New Contracts Effective
January 1, 2011
RE/MAX Advantage
Purpose of this meeting
• Share with you that significant changes will occur to
the Colorado Approved real estate contracts and
forms.
• Provide you with an over view of some of the most
significant changes.
• Review the Residential Buy and Sell Contract and the
Vacant Land.
• Please review the Commercial Contract if applicable
as major changes will occur as of January 1, 2011.
What we cannot accomplish
• A comprehensive review of the contracts
• Discuss individual situations or participate in
“war stories”.
Therefore – please hold your questions until
after we present the material.
We recommend
• Contract class – offered by Empire Title this
month and by PPAR first week of January
• Contract class – offered on line at
www.vaned.com
• You can review the new contracts and forms
at the Colorado Division of Real Estate web
page - http://www.dora.state.co.us/realestate/contracts/contracts.htm
Overview of contract changes
• New contracts can not be used prior to
January 1, 2011
• Any listing agreement or any sale contract
written and endorsed prior to January 1 will
not have to be rewritten on the new forms.
• We will need to use applicable amend and
extends. (New contracts will need new documents.)
Seller’s Property
Disclosure
Seller’s property
disclosures will need to be
of the most current
version. If the property
goes under contract after
January 1 you will need to
use the new form.
The contract calls for the
most recent version of the
Seller’s Property
Disclosure.
Seller’s Property Disclosure
• New headings have been added to the
document.
• The Seller is required to disclose their actual
knowledge. (No duty to investigate.)
Almost every contract and form has
changed.
• No longer one contract or one form for all
types of properties.
– Residential
– Income Residential
– Land
– Commercial
– Foreclosure
All related forms have also changed in
order to reflect new contrasts.
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Amend and extend.
Counter Proposal
Foreclosure Protection Act
Seller’s Property Disclosure
Inspection Notice
Exclusive Right to Buy Contract
• Reorganized by category.
• Related forms also reorganized.
• New Residential Addendum created to be
used for land and commercial contracts.
• We will review the residential documents for
major changes and the land documents as
time permits.
Elimination of the extra
day after Inspection
Resolution Deadline
The contract now terminates
upon the Inspection Resolution
deadline. The extra 24 hour
period is eliminated.
A new form has been created in
order to facilitate negotiations
beyond the “Seller’s Alternative
Resolution”.
Inspection
Resolution Ideas
You may elect to
include a time when
you set the Inspection
Resolution Deadline.
Allow time for seller to
respond to Inspection
Objections.
Colorado Foreclosure Protection Act
• Where the Short Sale Addendum is used the
act does not apply.
• No longer is it necessary to determine if the
buyer is in the “business of purchasing
investment property.”
Colorado Foreclosure Protection Act
• The Colorado Foreclosure Protection Act
requires special contracts and disclosures if
the following criteria is present.
– The property is residential.
– It must be the principal residence of the seller.
– The buyer does not intend to occupy the property.
– The property is either in foreclosure or the owner
is 30 days or more delinquent in payments.
Short Sale: Best Practices
• New legislation requires the disclosure of
profits and terms of sales for simultaneous
closings to all parties of the transaction
including lenders.
• It is extremely important to fill in the Short
Sale acceptance deadline in the Short Sale
Addendum.
• The Short Sale Addendum must be indicated
as an attachment of the contract.
Listing Agreement Issues
• Hold Over Provision:
It is the recommendation of the company
that a reasonable hold over period be
selected. It is for the protection of the
listing agent. (Line 131)
Listing Agreement Issues
• Upon the termination of a listing the agent
should indentify in writing any buyer that shall
be subject to the hold over period.
• The agent should advise the owner that to
avoid the possibility of owing a fee to 2
different listing brokers they should exclude
the identified buyers from the new listing
agreement.
Listing Contract issues
• It is recommended that you add specific
marketing efforts in section 9.3 which is
broker marketing.
• In Exclusive Right to Buy Contracts make sure
a compensation amount is provided in the
document.
Notice to Terminate
• Document continues but is revised.
• Must accompany all terminated contracts if
the inspection notice is not used.
Notice to Terminate
• New criteria for buyer to use to cancel the
contract
– Buyer: Environmental Inspection Objection
Deadline
– Buyer: Due Diligence
– Buyer: Condemnation
– Buyer: Short Sale Addendum
– Seller: Short Sale Addendum
Short Sale Addendum
• Section 5 – Seller Deadline for Submission to Lien
Holder. (Fill in box with a specific number of days)
Seller agrees to submit to each Lien Holder a request for
a Short Sale and all documents and information
requested by Lien Holder, including a copy of the
Contract, any Counterproposal, this Addendum and
amendments. The initial submission by seller to each
Lien Holder shall be on or before Initial Submission
Deadline. Any additional information or documentation
requested of Seller by such Lien Holder shall be
submitted within five days of such request or Buyer may
terminate the Contract pursuant to 8.2 below.
Short Sale Addendum
• Place a specific date (approximately 30 to 60
days out) for the Short Sale Acceptance
Deadline.
Short Addendum
• Parties can elect if this section shall apply Section 8.3.2
Both buyer and seller have the right to
Terminate the Contract by written notice to
the other party so long as it is received on or
before Short Sale Acceptance. Additionally,
Seller has the right to accept subsequent
offers from other buyers prior to Short Sale
Acceptance without liability to Buyer.
Closing Instructions
• Return of Earnest Money – states requirement
of earnest money holder to return earnest
money within five days of receipt of notice
unless in possession of notice of earnest
money dispute.
• Defines earnest money’s options in situations
of dispute.
Counterproposal
• New Columns
– No Change
– Deleted
• If any item is left blank or is marked the “No
Change” column it means no change to the
corresponding provision of the Contract. If any
item is marked in the Deleted column it means
that the corresponding provision of the Contract
to which reference is made is deleted.
Seller Authorization
• Expanded to include more than one lien. (up
to 6 liens)
• Social Security Number of seller added.
• Defines agent can have access to account
balances, account history, and etc.
Contract to Buy and Sell Real Estate
• Total Reformatting of the Contract.
• Total Reformatting of the Sections.
• Total Reformatting of the Date Block.
Contract to Buy and Sell Real Estate
• Seller’s name added to the front of the
contract as the current owner of the property.
• “If any fixtures are attached to the Property
after the date of the Contract, such additional
fixtures are also included in the Purchase
Price.”
New - 4.2.2 Return of Earnest Money
• If Buyer has a right to terminate this Contract and
timely terminates, Buyer shall be 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, if the
Earnest Money has not already been returned
following the receipt of a Notice to Terminate or
other written notice of termination, Seller agrees
to execute and return to Buyer or Broker working
with buyer, written mutual instructions, ie,
Earnest Money Release form, within three days of
Seller’s receipt of such form.
Clarification of Available Funds
• Buyer is in Default if funds are not available
for disbursement by Closing Company at
Closing.
• You may want to schedule closings for later in
the day.
• Closing location and time should be at the
mutual agreement of the parties of the
contract.
Seller Concession
• “Seller Concession shall be reduced to the
extent it exceeds the aggregate of what is
allowed by Buyer’s lender, but in no event
shall Seller pay or credit an amount for Seller
Concession that exceeds the lesser of (1) the
stated amount for Seller Concession or (2) the
Buyer’s closing costs.”
Loan Application
• “..If required by such lender, shall make an
application verifiable by such lender, on or
before Loan Application Deadline and exercise
reasonable efforts to obtain such loan or
approval.”
Appraisal Provisions
• Did you know?
– Seller may terminate this contract by delivering
written notice to terminate to Buyer on or before
three days following Seller’s receipt of the
Appraisal Requirements.
Appraisal
• Duh…
The new contract states the Appraisal
Deadline does not apply for FHA or VA loans.
Evidence of Title, Survey and CIC
Documents
• Common Interest Community
In the event of any unsatisfactory provision in any of the CIC
Documents, in Buyer’s sole subjective discretion, and written
notice to terminate by Buyer, or on behalf of Buyer is
delivered to Seller on or before CIC Documents Deadline this
contract shall terminate. If Seller does not receive Buyer’s
written notice to terminate on or before CIC Documents
Objection Deadline, Buyer accepts the CIC Documents and
waives the right to terminate.
Evidence of Title, Survey and CIC
Documents
• Best Practice:
Review the Home Owner Association minutes
to search for any pending special assessments.
Evidence of Title, Survey and CIC
Documents
• Buyer has right to cancel in their sole and
subjective discretion.
Disclosure, Inspection and Due
Diligence
• Unless 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”. Seller shall
disclose to Buyer in writing, any latent defects
actually known by Seller. Buyer, acting in good
faith, shall have the right to have inspections
(by a third party, personally or both) of the
Property and Inclusions (Inspection), at
Buyer’s expense.
Disclosure, Inspection and Due
Diligence
• Expands items that can be inspected (utilities,
communication services, heating and
plumbing)
• Buyer can terminate in Buyer’s sole subjective
discretion.
Disclosure, Inspection and Due
Diligence
• Due Diligence – New Section
– Due Diligence/Physical Inspection – Inspection
Objection Deadline
– Due Diligence/Documents – Due Diligence
Documents Delivery Deadline
Colorado Foreclosure Act Advisory
• Applies if
– 1. property is residential,
– 2. principal residence of seller
– 3. buyer not to reside
– 4. the property is in foreclosure or any loan is 30
days delinquent
Does not apply if it is a Short Sale transaction and
the Short Sale Addendum is used.
Closing Provisions
• Seller and Buyer shall cooperate with the closing
Company to enable the Closing Company to
deliver all documents required for closing to
Buyer and Seller and their designees by the
Closing Documents Delivery Deadline.
• If Buyer is obtaining a new loan to purchase the
Property, Buyer acknowledges Buyer’s lender
shall be required to provide the Closing Company
in a timely manner all required loan documents
and financial information concerning Buyer’s new
loan.
Closing Provisions
• Disclosure of Settlement Costs.
Buyer and Seller acknowledge that costs,
quality, and extent of service vary between
different settlement service providers.
• Buyer acknowledges that Buyer may be
obligated to pay the Association, at Closing, an
amount for reserves or working capital.
General Provisions
• 19.3 Condemnation – New section requiring
Seller to disclose any notice prior to Closing of
any pending condemnation action.
Broker’s Acknowledgements and
Compensation Disclosure
• Broker agrees that if Brokerage Firm is the
Earnest Money Holder and, except as provided in
section 24, the Earnest Money has not already
bee returned following receipt of a Notice to
Terminate or other written notice of termination,
Earnest Money Holder shall release the Earnest
Money as directed by the written mutual
instructions. Such release of earnest Money shall
be made within five days of earnest Money
Holder’s receipt of the executed written
instructions, provided the Earnest Money check
has cleared.
Contract to Buy and Sell Land
• New form – similar to new Residential
Contract
• Boxes to indicate if there is no Residence on
property or if there is and the Residential
Addendum will be used.
• Land Contract eliminates those items that are
specific to a residence.
Contract to Buy and Sell Land
• Specific attention needs to be given to Section
10.6 which is Due Diligence-Physical
Inspection.
– Includes provisions for Phase I and Phase II
Environmental Assessments.
– Includes provisions for compliance with Americans
with Disabilities Act.
– Creation of an Environmental Inspection Objection
Deadline.
Contract to Buy and Sell Land
• Specific attention needs to be given to Section
10.8 which is Due Diligence-Documents
– List of 13 specific reports and or documents
– Creation of a Due Diligence Documents Condition
Deadline
Contract to Buy and Sell Land
• Specific attention needs to be given to Section
11 which is Tenant Estoppel Statements
– List of specific items a buyer can review and object
to in each of the tenants leases.
– Creation of a Tenant Estoppel Statement
Objection Deadline.