Colorado Contracts and Regulations

Writing a Purchase Offer

Here is where the rubber meets the road. You are now going to learn how to write a purchase offer on a parcel of real estate. Remember that in spite of its title, it is only an offer until it is both accepted by the Seller and acceptance is communicated to the Buyer. Caution #2 is that you are not a party to this contract. It is to be written according to your buyer’s desires – and accepted or countered according to your seller’s desires. 

The printed portions of this form, except differentiated additions, have been approved by the Colorado Real Estate Commission. (CBS 1-6-15) (Mandatory 1-16) 

Notice that this is Form #1. It will most likely be #1 in your heart as well.

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

· Describe the information required to complete a Contract to Buy and Sell Real Estate

· Explain the difference between fixtures, personal property and trade fixtures

· Review the Appraisal Condition of the Contract to Buy and Sell Real Estate 

Let’s get started!

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Introduction to the New Forms

The majority of time in this chapter will be spent on CBS1-6-15 Contract to Buy and Sell Real Estate (Residential). The other four forms contain identical information and three of the forms have extensive Due Diligence sections which will be discussed independently.

The new contract forms have been formatted in an attempt to make each version’s layout consistent with the other forms. While much of the actual language found in the new forms is the same as in previous contracts, the reorganization gives the forms a new look with the goal of making them easier to use and understand.  

The forms have various “captions” or titles. The respective items collected in the respective area will be more easily found and will have a more natural progression. 

1.  Agreement

2.  Transaction Provisions

3.  Disclosure, Inspection, Due Diligence

4.  Closing Provisions

5.  General Provisions

6.  Additional Provisions & Attachments

7.  Signatures

The five forms are:

CBS1-6-15 Contract to Buy and Sell Real Estate (Residential)

The licensee will use this form when writing an offer to purchase on a single family home or a multi-family property (condominium, townhome, etc.) where the buyer intends the purchase to be a principal residence.  This is primarily designed for an owner occupant principal residence purchase.

CBSF1-6-15 Contract to Buy and Sell Real Estate (Colorado Foreclosure Protection Act)

The licensee will use this form when writing an offer to purchase where the following exists:

11. 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 at least thirty days delinquent or in default. If the transaction is a Short Sale transaction and a Short Sale Addendum is part of this Contract, the Act does not apply. Each party is further advised to consult an attorney.

If the buyer intends to occupy as a principal residence the licensee will use all normal forms (CBS1-6-15)

CBS2-6-15 Contract to Buy and Sell Real Estate (Income-Residential):

The licensee will use this form when writing an offer to purchase for an investor who is buying a property to use as an investment or rental.  The property may be a residential single family up to a 200 unit apartment. The licensee will make the appropriate box on page 1 dependent upon the size of property being covered in the form. The key to this is that the buyer will be a “non-owner occupant”.  The additional reason for the use of this form is the extensive due diligence in Sections 10 and 11,  pages 8, 9, 10 and 11 of CBS2 (Investor-Residential), CBS3 (Commercial) and CBS4 (Land).

CBS3-6-15 Contract to Buy and Sell Real Estate (Commercial):

This is the form the licensee will use when writing an offer to purchase on a commercial property.  The due diligence is Sections 10 and 11, pages 8, 9, and 10.

CBS4-6-15 Contract to Buy and Sell Real Estate (Land):

The licensee will use this form when writing an offer to purchase on a property where the major portion of the value of the property lies in the land.  ( Example: A 360 acre farm/ranch with two homes included would use the Land form with the residential addendum attached to cover the houses). The licensee will mark the appropriate box on the top of Page 1--_____Property With No Residences or ________Property With Residences-Residential Addendum ( RA33-10-12) Attached.

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§1 Agreement

THIS FORM HAS IMPORTANT LEGAL CONSEQUENCES AND THE PARTIES SHOULD CONSULT LEGAL AND TAX OR OTHER COUNSEL BEFORE SIGNING.   CONTRACT TO BUY AND SELL REAL ESTATE (RESIDENTIAL)

Date: __________________

AGREEMENT

1. AGREEMENT. Buyer agrees to buy, and Seller, agrees to sell, the Property described below on the terms and conditions set forth in this contract (Contract).

The parenthetical (Contract) means that from now forward, the word Contract with a capital “C” refers to this document and not some other contract.

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Agreement: §2 Parties and Properties

2.1. Buyer. Buyer, _________________________________________ will take title to the real property described below as 

 ___  Joint Tenants ___ Tenants In Common ___ Other _________________________________________________________.

2.2.  No Assignability.  This Contract  is Not assignable by Buyer unless otherwise specified in Additional Provisions.

The Seller may always assign (since the property presumably remains unchanged), but the buyer must have permission to do so (since each buyer’s financial qualifications are different). If either party dies during the executory phase, the contract is still in effect and binding on that party’s heirs.

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Agreement: §2 Parties and Properties (continued)

2.5.  Inclusions.  The Purchase Price includes the following items (Inclusions):

· 2.5.1. Inclusions - Attached.  If attached to the Property on the date of this Contract, the following items are included unless excluded under Exclusions: lighting, heating, plumbing, ventilating and air conditioning units, 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), and garage door openers including _______ remote controls. ). If checked, the following are owned by the Seller and included (leased items should be listed under  Due Diligence Documents): _____ None _____ Solar Panels _____ Water Softeners _____ Security _____ Systems _____ Satellite Systems (including satellite dishes). If any additional items are attached to the Property after the date of this Contract, such additional items are also included in the Purchase Price.

· 2.5.2. Inclusions - Not Attached. If on the Property, whether attached or not, on the date of this Contract, the following items are included unless excluded under Exclusions: storm windows, storm doors, window and porch shades, awnings, blinds, screens, window coverings and treatments, curtain rods, drapery rods, fireplace inserts, fireplace screens, fireplace grates, heating stoves, storage sheds, carbon monoxide alarms, smoke/fire detectors and all keys.

· 2.5.3. Personal Property - Conveyance. Any personal property must be conveyed at Closing by Seller free and clear of all taxes (except personal property taxes for the year of Closing), liens and encumbrances, except _____. Conveyance of all personal property will be by bill of sale or other applicable legal instrument.

· 2.5.4. Other Inclusions. The following items, whether fixtures or personal property, are also included in the Purchase Price: _____ If the box is checked, Buyer and Seller have concurrently entered into a separate agreement for additional personal property outside of this contract.

· 2.5.5. Parking and Storage Facilities.  the use or ownership of the following parking facilities: _____________________________; and the use or ownership of the following storage facilities:________________________. Note to Buyer: If exact rights to the parking and storage facilities is a concern to Buyer, Buyer should investigate.

For condominiums, parking and storage may be deeded or may just be assigned for use by that unit and considered common area. The only way to know other than to review the Seller’s original deed is to ask the Homeowners’ Association.

2.6. Exclusions. The following items are excluded (Exclusions):_____

2.7. Water Rights, Well Rights.  

· 2.7.1 Deeded Water Rights: The following legally described water rights: _____________________________ Any deeded water rights shall be conveyed by a good and sufficient _________ Deed ____  at closing

· 2.7.2. Other Rights Relating to Water. The following rights relating to water not included in §§ 2.7.1, 2.7.3, and 2.7.4 will be transferred to Buyer at Closing: _____________________________.

· 2.7.3.  Well Rights:  Seller agrees to supply required information to Buyer about the well. Buyer understands that if the well to be transferred is a “Small Capacity Well” or a “Domestic Exempt Water Well” used for ordinary household purposes, Buyer must, prior to or at Closing, complete a Change in Ownership form for the well. If an existing well has not been registered with the Colorado Division of Water Resources in the Department of Natural Resources (Division), Buyer must complete a registration of existing well form for the well and pay the cost of registration. If no person will be providing a closing service in connection with the transaction, Buyer must file the form with the Division within sixty days after Closing. The Well Permit # is _________________.

If you practice real estate brokerage in Colorado, you must know water rights in other than urban areas. Even then, some older urban properties may also have a well. Water rights are normally real property and are usually transferred by the appropriate type of deed. Some ditch rights may be personal property rights.

· 2.7.4. Water Stock Certificates: The water stock certificates to be transferred at Closing are as follows:_____

· 2.7.5. Conveyance. If Buyer is to receive any rights to water pursuant to § 2.7.2 (Other Rights Relating to Water), § 2.7.3 (Well Rights), or § 2.7.4 (Water Stock Certificates), Seller agrees to convey such rights to Buyer by executing the applicable legal instrument at Closing.

When you are preparing this offer for your buyer, you will not be privy to the Seller’s inclusions/exclusions in the listing contract. While the listing broker may have advertised certain major items, you should write this as if the buyer knows nothing and specifically asks for those items desired to be included. Never presume that an item will either be included or excluded. If not written here, there is no agreement and default goes to the seller. You will have the opportunity to learn this lesson when you buy an item your buyer thought was included and you failed to specify it. Although rare, the buyer may also wish to exclude some particularly undesirable property items (e.g. the rusty autos and parts in the yard).

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Agreement: §3 Dates and Deadlines

The following 39 dates and deadlines will govern the life of this contract. Your main job, once under contract, is to keep it on track – that is to assist your client to live up to his or her side. Remember the phrase “time is of the essence” – meaning any missed deadline has serious consequences – one of the most important is that it may give the other side a free ticket to cancel the contract.

The reference number given before each topic (on the actual form) refers to the governing section in the Contract. Once you’ve been through this contract review, it will be helpful to come back to this grid and read and relate each line with its reference paragraph.

You will develop your own method of filling in the deadlines, subject to the specifics of each offer you write for a buyer (or review with your seller). It is best to follow your employing broker’s lead here, as date preferences may be market- (or even office-) specific. Some thoughts on allowed times are given in the narrative for each reference paragraph.

The Commission in the new forms groups related items together by subject matter.  It is believed that this will allow the licensee to better help a consumer find specific information in this “somewhat lengthy” document.

3. Dates, Deadlines, and Applicability 

1 Alternative Earnest Money Deadline

Title

2  Record Title Deadline

3  Record Title Objection Deadline

4 Off-Record Title Deadline

5 Off-Record Title Objection Deadline

6. Title Resolution deadline 

7 Right of First Refusal Deadline

Owners’ Association

8  Association Documents Deadline

9  Association Documents Termination Deadline

Seller’s Disclosures

10 Seller’s Property Disclosure Deadline

11 Lead-Based Paint Disclosure Deadline

Loan and Credit

12 New Loan Application Deadline

13 New Loan Termination Deadline

14 Buyer’s Credit Information Deadline

15 Disapproval of Buyer’s Credit Information Deadline

16 Existing Loan Deadline

17 Existing Loan Termination Deadline

18 Loan Transfer Approval Deadline

19 Seller or Private Financing Deadline

Appraisal

20 Appraisal Deadline

21 Appraisal Objection Deadline

22 Appraisal Resolution Deadline

Survey

23 New ILC or New  Survey Deadline

24 New ILC or New Survey Objection Deadline

25 New ILC or New Survey Resolution Deadline

Inspection and Due Diligence

26 Inspection Objection Deadline

27 Inspection Termination Deadline 

28 Inspection Resolution Deadline

29 Property Insurance Termination Deadline

30 Due Diligence Documents Delivery Deadline

31 Due Diligence Documents Objection Deadline

32 Due Diligence Documents Resolution Deadline

33 Conditional Sale Deadline

34 Lead-Based Paint Termination Deadline

Closing and Possession

35 Closing Date

36 Possession Date

37 Possession Time

38 Acceptance Deadline Date

39 Acceptance Deadline Time

Leave no lines blank in the dates/deadlines grid. Either a date or “N/A” or “Deleted.” IF you delete here, even though it is sufficient, it makes for easier reading if you also line through (non-obliterating) the reference paragraph, or completely omit if your software and Rule F-5 permit.

3.2  Applicability of Terms. Any box checked in this Contract means the corresponding provision applies. If any deadline, blank in § 3. 1 (Dates and Deadlines) is left blank or completed with  the abbreviation “N/A” or the word “Deleted” such deadline, is not applicable and  the corresponding provision containing the deadline is deleted.  If no box is checked in a provision that contains a selection of “None”, such provision means that “None” applies.

The abbreviation “MEC” (mutual execution of this Contract) means the date upon which both parties have signed this Contract.

(Note: If  FHA or  VA loan boxes are checked in §4.5.3 (Loan Limitations) the  Appraisal Deadline (§3)  do Not apply to  FHA insured or  VA guaranteed loans.)

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Agreement: §4 Purchase Price and Terms

4.1. Price and Terms. The Purchase Price set forth below shall be payable in U.S. Dollars by Buyer as follows:

This is the crux of the deal. Mix and match loan types, or delete lines as needed.   

Item No.	Reference	Item	Amount	Amount
1	§4.1	Purchase Price	$
2	§4.2	Earnest Money		$
3	§4.5	New Loan
4	§4.6	Assumption Balance
5	§4.7	Seller or Private Financing
6	§4.8	Seller Financing
7 & 8
9	§4.4	Cash at Closing
10		Total	$	$

 

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Agreement: §4 Purchase Price and Terms (continued)

4.2. Seller Concession. At Closing, Seller will credit to Buyer $ n/a (Seller Concession). The Seller Concession may be used for any Buyer fee, cost, charge or expenditure to the extent the amount is allowed by the Buyer’s lender and is included in the Closing Statement or Closing Disclosure, at Closing. Examples of allowable items to be paid for by the Seller Concession include, but are not limited to: Buyer’s closing costs, loan discount points, loan origination fees, prepaid items and any other fee, cost, charge, expense or expenditure. Seller Concession is in addition to any sum Seller has agreed to pay or credit Buyer elsewhere in this Contract.

4.3. Earnest Money. The Earnest Money set forth in this Section, in the form of ____________________ , will be payable to and held by (Earnest Money Holder), in its trust account, on behalf of both Seller and Buyer. The Earnest Money deposit must be tendered by Buyer with this Contract unless the parties mutually agree to an Alternative Earnest Money Deadline for its payment. The parties authorize delivery of the Earnest Money deposit to the company conducting the Closing (Closing Company), if any, at or before Closing. In the event Earnest Money Holder has agreed to have interest on Earnest Money deposits transferred to a fund established for the purpose of providing affordable housing to Colorado residents, Seller and Buyer acknowledge and agree that any interest accruing on the Earnest Money deposited with the Earnest Money Holder in this transaction will be transferred to such fund.

The Commission has created this section to resolve the problem of an offer to purchase being submitted without “valid earnest money” (either a “copy” of an earnest money  check or a “copy” of a Promissory Note—neither of which in Colorado is valid earnest money).  In the event that the buyer is not able to submit the valid earnest money the licensee is encouraged to choose an “Alternative Earnest Money Deadline”(see below) allowing the offer to purchase to be legally valid in order to move forward with the transaction.

In addition, the language of line one “part payment of the Purchase Price and” was removed.  For example, a VA loan or other 100% financing do not apply the Earnest Money to the Purchase Price. It might be more appropriate in these cases to reference the earnest money is or is not

· 4.3.1. Alternative Earnest Money Deadline.  The deadline for delivering the Earnest Money, if other than at the time of tender of this Contract is as set forth as the Alternative Earnest Money Deadline.

Clearly state the form of tender such as “personal check,” “cash” or “promissory note” per Rule E-1(m).

This says the brokerage firm will hold the earnest money, but more than 50% of the time the broker simply gives the money over to the title company. In this case, the broker must have closing instructions signed by the buyer and seller and title company before turning over the money. The state REALTOR® association has established a housing opportunity fund as referenced above. Make sure your bank is capable of accounting for earnest money by individual deposit before doing this. For a small office it could be an accounting challenge.

· 4.3.2. Return of Earnest Money.  If Buyer has a right to terminate this Contract and timely terminates, Buyer is entitled to the return of Earnest Money as provided in this Contract. If this Contract is terminated as set forth in § 25 and, except as provided in § 24(Earnest Money Dispute), if the Earnest Money has not already been returned following receipt of a Notice to Terminate, Seller agrees to execute and return to Buyer or Broker working with Buyer, written mutual instructions, e.g., Earnest Money Release form, within three days of Seller’s receipt of such form.

This is a new provision which specifically provides that if the Buyer is entitled to terminate and does terminate (no dispute over earnest money involved) the contract the Earnest Money being held by the Seller is required to sign the Earnest Money Release form and return the form along with the Earnest Money to the Buyer within 3 days of the Seller’s receipt of the form.  If the Earnest Money is being held by someone other than the Listing or Seller Broker (e.g., the closing entity or title company) the entity has 5 days following receipt to return so long as the check has passed the bank.

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Agreement: §4 Purchase Price and Terms (continued)

4.4. Form of Funds; Time of Payment; Available Funds.

· 4.4.1. Good Funds.  All amounts payable by the parties at Closing, including any loan proceeds, Cash at Closing and closing costs, must be in funds that comply with all applicable Colorado laws, including electronic transfer funds, certified check, savings and loan teller’s check and cashier’s check (Good Funds).

(Remember that a Colorado closing coincides with the transfer of title. Therefore all moneys at closing must be “good funds,” money that cannot be recalled or cancelled, (e.g. not any type of check that could bounce, any I.O.U. or promissory note, etc.)

· 4.4.2. Time of Payment Available Funds.  All funds including the Purchase Price to be paid by Buyer, must be paid before or at Closing or as otherwise agreed in writing between the parties shall be timely paid to allow disbursement by Closing Company at Closing OR SUCH NONPAYING PARTY WILL BE IN DEFAULT. Buyer represents that Buyer, as of the date of this Contract, ____  Does   ____Does Not have funds that are immediately verifiable and available in an amount not less than the amount stated as Cash at Closing in § 4.1.

(Remember that a Colorado closing coincides with the transfer of title. Therefore all moneys at closing must be “good funds,” money that cannot be recalled or cancelled, (e.g. not any type of check that could bounce, any I.O.U. or promissory note, etc.)

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Agreement: §4 Purchase Price and Terms (continued)

4.5. New Loan.

· 4.5.1. Buyer to Pay Loan Costs.  Buyer, except as otherwise permitted in § 4.2 (Seller Concession), if applicable, must timely pay Buyer’s loan costs, loan discount points, prepaid items and loan origination fees, as required by lender.

· 4.5.2. Buyer May Select Financing.  Buyer may pay in cash or select financing appropriate and acceptable to Buyer, including a different loan than initially sought, except as restricted in § 4.5.3 (Loan Limitations) or § 30, Additional Provisions.

· 4.5.3. Loan Limitations.  Buyer may purchase the Property using any of the following types of loan: _____ Conventional _____ FHA _____ VA ____ Bond _____ Other.

· 4.5.4. Loan Estimate – Monthly Payment and Loan Costs.  Buyer is advised to review the terms, conditions and costs of Buyer’s New Loan carefully. If Buyer is applying for a residential loan, the lender generally must provide Buyer with a Loan Estimate within three days after Buyer completes a loan application. Buyer should also obtain an estimate of the amount of Buyer’s monthly mortgage payment.

4.6.  Assumption.  Buyer agrees to assume and pay an existing loan in the approximate amount of the Assumption Balance set forth in § 4.1 (Price and Terms), presently payable at $______________  per  ________________ including principal and interest presently at the rate of ________% per annum, and also including escrow for the following as indicated: ___ Real Estate Taxes ____Property Insurance Premium ___ Mortgage Insurance Premium and_____. Buyer agrees to pay a loan transfer fee not to exceed $_____________. At the time of assumption, the new interest rate will not exceed ________% per annum and the new payment will not exceed $_____________ per ________________ principal and interest, plus escrow, if any. If the actual principal balance of the existing loan at Closing is less than the Assumption Balance, which causes the amount of cash required from Buyer at Closing to be increased by more than $_____________, or if any other terms or provisions of the loan change, Buyer shall have the right to terminate under §25.1, on or before  Closing Date. 

Seller ___ Will ____   Will Not be released from liability on said loan. If applicable, compliance with the requirements for release from liability shall be evidenced by delivery _____  on or before Loan Transfer Approval Deadline ______  at Closing of an appropriate letter of commitment from lender. Any cost payable for release of liability shall be paid by  ________________in an amount not to exceed $_____________.

Double check your figures if there is an assumption involved. Remember closing may occur a few months after this contract. So, if the seller has made more payments, the assumed balance will be lower – leaving more cash for the buyer to come up with. Closing is not the time to find this out. There are few worse feelings than having a cash-strapped buyer come to closing to learn that they need more cash. Here is another situation in which the broker has been known to cough up the difference.

Emphasis above added.  It is to suggest that almost every V.A. or FHA loan intended to be assumed will require lender pre-approval.

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Agreement: §4 Purchase Price and Terms (continued)

4.7. Seller or Private Financing. 

WARNING: Unless the transaction is exempt, federal and state laws impose licensing, other requirements and restrictions on sellers and private financiers. Contract provisions on financing and financing documents, unless exempt, should be prepared by a licensed Colorado attorney or licensed mortgage loan originator. Brokers should not prepare or advise the parties on the specifics of financing, including whether or not a party is exempt from the law.

·  4.7.1. Seller Financing. If Buyer is to pay all or any portion of the Purchase Price with Seller financing, _____Buyer _____Seller will deliver the proposed Seller financing documents to the other party on or before _____ days before Seller or Private Financing Deadline.

· 4.7.1.1. Seller May Terminate. If Seller is to provide Seller financing, this Contract is conditional upon Seller determining whether such financing is satisfactory to the Seller, including its payments, interest rate, terms, conditions, cost and compliance with the law. Seller has the Right to Terminate under § 25.1, on or before Seller or Private Financing Deadline, if such Seller financing is not satisfactory to Seller, in Seller’s sole subjective discretion.

· 4.7.2. Buyer May Terminate. If Buyer is to pay all or any portion of the Purchase Price with Seller or private financing, this Contract is conditional upon Buyer determining whether such financing is satisfactory to Buyer, including its availability, payments, interest rate, terms, conditions and cost. Buyer has the Right to Terminate under § 25.1, on or before Seller or Private Financing Deadline, if such Seller or private financing is not satisfactory to Buyer, in Buyer’s sole subjective discretion.

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Transaction Provisions: §5 Financing Conditions and Obligations

5.1. New Loan Application.  If Buyer is to pay all or part of the Purchase Price by obtaining one or more new loans (New Loan), or if an existing loan is not to be released at Closing, Buyer, if required by such lender, shall make an application verifiable by such lender, on or before New Loan Application Deadline  and exercise reasonable efforts to obtain such loan or approval.

A savvy buyer with a good broker will have been pre-qualified, or even pre-approved long before writing an offer. If not, it seems in everyone’s best interests to set the loan application deadline at 3 days or less after MEC in the dates and deadlines grid.

5.2. New Loan Review.  If Buyer is to pay all or part of the Purchase Price with a New Loan, this Contract is conditional upon Buyer determining, in Buyer’s sole subjective discretion, whether the New Loan is satisfactory to Buyer, including its availability, payments, interest rate, terms, conditions, and cost. This condition is for the sole benefit of Buyer. Buyer has the Right to Terminate under § 25.1, on or before New  Loan Termination Deadline if the new Loan is not satisfactory to Buyer in Buyer’s sole subjective discretion. Buyer does not have a right to terminate based on the New Loan if the objection is based on the Appraised Value (defined below) or the Lender Requirements (defined below). IF SELLER IS NOT IN DEFAULT AND DOES NOT TIMELY RECEIVE WRITTEN BUYER’S NOTICE TO TERMINATE, BUYER’S EARNEST MONEY WILL BE NONREFUNDABLE, except as otherwise provided in this contract (e.g., Appraisal, Title, Survey).

This is actually a free out from the contract for the buyer. No matter what the buyer has proposed as financing, the buyer may seek a different loan at any time. As a broker working with the buyer, you would certainly want to check the first four boxes in §4.5.3. Even so, whatever the loan types, the buyer may terminate without penalty and get all of his or her earnest money back upon stating that loan applied for is not satisfactory. The broker working with the buyer will want the loan approval deadline to be closer to closing. The broker working with the seller may want to counter this date to make loan approval deadline closer to contract execution.

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Transaction Provisions: §5 Financing Conditions and Obligations (continued)

5.3. Credit Information  If an existing loan is not to be released at Closing, this Contract is conditional (for the benefit of Seller) upon Seller’s approval of Buyer’s financial ability and creditworthiness, which approval will be at Seller’s sole subjective discretion. Accordingly: (1) Buyer must supply to Seller by Buyer’s Credit Information Deadline, at Buyer’s expense, information and documents (including a current credit report) concerning Buyer’s financial, employment and credit condition; (2) Buyer consents that Seller may verify Buyer’s financial  ability and creditworthiness; and (3) any such information and documents received by Seller shall be held by Seller in confidence, and not released to others except to protect Seller’s interest in this transaction. If the Cash at Closing is less than as set forth in § 4.1 of this Contract, Seller  has the right to terminate under § 25.1, or before Closing. If Seller disapproves of Buyer’s financial ability or creditworthiness Seller’s sole subjective discretion, Seller shall have the Right to Terminate under § 25.1, on or before  Disapproval of Buyer’s Credit Information Deadline .

5.4. Existing Loan Review.  If an existing loan is not to be released at Closing, Seller must deliver copies of the loan documents (including note, deed of trust, and any modifications) to Buyer by Existing Loan Deadline. For the sole benefit of Buyer, this Contract is conditional upon Buyer’s review and approval of the provisions of such loan documents Buyer, has the Right to Terminate under § 25.1, on or before  Existing Loan Termination Deadline, based on any unsatisfactory provision of such documents, in Buyer’s sole subjective discretion. If the lender’s approval of a transfer of the Property is required, this Contract is conditional upon Buyer obtaining such approval without change in the terms of such loan, except as set forth in § 4.6. If lender’s approval is not obtained by Loan Transfer Approval Deadline, this Contract will terminate on such deadline. Seller  has the Right to Terminate under § 25.1, on or before  Closing, in Seller’s sole subjective discretion, if Seller is to be released from liability under such existing loan and Buyer does not obtain such compliance as set forth in § 4.6.

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Transaction Provisions: §6 Appraisal Provisions

6.1. Appraisal Definition. An “Appraisal” is an opinion of value prepared by a licensed or certified appraiser, engaged on behalf of Buyer or Buyer’s lender, to determine the Property’s market value (Appraised Value). The Appraisal may also set forth certain lender requirements, replacements, removals or repairs necessary on or to the Property as a condition for the Property to be valued at the Appraised Value.

6.2. Appraisal Condition.

The applicable Appraisal provision set forth below applies to the respective loan type set forth in §4.5.3., or if a cash transaction, i.e. no financing, § 6.2.1. shall apply.

· 6.2.1. Conventional/Other.  Buyer has the right to obtain an Appraisal. If the Appraised Value is less than the Purchase Price, or if the Appraisal is not received by Buyer on or before Appraisal Deadline Buyer may, on or before  Appraisal Objection Deadline:

· 6.2.1.1. Notice to Terminate. Notify Seller in writing, pursuant to § 25.1,  that this Contract is terminated; or

· 6.2.1.2. Appraisal Objection. Deliver to Seller a written objection accompanied by either a copy of the Appraisal or written notice from lender that confirms the Appraised Value is less than the Purchase Price (Lender Verification.

· 6.2.1.3. Appraisal Resolution. If an Appraisal Objection is received by Seller, on or before  Appraisal Objection Deadline, and if Buyer and Seller have not agreed in writing to a settlement thereof on or before  Appraisal Resolution Deadline, this Contract will terminate on the  Appraisal Resolution Deadline, unless Seller receives Buyer’s written withdrawal of the Appraisal Objection before such termination, i.e., on or before expiration of  Appraisal Resolution Deadline.

· 6.2.2. FHA. It is expressly agreed that, notwithstanding any other provisions of this Contract, the Purchaser (Buyer) shall not be obligated to complete the purchase of the Property described herein or to incur any penalty by forfeiture of Earnest Money deposits or otherwise unless the purchaser (Buyer) has been given in accordance with HUD/FHA or VA requirements a written statement issued by the Federal Housing Commissioner, Department of Veterans Affairs, or a Direct Endorsement lender, setting forth the appraised value of the Property of not less than $_____________. The Purchaser (Buyer) shall have the privilege and option of proceeding with the consummation of this Contract without regard to the amount of the appraised valuation. The appraised valuation is arrived at to determine the maximum mortgage the Department of Housing and Urban Development will insure.

HUD does not warrant the value or the condition of the Property. The purchaser (Buyer) should satisfy himself/herself that the price and condition of the Property are acceptable.

· 6.2.3. VA. It is expressly agreed that, notwithstanding any other provisions of this Contract, the purchaser (Buyer) shall not incur any penalty by forfeiture of Earnest Money or otherwise or be obligated to complete the purchase of the Property described herein, if the Contract Purchase Price or cost exceeds the reasonable value of the Property established by the Department of Veterans Affairs. The purchaser (Buyer) shall, however, have the privilege and option of proceeding with the consummation of this Contract without regard to the amount of the reasonable value established by the Department of Veterans Affairs. 

6.3. Lender Property Requirements. If the lender imposes any written requirements, replacements, removals or repairs (Lender Requirements), including any specified in the Appraisal to be made to the Property (e.g., roof repair, repainting), beyond those matters already agreed to by Seller in this Contract, this contract terminates on the earliest of three days following Seller’s receipt of the Lender Requirements, or closing, unless prior to termination. (1) the parties enter into a written agreement to satisfy the Lender Requirements; (2) the Lender Requirements have been completed or (3) the satisfaction of the Lender Requirements is waived in writing by Buyer.

A Seller cannot be forced into making any repairs he or she does not want to make just so the buyer can get his or her loan.

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Transaction Provisions: §6 Appraisal Provisions (continued)

6.4. Cost of Appraisal. Cost of any appraisal to be obtained after the date of this Contract must be timely paid by____ Buyer ____ Seller. The cost of the Appraisal may include any and all fees paid to the appraiser, appraisal management company, lender's agent or all three.

Cost of appraisal is normally paid by the buyer, but this is negotiable.

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Transaction Provisions: §7 Evidence of Title and Association Documents

7.1. Evidence of Title. On or before Record Title Deadline (§ 2.3), Seller shall cause to be furnished to Buyer, at Seller’s expense, a current commitment for owner’s title insurance policy (Title Commitment) in an amount equal to the Purchase Price, or if this box is checked, ___ An Abstract of title certified to a current date. If title insurance is furnished, Seller shall also deliver to Buyer copies of any abstracts of title covering all or any portion of the Property (Abstract) in Seller’s possession. At Seller’s expense, Seller shall cause the title insurance policy to be issued and delivered to Buyer as soon as practicable at or after Closing. The title insurance commitment ___  Shall ___  Shall Not commit to delete or insure over the standard exceptions which relate to: (1) parties in possession, (2) unrecorded easements, (3) survey matters, (4) any unrecorded mechanics’ liens, (5) gap period (effective date of commitment to date deed is recorded), and (6) unpaid taxes, assessments and unredeemed tax sales prior to the year of Closing. Any additional premium expense to obtain this additional coverage shall be paid by ___  Buyer ___  Seller.

Note: The title insurance company may not agree to delete or insure over any or all of the standard exceptions. Buyer shall have the right to review the Title Commitment. If the Title Commitment or its provisions are not satisfactory to Buyer, Buyer may exercise Buyer’s rights pursuant to §8.1.

Few properties have title tracked by abstracts any more. The requirement for the Seller to deliver the actual Title Insurance Policy after closing is actually the broker working with the Seller’s requirement – since it is the broker’s primary job to insure the client’s compliance with the entire contract. The check-box for extended title insurance coverage favors the buyer if selected, but may not be required. Follow your employing broker’s direction on the use of this box in the interests of your client.

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Transaction Provisions: §7 Owners' Association Documents

7. OWNERS’ ASSOCIATION. This Section is applicable if the Property is located within a Common Interest Community and subject to the declaration (Association)

7.1. Common Interest Community Disclosure.

THE PROPERTY IS LOCATED WITHIN A COMMON INTEREST COMMUNITY AND IS SUBJECT TO THE DECLARATION FOR SUCH COMMUNITY. THE OWNER OF THE PROPERTY WILL BE REQUIRED TO BE A MEMBER OF THE OWNER’S ASSOCIATION FOR THE COMMUNITY AND WILL BE SUBJECT TO THE BYLAWS, AND RULES AND REGULATIONS OF THE ASSOCIATION. THE DECLARATION, BYLAWS, AND RULES AND REGULATIONS WILL IMPOSE FINANCIAL OBLIGATIONS UPON THE OWNER OF THE PROPERTY, INCLUDING AN OBLIGATION TO PAY ASSESSMENTS OF THE ASSOCIATION. IF THE OWNER DOES NOT PAY THESE ASSESSMENTS, THE ASSOCIATION COULD PLACE A LIEN ON THE PROPERTY AND POSSIBLY SELL IT TO PAY THE DEBT. THE DECLARATION, BYLAWS, AND RULES AND REGULATIONS OF THE COMMUNITY MAY PROHIBIT THE OWNER FROM MAKING CHANGES TO THE PROPERTY WITHOUT AN ARCHITECTURAL REVIEW BY THE ASSOCIATION (OR A COMMITTEE OF THE ASSOCIATION) AND THE APPROVAL OF THE ASSOCIATION. PURCHASERS OF PROPERTY WITHIN THE COMMON INTEREST COMMUNITY SHOULD INVESTIGATE THE FINANCIAL OBLIGATIONS OF MEMBERS OF THE ASSOCIATION. PURCHASERS SHOULD CAREFULLY READ THE DECLARATION FOR THE COMMUNITY AND THE BYLAWS AND RULES AND REGULATIONS OF THE ASSOCIATION. 

Here’s a perfect example of the overuse of bold-faced font and all capital letters. If you shout everything, it’s hard to tell the important from the unimportant. This warning and its font are specified in Colorado statute. It’s in this contract because some Buyers have claimed they didn’t know they were subject to an HOA, or the extent of the HOA’s power. Don’t let your buyer be one of those.

7.2 Association Documents to Buyer.  Seller is obligated to provide to Buyer the Association Documents (defined below), at Seller's expense, on or before  Association Documents Deadline. Seller authorizes the Association to provide the Association Documents to Buyer, at Seller's expense. Seller's obligation to provide the Association Documents is fulfilled on Buyer's receipt of the Association Documents, regardless of who provides such documents.

Before striking this, remember that more than half of all transactions, and a very high percentage of suburban single-family transactions, are subject to an HOA. It’s not just for condominiums.

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Transaction Provisions: §7 Owners' Association Documents (continued)

7.3. Association Documents Association Documents (Association Documents) consist of the following:

7.3.1. All Association declarations, articles of Incorporation, bylaws, articles of incorporation, operating agreement, rules and regulations, party wall agreements and the Association's responsible governance policies adopted under § 38-33.3-209.5, C.R.S.;

7.3.2  Minutes of: (1) the annual owners' or members' meeting and (2) any executive boards' or managers' meetings; such minutes include those provided under the most current annual disclosure required under § 38-33.3-209,4 C.R.S. (Annual Disclosure) and minutes of meetings, if any, subsequent to the meetings disclosed in the Annual Disclosure. If none of the preceding minutes exist, then the most recent minutes, if any (§§ 7.3.1 and 7.3.2 collectively, Governing Documents); and

7.3.3  List of all Association insurance policies as provided in the Association's last Annual Disclosure, including, but not limited to, property, limited liability, association director and officer professional liability and fidelity policies. the list must include company names, policy limits, policy deductibles, additional named insured and expiration dates of the policies listed (Association Insurance Documents;  

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Transaction Provisions: §7 Owners' Association Documents (continued)

7.4. Conditional on Buyer’s Review. Buyer has the right to review the Association Documents. Buyer has the Right to Terminate under § 25.1, on or before  Association Documents Termination Deadline, based on any unsatisfactory provision in any of the Association Documents, in Buyer’s sole subjective discretion. Should Buyer receive the Association Documents after  Association Documents Deadline, Buyer, at Buyer’s option, has the Right to Terminate under § 25.1 by Buyer’s Notice to Terminate received by Seller on or before ten days after Buyer’s receipt of the Association Documents. If Buyer does not receive the Association Documents, or if Buyer’s Notice to Terminate would otherwise be required to be received by Seller after  Closing Date, Buyer’s Notice to Terminate must be received by Seller on or before Closing. If Seller does not receive Buyer’s Notice to Terminate within such time, Buyer accepts the provisions of the Association Documents as satisfactory, and Buyer waives any Right to Terminate under this provision, notwithstanding the provisions of § 8.6 (Right of First Refusal or Contract Approval) .

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Transaction Provisions: §8 Title Insurance, Record Title and Off Record Title

8.1 Evidence of Record Title.

· 8.1.1. Seller Selects Title Insurance Company. If this box is checked, Seller will select the title insurance company to furnish the owner’s title insurance policy at Seller’s expense. On or before  Record Title Deadline, Seller must furnish to Buyer, a current commitment for an owner’s title insurance policy (Title Commitment), in an amount equal to the Purchase Price, or if this box is checked, an Abstract of Title certified to a current date. Seller will cause the title insurance policy to be issued and delivered to Buyer as soon as practicable at or after Closing.

· 8.1.2. Buyer Selects Title Insurance Company. If this box is checked, Buyer will select the title insurance company to furnish the owner’s title insurance policy at Buyer’s expense. On or before  Record Title Deadline, Buyer must furnish to Seller, a current commitment for owner’s title insurance policy (Title Commitment), in an amount equal to the Purchase Price. If neither box in § 8.1.1 or § 8.1.2 is checked, § 8.1.1 applies.

· 8.1.3. Owner’s Extended Coverage (OEC). The Title Commitment_____  Will _____ Will Not contain Owner’s Extended Coverage (OEC). If the Title Commitment is to contain OEC, it will commit to delete or insure over the standard exceptions which relate to: (1) parties in possession, (2) unrecorded easements, (3) survey matters, (4) unrecorded mechanics’ liens, (5) gap period (period between the effective date and time of commitment to the date and time the deed is recorded), and (6) unpaid taxes, assessments and unredeemed tax sales prior to the year of Closing. Any additional premium expense to obtain OEC will be paid by_____  Buyer_____  Seller _____ One-Half by Buyer and One-Half by Seller _____ Other   

Regardless of whether the Contract requires OEC, the Title Insurance Commitment may not provide OEC or delete or insure over any or all of the standard exceptions for OEC. The Title Insurance Company may require a New Survey or New ILC, defined below, among other requirements for OEC. If the Title Insurance Commitment is not satisfactory to Buyer, Buyer has a right to object under § 8.45 (Right to Object to Title, Resolution).

· 8.1.4. Title Documents. Title Documents consist of the following: (1) copies of any plats, declarations, covenants, conditions and restrictions burdening the Property, and (2) copies of any other documents (or, if illegible, summaries of such documents) listed in the schedule of exceptions (Exceptions) in the Title Commitment furnished to Buyer (collectively, Title Documents).

· 8.1.5. Copies of Title Documents. Buyer must receive, on or before  Record Title Deadline, copies of all Title Documents. This requirement pertains only to documents as shown of record in the office of the clerk and recorder in the county where the Property is located. The cost of furnishing copies of the documents required in this Section will be at the expense of the party or parties obligated to pay for the owner’s title insurance policy.

· 8.1.6. Existing Abstracts of Title. Seller must deliver to Buyer copies of any abstracts of title covering all or any portion of the Property (Abstract of Title) in Seller’s possession on or before  Record Title Deadline.

8.2. Record Title. Buyer has the right to review and object to the Abstract of Title or Title Commitment and any of the Title Documents as set forth in § 8.45 (Right to Object to Title, Resolution) on or before  Record Title Objection Deadline. Buyer’s objection may be based on any unsatisfactory form or content of Title Commitment or Abstract of Title, notwithstanding § 13, or any other unsatisfactory title condition, in Buyer’s sole subjective discretion. If the Abstract of Title, Title Commitment or Title Documents are not received by Buyer on or before the  Record Title Deadline, or if there is an endorsement to the Title Commitment that adds a new Exception to title, a copy of the new Exception to title and the modified Title Commitment will be delivered to Buyer. Buyer has until the earlier of Closing or ten days after receipt of such documents by Buyer to review and object to: (1) any required Title Document not timely received by Buyer, (2) any change to the Abstract of Title, Title Commitment or Title Documents, or (3) any endorsement to the Title Commitment. If Seller receives Buyer’s Notice to Terminate or Notice of Title Objection, pursuant to this § 8.2 (Record Title), any title objection by Buyer is governed by the provisions set forth in § 8.45 (Right to Object to Title, Resolution). If Seller has fulfilled all Seller's obligations, if any, to deliver to Buyer all documents required by § 8.1 (Evidence of Record Title) and Seller does not receive Buyer’s Notice to Terminate or Notice of Title Objection by the applicable deadline specified above, Buyer accepts the condition of title as disclosed by the Abstract of Title, Title Commitment and Title Documents as satisfactory.

7.2. Copies of Exceptions. On or before Record Title Deadline (§ 3), Seller, at Seller’s expense, shall furnish to Buyer and __________________, (1) copies of any plats, declarations, covenants, conditions and restrictions burdening the Property, and (2) if a Title Commitment is required to be furnished, and if this box is checked ___ Copies of any Other Documents (or, if illegible, summaries of such documents) listed in the schedule of exceptions (Exceptions). Even if the box is not checked, Seller shall have the obligation to furnish these documents pursuant to this section if requested by Buyer any time on or before  Exceptions Request Deadline (§ 3). This requirement shall pertain only to documents as shown of record in the office of the clerk and recorder in the county where the Property is located. The abstract or Title Commitment, together with any copies or summaries of such documents furnished pursuant to this section, constitute the title documents (collectively, Title Documents).

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Transaction Provisions §8 Title Insurance, Record Title and Off-Record Title (continued)

8.3. Off-Record Title Matters. Seller must deliver to Buyer, on or before  Off-Record Title Deadline (§ 3) true copies of all existing surveys in Seller’s possession pertaining to the Property and must disclose to Buyer all easements, liens (including, without limitation, governmental improvements approved, but not yet installed) or other title matters (including, without limitation, rights of first refusal and options) not shown by public records of which Seller has actual knowledge (Off-Record Matters). This Section excludes and  New ILC or  New Survey governed under  § 9 (New ILC, New Survey). Buyer  has the right to inspect the Property to investigate if any third party has any right in the Property not shown by public records (e.g. an unrecorded easement, boundary line discrepancy or water rights). Buyer’s Notice to Terminate or Notice of Title Objection of any unsatisfactory condition (whether disclosed by Seller or revealed by such inspection, notwithstanding §8.2 (Record Title) and §13 (Transfer of Title), in Buyer’s sole subjective discretion must be received by Seller on or before  Off-Record Title Objection Deadline,  Buyer has until the earlier of Closing or ten days after receipt by Buyer to review and object to such Off-Record Matter. If Seller receives Buyer’s Notice to Terminate or Notice of Title Objection pursuant to this § 8.3 (Off-Record Title) any title objection by Buyer is governed by the provisions set forth in § 8.4 (Right to Object to Title, Resolution) If Seller does not  receive Buyer’s Notice to Terminate or Notice of Title Objection by the applicable deadline specified above, Buyer accepts title subject to such Off-Record Matters and rights, if any, of third parties not shown by public records of which Buyer has actual knowledge.

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Transaction Provisions: §8 Title Insurance, Record Title and Off-Record Title

Only one of the above two  will apply. But either will provide the buyer with a free out if the property is not worth the offering price. Appraisals are engaged by the “Buyer’s lender” in most cases – not the buyer. The buyer always has the right to proceed with the transaction provided he or she has the additional funds that the lender/FHA/VA will not approve for the loan.

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Transaction Provisions §8 Title Insurance, Record Title and Off-Record Title (continued)

It makes sense (and simplicity of tracking) to set the objection deadline for the following three paragraphs on the same date. Unlike the physical condition inspection in Paragraph 10 of this contract, the buyer may not terminate the contract for title objections until closing as the Seller has up to that point to correct any title issues. Buyer may waive title corrections at any time (for instance, a small survey encroachment of no consequence to the buyer.)

8.5 Right to Object To Title, Resolution.  Buyer’s right to object, in Buyer's sole subjective discretion, to any title matters shall include those matters set forth in § 8.2 (Record Title), §8.3 (Off-Record Title), § 8.4 (Special Taxing District) and §13 (Transfer of Title).  If Buyer objects to any title matter, on or before the applicable deadline, Buyer has the following options:

· 8.45.1. Title Objection, Resolution. If Seller receives Buyer’s written Notice objecting to any title matter (Notice of Title Objection),on or before the applicable deadline, and if Buyer and Seller have not agreed to a written settlement on or before  Title Resolution Deadline , this Contract will terminate on the expiration of  Title Resolution Deadline, unless Seller receives Buyer’s written withdrawal of Buyer’s Notice of Title Objection, i.e., Buyer’s written notice to waive objection to such items and waives the right to terminate for that reason, on or before expiration of  Title Resolution Deadline . If either the Record Title Deadline or the Off-Record Title Deadline, or both, are extended pursuant to § 8.2 (Record Title) or § 8.3 (Off-Record Title), or § 8.4 (Special Taxing Districts), the Title Resolution Deadline also will be automatically extended to the earlier of Closing or fifteen days after Buyer’s receipt of the applicable documents; or

· 8.45.2. Title Objection, Right to Terminate. Buyer  may exercise the  right to terminate  under § 25.1, on or before the applicable deadline, based on any title matter unsatisfactory to Buyer, in Buyer’s sole subjective discretion.

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Transaction Provisions §8 Title Insurance, Record Title and Off-Record Title (continued)

8.5. Special Taxing Districts.

SPECIAL TAXING DISTRICTS MAY BE SUBJECT TO GENERAL OBLIGATION INDEBTEDNESS THAT IS PAID BY REVENUES PRODUCED FROM ANNUAL TAX LEVIES ON THE TAXABLE PROPERTY WITHIN SUCH DISTRICTS. PROPERTY OWNERS IN SUCH DISTRICTS MAY BE PLACED AT RISK FOR INCREASED MILL LEVIES AND TAX TO SUPPORT THE SERVICING OF SUCH DEBT WHERE CIRCUMSTANCES ARISE RESULTING IN THE INABILITY OF SUCH A DISTRICT TO DISCHARGE SUCH INDEBTEDNESS WITHOUT SUCH AN INCREASE IN MILL LEVIES. BUYER SHOULD INVESTIGATE THE SPECIAL TAXING DISTRICTS IN WHICH THE PROPERTY IS LOCATED BY CONTACTING THE COUNTY TREASURER, BY REVIEWING THE CERTIFICATE OF TAXES DUE FOR THE PROPERTY, AND BY OBTAINING FURTHER INFORMATION FROM THE BOARD OF COUNTY COMMISSIONERS, THE COUNTY CLERK AND RECORDER, OR THE COUNTY ASSESSOR.  

A tax certificate from the respective county treasurer listing any special taxing districts that affect the Property (Tax Certificate) must be delivered to Buyer on or before  Record Title Deadline. If the property is located within a special taxing district and such inclusion is unsatisfactory to Buyer, in Buyer's sole subjective discretion, Buyer may object, on or before Record Title Objection Deadline. If the Tax Certificate shows that the property is included in a special taxing district and is received by Buyer after the Record Title Deadline, Buyer has until the earlier of closing or 10 days after receipt by Buyer to review and object to the Property's inclusion in a special taxing district as unsatisfactory to Buyer.

Here we go with the bold-face all caps again... And again, it’s required by law. A special taxation district is enacted for a single-purpose (e.g. a recreation center) – separate from normal property taxes. This warning stems from homeowners in the early 1990s being constructively evicted because they could not pay the exorbitant taxes that were not clearly understood when they purchased their homes. Some homes actually had negative (below zero) property valuations. When this warning says “Buyer should investigate, it really means broker working with the buyer should investigate and share this information with the buyer before the offer is written.

Buyer has the Right to Terminate under 25.1, on or before  Off-Record Title Objection Deadline, based on any unsatisfactory effect that the Property being located within a special taxing district in Buyer’s sole subjective discretion.

Since the Seller cannot remove the property from the special taxation district, the buyer may terminate on these grounds at any time. Of course, if the broker working with the buyer is ahead of the game, this can likely be resolved before the offer is ever written/presented.

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Transaction Provisions: §8 Title Insurance, Record Title and Off-Record Title (continued)

8.6. Right of First Refusal or Contract Approval. If there is a right of first refusal on the Property or a right to approve this Contract, Seller must promptly submit this Contract according to the terms and conditions of such right. If the holder of the right of first refusal exercises such right or the holder of a right to approve disapproves this Contract, this Contract will terminate. If the right of first refusal is waived explicitly or expires, or the Contract is approved, this Contract shall remain in full force and effect. Seller must promptly notify Buyer of the foregoing. If expiration or waiver of the right of first refusal or approval of this Contract has not occurred on or before  Right of First Refusal Deadline, this Contract shall terminate.

Although there are some legitimate reasons someone may have a right to refuse this offer, this is when you want your fair housing senses to be highly tuned. These types of clauses have been used in the past to deny ownership to otherwise protected classes.

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Transaction Provisions §8 Title Insurance, Record Title and Off-Record Title (continued)

8.7. Title Advisory. The Title Documents affect the title, ownership and use of the Property and should be reviewed carefully. Additionally, other matters not reflected in the Title Documents may affect the title, ownership and use of the Property, including without limitation, boundary lines and encroachments, area,  zoning, building code violations, unrecorded easements and claims of easements, leases and other unrecorded agreements, water on or under the Property, and various laws and governmental regulations concerning land use, development and environmental matters.

· 8.7.1. OIL, GAS, WATER AND MINERAL DISCLOSURE. THE SURFACE ESTATE OF THE PROPERTY MAY BE OWNED SEPARATELY FROM THE UNDERLYING MINERAL ESTATE, AND TRANSFER OF THE SURFACE ESTATE MAY NOT NECESSARILY INCLUDE TRANSFER OF THE MINERAL ESTATE OR WATER RIGHTS. THIRD PARTIES MAY OWN OR LEASE INTERESTS IN OIL, GAS, OTHER MINERALS, GEOTHERMAL ENERGY OR WATER ON OR UNDER THE SURFACE OF THE PROPERTY, WHICH INTERESTS MAY GIVE THEM RIGHTS TO ENTER AND USE THE SURFACE OF THE PROPERTY TO ACCESS THE MINERAL ESTATE, OIL, GAS OR WATER.

· 8.7.2. SURFACE USE AGREEMENT. THE USE OF THE SURFACE ESTATE OF THE PROPERTY TO ACCESS THE OIL, GAS OR MINERALS MAY BE GOVERNED BY A SURFACE USE AGREEMENT, A MEMORANDUM OR OTHER NOTICE OF WHICH MAY BE RECORDED WITH THE COUNTY CLERK AND RECORDER.

· 8.7.3. OIL AND GAS ACTIVITY. OIL AND GAS ACTIVITY THAT MAY OCCUR ON OR ADJACENT TO THE PROPERTY MAY INCLUDE, BUT IS NOT LIMITED TO, SURVEYING, DRILLING, WELL COMPLETION OPERATIONS, STORAGE, OIL AND GAS, OR PRODUCTION FACILITIES, PRODUCING WELLS, REWORKING OF CURRENT WELLS, AND GAS GATHERING AND PROCESSING FACILITIES.

· 8.7.4. ADDITIONAL INFORMATION. BUYER IS ENCOURAGED TO SEEK ADDITIONAL INFORMATION REGARDING OIL AND GAS ACTIVITY ON OR ADJACENT TO THE PROPERTY, INCLUDING DRILLING PERMIT APPLICATIONS. THIS INFORMATION MAY BE AVAILABLE FROM THE COLORADO OIL AND GAS CONSERVATION COMMISSION.

· 8.7.5. Title Insurance Exclusions. Matters set forth in this Section, and others, may be excepted, excluded from, or not covered by the owner’s title insurance policy.

8.8. Consult an Attorney. Buyer is advised to timely consult legal counsel with respect to all such matters as there are strict time limits provided in this Contract (e.g.,  Record Title Objection Deadline and  Off-Record Title Objection Deadline).

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Transaction Provisions §9 New ILC, New Survey

NEW ILC, NEW SURVEY.

9.1. New ILC or New Survey. If the box is checked, a (1)_____ New Improvement Location Certificate (New ILC) or (2) _____ New Survey in the form of __________ is required and the following will apply:

· 9.1.1. Ordering of New ILC or New Survey. _____Seller _____Buyer will order the New ILC or New Survey. The New ILC or New Survey may also be a previous ILC or survey that is in the above-required form, certified and updated as of a date after the date of this Contract.

· 9.1.2. Payment for New ILC or New Survey. The cost of the New ILC or New Survey will be paid, on or before Closing, by: _____Seller _____Buyer or:_____

· 9.1.3. Delivery of New ILC or New Survey. Buyer, Seller, the issuer of the Title Commitment (or the provider of the opinion of title if an Abstract of Title), and _____ will receive a New ILC or New Survey on or before  New ILC or New Survey Deadline.

· 9.1.4. Certification of New ILC or New Survey. The New ILC or New Survey will be certified by the surveyor to all those who are to receive the New ILC or New Survey.

9.2. Buyer’s Right to Waive or Change New ILC or New Survey Selection. Buyer may select a New ILC or New Survey different than initially specified in this Contract if there is no additional cost to Seller or change to the  New ILC or New Survey Objection Deadline. Buyer may, in Buyer’s sole subjective discretion, waive a New ILC or New Survey if done prior to Seller incurring any cost for the same.

9.3. New ILC or New Survey Objection. Buyer has the right to review and object to the New ILC or New Survey. If the New ILC or New Survey is not timely received by Buyer or is unsatisfactory to Buyer, in Buyer’s sole subjective discretion, Buyer may, on or before  New ILC or New Survey Objection Deadline, notwithstanding § 8.3 or § 13:

· 9.3.1. Notice to Terminate. Notify Seller in writing, pursuant to § 25.1, that this Contract is terminated; or

· 9.3.2. New ILC or New Survey Objection. Deliver to Seller a written description of any matter that was to be shown or is shown in the New ILC or New Survey that is unsatisfactory and that Buyer requires Seller to correct.

· 9.3.3. New ILC or New Survey Resolution. If a  New ILC or New Survey Objection is received by Seller, on or before  New ILC or New Survey Objection Deadline, and if Buyer and Seller have not agreed in writing to a settlement thereof on or before  New ILC or New Survey Resolution Deadline, this Contract will terminate on expiration of the  New ILC or New Survey Resolution Deadline, unless Seller receives Buyer’s written withdrawal of the New ILC or New Survey Objection before such termination, i.e., on or before expiration of  New ILC or New Survey Resolution Deadline.

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CHAPTER START

Disclosure, Inspection and Due Diligence: §10 Property Disclosure, Inspection, Indemnity, Insurability, Due Diligence, Buyer Disclosure and Source of Water

10.1. Seller’s Property Disclosure. On or before  Seller’s Property  Disclosure Deadline, Seller agrees to deliver to Buyer the most current version of the applicable Colorado Real Estate Commission’s Seller’s Property Disclosure form completed by Seller to Seller’s actual knowledge, and current as of the date of this Contract.

Click here to open the Seller's Property Disclosure Forms:

· All Types of Properties

· Residential

10.2. Disclosure of Adverse Material Facts; Subsequent Disclosure Present Condition. Seller must disclose to Buyer any adverse material facts actually known by Seller as of the date of the contract. Seller agrees that disclosure of adverse material facts will be in writing. In the event that Seller discovers an adverse material fact after the date of this Contract, Seller must timely disclose such adverse fact to the Buyer. Buyer has the Right to Terminate based the Seller's new disclosure on the earlier of the Closing or five days after Buyer's receipt of the new disclosure. Except as otherwise provided in this Contract, Buyer acknowledges that Seller is conveying the Property to Buyer in an “ As Is” condition, “ Where Is” and “  With All Faults.”

10.3. Inspection Objection Deadline. Unless otherwise provided in this Contract Buyer acting in good faith, has the right to have inspections (by one or more third parties, personally or both) of the Property and Inclusions (Inspection), at Buyer’s expense. If (1) the physical condition of the Property, including, but not limited to, the roof, walls, structural integrity of the Property, the electrical, plumbing, HVAC and other mechanical systems of the Property, (2) the physical condition of the Inclusions, (3) service to the property (including utilities and communication services), systems and components of the Property, (e.g. heating and plumbing), (4) any proposed or existing transportation project, road, street or highway, or (5) any other activity, odor or noise (whether on or off the Property) and its effect or expected effect on the Property or its occupants is unsatisfactory in Buyer’s sole subjective discretion, Buyer may:

· 10.3.1. Inspection Objection. On or before the  Inspection Objection Deadline, deliver to Seller a written description of any unsatisfactory condition that Buyer requires Seller to correct; or

· 10.3.2. Terminate. On or before the  Inspection Termination Deadline, notify Seller, in writing pursuant to § 25.1, that this Contract is terminated due to any unsatisfactory condition.  Inspection Termination Deadline will be on the earlier of Inspection Resolution Deadline or the date specified in § 3.1 for Inspection Termination Deadline.

 

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Disclosure, Inspection and Due Diligence: §10 Property Disclosure, Inspection, Indemnity, Insurability, Due Diligence, Buyer Disclosure and Source of Water (continued)

10.3. Inspection Resolution. If an Inspection Objection is received by Seller on or before Inspection Objection Deadline, and if Buyer and Seller have not agreed in writing to a settlement thereof on or before  Inspection Resolution Deadline, this Contract will terminate on Inspection Resolution Deadline  unless Seller receives Buyer’s written withdrawal of the Inspection Objection before such termination, i.e., on or before expiration of Inspection Resolution Deadline.

10.4. Damage, Liens and Indemnity. Buyer, except as otherwise provided in this Contract or other written agreement between the parties, is responsible for payment for all inspections, tests, surveys, engineering reports, or any other reports performed at Buyer’s request (Work) and must pay for any damage that occurs to the Property and Inclusions as a result of such Work. Buyer must not permit claims or liens of any kind against the Property for Work performed on the Property. Buyer agrees to indemnify, protect and hold Seller harmless from and against any liability, damage, cost or expense incurred by Seller and caused by any such Work, claim, or lien. This indemnity includes Seller’s right to recover all costs and expenses incurred by Seller to defend against any such liability, damage, cost or expense, or to enforce this Section, including Seller’s reasonable attorney fees, legal fees and expenses. The provisions of this Section shall survive the termination of this Contract. This § 10.4 does not apply to items performed pursuant to an Inspection Resolution.

You break it, you fix it.

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Disclosure, Inspection and Due Diligence: §10Property Disclosure, Inspection, Indemnity, Insurability, Due Diligence, Buyer Disclosure and Source of Water (continued)

10.5. Insurability. Buyer has the right to review and object to the availability, terms and conditions of and premium for property insurance. (Property Insurance). Buyer has the Right to Terminate under § 25.1 on or before  Property Insurance Termination Deadline (§ 3) based on any unsatisfactory provision of the Property Insurance, in Buyer’s sole subjective discretion.

After a series of particularly horrific Colorado wild fires, some insurance companies were redlining entire Zip codes as places for which they would not issue homeowner’s insurance. Similarly, homeowner’s insurance premiums in some Zip codes increased by vast amounts. It’s not such a problem as of this writing, but the buyer has a right, under this contract, to be aware and terminate if necessary.

10.6  Due Diligence

· 10.6.1 Due Diligence Documents. If the respective box is checked, Seller agrees to deliver copies of the following documents and information pertaining to the Property (Due Diligence Documents) to Buyeron or before  Due Diligence Documents Delivery

· 10.6.1.1 All current leases, including any amendments or other occupancy agreements, pertaining to the Property. Those leases or other occupancy agreements pertaining to the Property that survive Closing are as follows (Leases):

· 10.6.1.2. Other documents and information:

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Disclosure, Inspection and Due Diligence: §10 Property Disclosure, Inspection, Indemnity, Insurability, Due Diligence, Buyer Disclosure and Source of Water (continued)

· 10.6.2. Due Diligence Documents Review and Objection. Buyer has the right to review and object to Due Diligence Documents. If the Due Diligence Documents are not supplied to Buyer or are unsatisfactory in Buyer’s sole subjective discretion, Buyer may, on or before  Due Diligence Documents Objection Deadline:

· 10.6.2.1. Notice to Terminate. Notify Seller in writing, pursuant to § 25.1, that this Contract is terminated; or

· 10.6.2.2. Due Diligence Documents Objection. Deliver to Seller a written description of any unsatisfactory Due Diligence Documents that Buyer requires Seller to correct.

· 10.6.2.3. Due Diligence Documents Resolution. If a Due Diligence Documents Objection is received by Seller, on or before  Due Diligence Documents Objection Deadline, and if Buyer and Seller have not agreed in writing to a settlement thereof on or before  Due Diligence Documents Resolution Deadline, this Contract will terminate on  Due Diligence Documents Resolution Deadline unless Seller receives Buyer’s written withdrawal of the Due Diligence Documents Objection before such termination, i.e., on or before expiration of  Due Diligence Documents Resolution Deadline.

10.7. Conditional Upon Sale of Property. This Contract is conditional upon the sale and closing of that certain property owned by Buyer and commonly known as _________________ Buyer has the Right to Terminate under § 25.1 effective upon Seller's receipt of Buyer’s Notice to Terminate on or before  Conditional Sale Deadline if such property is not sold and closed by such deadline. This Section is for the sole benefit of Buyer. If Seller does not receive Buyer’s Notice to Terminate on or before  Conditional Sale Deadline, Buyer waives any Right to Terminate under this provision

Note: Any property sale contingency should appear in  Additional Provisions (§ 30).

Look in your buyer’s eyes when asking this one. Remember you must disclose any reason your buyer may not be able to complete this transaction – even if you are the buyer’s agent.

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Disclosure, Inspection and Due Diligence: §10 Property Disclosure, Inspection, Indemnity, Insurability, Due Diligence, Buyer Disclosure and Source of Water (continued)

10.8. Source of Potable Water (Residential Land and Residential Improvements Only). Buyer ___ Does ___ Does Not acknowledge receipt of a copy of Seller’s Property Disclosure or Source of Water Addendum disclosing the source of potable water for the Property. ___ There is  No Well. Buyer ___  Does ___  Does Not acknowledge receipt of a copy of the current well permit. 

Note to Buyer:  SOME WATER PROVIDERS RELY, TO VARYING DEGREES, ON NONRENEWABLE GROUND WATER. YOU MAY WISH TO CONTACT YOUR PROVIDER (OR INVESTIGATE THE DESCRIBED SOURCE) TO DETERMINE THE LONG-TERM SUFFICIENCY OF THE PROVIDER’S WATER SUPPLIES. 

This provision was added in 2008 as a result of a subdivision relying on a private water company actually running dry.

10.9. Existing Leases; Modification of Existing Leases; New Leases. [Intentionally Deleted]

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Disclosure, Inspection and Due Diligence: §10 Property Disclosure, Inspection, Indemnity, Insurability, Due Diligence, Buyer Disclosure and Source of Water (continued)

10.10. Lead-Based Paint.  

10.10.1 Lead-Based Paint Disclosure. Unless exempt, if the Property includes one or more residential dwellings constructed or a building permit was issued prior to January 1, 1978, for the benefit of Buyer, Seller and all licensed real estate licensees must sign and deliver to Buyer a completed Lead-Based Paint Disclosure (Sales) form on or before the  Lead-Based Paint Disclosure Deadline. If Buyer does not timely receive the Lead-Based Paint Disclosure, Buyer may waive the failure to timely receive the Lead-Based Paint Disclosure, or Buyer may exercise Buyer's Right to Terminate under § 25.1 by Seller's receipt of Buyer's Right to Terminate on or before the expiration of the  Lead-Based Paint Termination Deadline.

10.10.2 Lead-Based Paint Assessment. If buyer elects to conduct or obtain a risk assessment or inspection of the Property for the presence of Lead-Based Paint or Lead Based Paint Hazards, Buyer has a Right to Terminate under § 25.1 Seller's receipt of Buyer's Notice to Terminate on or before the expiration of the  Lead-Based Paint Termination Deadline. if Buyer's Notice to Terminate would otherwise be required to be received by Seller after  Closing Date, Buyer's Notice to Terminate must be received by Seller on or before Closing. Buyer may elect to waive Buyer's right to conduct or obtain a risk assessment or inspection of the Property for the presence of Lead-Based Paint or Lead Based Paint Hazards. If Seller does not receive Buyer's Notice to Terminate within such time, Buyer accepts the condition of the Property relative to any Lead-Based Paint as satisfactory and Buyer waives any Right to Terminate under this provision.  

10.11 Carbon Monoxide Alarms. Note: If the improvements on the Property have a fuel-fired heater or appliance, a fireplace, or an attached garage and include one or more rooms lawfully used for sleeping purposes (Bedroom), the parties acknowledge 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.

  

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Disclosure, Inspection and Due Diligence: §10 Property Disclosure, Inspection, Indemnity, Insurability, Due Diligence, Buyer Disclosure and Source of Water (continued)

10.12. Methamphetamine Disclosure. If Seller knows that methamphetamine was ever manufactured, processed, cooked, disposed of, used or stored at the Property, Seller is required to disclose such fact. No disclosure is required if the Property was remediated in accordance with state standards and other requirements are fulfilled pursuant to § 25-18.5-102, C.R.S. Buyer further acknowledges that Buyer has the right to engage a certified hygienist or industrial hygienist to test whether the Property has ever been used as a methamphetamine laboratory. Buyer has the “Right to Terminate under § 25.1 upon Seller’s receipt of Buyer’s written notice to terminate, notwithstanding any provision of this Contract, based on Buyer’s test results that indicate the Property has been contaminated with methamphetamine, but has not been remediated to meet the standards established by rules of the State Board of Health promulgated pursuant to § 25-18.5-102, C.R.S., Buyer shall promptly give written notice to Seller of the results of the test.

Nasty Business! Note the 2nd sentence, as it is unlike all other disclosure requirements in real estate. A seller is not required to disclose that there was a meth lab on the property if it has been remediated under state law. Free advice: You do not want your family, or your buyer’s family living in a former methamphetamine lab regardless of remediation. The seller may not be required by law to disclose, but if the broker actually knows, he or she is between a rock and a hard place and has a tough ethical decision to make.

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Closing Provisions: §12 Closing Documents, Instructions, and Closing

12.1. Closing Documents and Closing Information. Seller and Buyer will cooperate with the Closing Company to enable the Closing Company to prepare and deliver all documents required for Closing to Buyer and Seller and their designees. If Buyer is obtaining a loan to purchase the Property, Buyer acknowledges Buyer’s lender is required to provide the Closing Company in a timely manner all required loan documents and financial information concerning Buyer’s loan. Buyer and Seller will furnish any additional information and documents required by Closing Company that will be necessary to complete this transaction. Buyer and Seller will sign and complete all customary or reasonably required documents at or before Closing.

12.2. Closing Instructions.  Colorado Real Estate Commission’s Closing Instructions ___  Are ___Are Not executed with this Contract.

12.3. Closing. Delivery of deed from Seller to Buyer will at closing (Closing). Closing shall be on the date specified as the  Closing Date (§ 3) or by mutual agreement at an earlier date. The hour and place of Closing will be as designated by___________________________________.

Unless there is a compelling reason other than the broker working with the buyer flexing his or her muscle, leave this up to the broker working with the Seller.

12.4. Disclosure of Settlement Costs. Buyer and Seller acknowledge 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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