Colorado’s Standard Residential Buy Sell Contract Made Easy

Are you buying or selling a home in Colorado? Are you familiar with the standard contract to facilitate this transaction? GLO helps those looking to buy or sell residential real estate in Colorado by reviewing and helping understand the terms of the contract.

What is the Contract to Buy and Sell Real Estate and why should I be familiar with It?

The standard contract is called Contract to Buy and Sell Real Estate, and it is generated by the Colorado Real Estate Commission. The Commission requires all real estate brokers to use this standard contract for buying and selling a home in Colorado. Because it can be difficult to understand, you should become familiar with this contract before you buy or sell your Colorado home. 

What Are the Important Provisions of the Contract to Buy and Sell Real Estate?

Section 2: Parties and Property

Section 2 of the contract contains many subsections regarding the basics of the transaction, such as who the parties are and what property is being sold. If you are buying the property with another person, you can indicate whether you are taking title as joint tenants or tenants in common. If you do not indicate a preference, you will be tenants in common. For more on co-ownership of property, read our explainer about tenants in common agreements here.

Let’s say you’re buying a home, but the seller is taking their refrigerator or washer and dryer with them. These items of unattached personal property are described as inclusions or exclusions in this section. If you want to be sure whether that fancy chandelier or dish washer is included in the purchase of the home, pay attention to Section 2.

Section 3: Dates and Deadlines

Section 3 is one of the most important sections of the contract. It provides the various deadlines for the transaction, such as deadlines for the seller’s disclosure of any problems with the home, buyer’s receipt of any loans, and buyer’s inspection of the home.

Section 4: Purchase Price and Terms

Section 4 details the purchase price. It breaks the total down into discreet quantities such as the amount of earnest money and the seller’s financing.

Section 4.1 details “Earnest Money,” which is the amount of money a buyer puts up to demonstrate their “earnest” interest in the home. Earnest money is usually given to a third party for safe keeping, such as the title insurance company. You should pay attention to this section because the parties can agree on who this money goes to should the buyer back out of the deal. If the deal goes through, however, the earnest money goes toward the purchase price.

Section 5: Financing Conditions and Obligations

Section 5 explains your financial conditions and obligations—whether you are the buyer or the seller. Generally, if you’re buying a home, you must get a sufficient home loan using “reasonable efforts.” If you don’t get a loan or you get one with unfavorable terms, such as high interest rates, then you can get out of the deal. Importantly, the buyer must determine whether the loan is a good deal or not, using their “sole subjective discretion.” This section allows the buyer to get out of the deal based on their judgment, and actually causes many deals to fall through.

In contrast, the seller has a similar right under Section 5. The seller may, in their “sole subjective discretion,” reject the buyer’s financing in some cases. The buyer must disclose to the seller the buyer’s credit information so the seller can determine whether the buyer has good enough credit to move forward with the deal.

Section 6: Appraisal

Section 6 pertains to the appraisal of the home. In essence, the home will be appraised by a third party as a part of the buyer’s financing obligations. This prevents the lender from lending the buyer a loan that is too high, which would exceed the cost of the home. However, because Colorado, and Denver in particular, has a hot real estate market, this appraisal may not reflect the actual purchase price if, for instance, the property is in extreme demand, or if there is some bidding war driving up the price.

Section 7: Home Owners Association

If you are buying a home subject to a homeowners’ association (“HOA”), you’ll want to read through Section 7 and carefully review the HOA documents for its rules and regulations.

Section 8: Title Insurance

Section 8 is about title and title insurance. Essentially, this section of the contract requires the seller to sell a house with a good title. The buyer has the option to purchase Owner’s Extended Coverage, which covers more than the typical title insurance. To find out more about title insurance and Owners Extended Coverage, check out our advice on title insurance here.  

Section 10: Disclosure, Inspection, and Due Diligence

Section 10 is another important section because it deals with the condition of the home. Specifically, the section deals with seller disclosures, home inspection, and buyer’s due diligence (i.e., investigating the quality of the home). Under Colorado law, the seller must tell the buyer about certain problems with the home, such as whether it contains lead based paint. This section provides the buyer with the right to terminate the contract if the home is in an “unsatisfactory condition.”

Other Provisions

We all hate hidden costs. Sections 15 & 26 deal with closing costs and proration, which may surprise you if you don’t thoroughly read this section. For example, in some locations in the Denver Metro area, you must pay an HOA transfer fee. These and other fees are found in this section.

If you and the seller or buyer disagree with anything regarding the contract, Sections 22 and 23 come into play. Section 22 states that if you and the other party arbitrate or litigate, whoever is found to be at fault must pay the costs of resolving the dispute. Section 23, however, provides that you must mediate the issue first, paying for half of that cost.

The remaining provisions worth mentioning are Section 24 regarding earnest money disputes, Section 25 regarding termination, Section 29 which requires the parties to deal in “good faith.” Finally, Section 30 is a catch-all provision if you need to add certain conditions into the contract due to the unique features of the property.

How can GLO help?

If you’re looking to buy or sell a home in Colorado, GLO has specialized in helping people in the Denver Metro area and along the Front Range in residential real estate transactions.

With GLO’s help, you will have peace of mind while under the pressure of making probably your largest lifetime investment.

Please fill out an Intake Form to inquire about working with GLO.

GLO has prepared this blog to provide general information on legal issues that may be of interest. This blog does not provide legal advice for any specific situation and this does not create an attorney-client relationship between any reader and GLO or its attorneys. GLO engages clients only through specific fee arrangements and signed engagement letters. GLO does not guarantee any results.