed a Listing Firm’s Well Checklist. It states right on the form that it is not intended to be anything but an internal document which allows the listing broker to get correct information regarding the well and then convey accordingly.

When listing property with a well, whether it is a primary or secondary water source, this form is an invaluable guide to the kinds of questions to ask and the kinds of data to gather for later use in the sales transaction. Since the history of many wells may pre-date modern recordkeeping, this kind of information as to flow rates, depth, permit numbers, etc. may take some time to gather. Do it at time of listing. Due to the current statutory Water Well Transfer requirements this for is invaluable in knowing the true picture of the well in order to proceed correctly. 

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Summary

This concludes Chapter 6. Below is a brief summary which you can review before taking your quiz.

Very much like the Exclusive Right-to-Sell, the  Exclusive Right-to-Buy Contract is binding and legal counsel shall be sought.

In  computing a period of days, when the ending date is not specified, the first day is excluded and the last day is included.

The  Uniform Duties are identical to the Exclusive Right-to-Sell.

· Promoting the interests of Buyer with the utmost good faith, loyalty and fidelity.

· Seeking a price and terms that are acceptable to Buyer.

· Counseling Buyer as to any material benefits or risks of a transaction known by Broker.

The  Success Fee is earned by the Brokerage Firm upon the Purchase of the Property and is payable upon closing of the transaction.

Neither Broker nor Brokerage Firm shall accept compensation from any other person or entity in connection with the Property without the written consent of Buyer.

Buyer agrees to conduct all negotiations for the Property only through Broker.

Broker will not obtain products or services from outside sources unless Buyer has agreed to pay for them promptly when due.

If a dispute arises, the parties shall first proceed in good faith to submit the matter to  mediation.

The arbitrator or court shall award to the  prevailing party all reasonable costs and expenses, including  attorney and legal fees.

No subsequent  modification of any of the terms of this Buyer Listing Contract shall be valid, binding upon the parties, or enforceable unless in writing and signed by the parties.

Buyer acknowledges receipt of a copy of this Buyer Listing Contract signed by Broker, including all attachments.

Megan’s Law - If the presence of a registered sex offender is a matter of concern, Buyer must contact local law enforcement officials regarding obtaining such information.

Broker Disclosure to Buyer 

· Seller’s Agent:  works solely on behalf of the seller to promote the interests of the seller with the utmost good faith, loyalty and fidelity.

· Buyer's Agent:  works solely on behalf of the buyer to promote the interests of the buyer with the utmost good faith, loyalty and fidelity.

· Transaction-Broker:  assists the buyer or seller or both by performing terms of any agreement without being an agent or advocate for any of the parties

· Customer:  a party to a real estate transaction with whom the broker has no brokerage relationship.

REO and Non-CREC Approved Listings 

· Broker and Brokerage Firm.

· Defined Terms

· Brokerage Relationship

· Brokerage Services and Duties

· Material Defects, Disclosure and Inspection.

Disclosures - Non-Brokerage Relationships

· Seller’s Property Disclosure (Residential)

· Lead-Based Paint Disclosures (Sales)

· Square Footage Disclosure

· Agreement to Amend/Extend Contract with Broker

· Listing Firm’s Well Checklist

Failure to disclose a known  material defect may result in legal liability.

Real Estate Brokers do not measure  square footage.

Click here if you would like to open this summary as a pdf, which you can then print or save to your device:  Chapter 6 Summary

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