What to expect for the exam
Colorado Exam: Part 1
 General Powers of the Real Estate Commission
 Purpose of the Real Estate Commission is to protect the public in
ALL real estate matters
 Conway-Bogue Decision
 Brokers may not charge a separate fee for preparing documents
 Brokers are allowed to practice law in a limited capacity
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Established RULE F:
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Allowed to fill out forms approved by the Real Estate Commission
If an approved form is available a real estate firm may not draft their own
version
Language of approved forms must be used exactly as written
May omit or strike-through sections that do not apply
All added information must be of a different size, color or font
Does not apply to new home sales
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Builders are not required to be real estate brokers
Colorado Exam: Part 1
 Investigation
 Upon the Commission’s own motion
 Verified written complaint
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False Advertising
Violating the Colorado Consumer Protection Act
Failure to properly handle and manage trust monies
Failure to keep documents for 4 years
Paying commission to an unlicensed person for work requiring a
license
 Request written response from licensee
 Commission may NOT subpoena records without cause (or prior
to written response)
Colorado Exam: Part 1
 Hearing and Penalties
 Hearings
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Dismiss the complaint
Issue a letter of admonishment (warning – lowest penalty)
Or send to a hearing (State Court, Administrative Law Judge)
 Penalties
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Fine not to exceed $2,500 per offense
Censure, suspend, permanent revocation
CREC is the ONLY entity that can suspend or revoke a license
May NOT charge damages or impose jail sentences
May refer to DA for criminal prosecution
Colorado Exam: Part 1
 Audits and Ethics
 Audits
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Commission can audit a Broker’s escrow account at any time without notice
Verify Broker has maintained records for 4 years
Verify they have not comingled funds
Verify they have provided clients with appropriate closing statements
 Ethics
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CREC has NO authority and will NOT investigate ethics violations, complaints
or disputes
Criminal matters handled in criminal courts
Licensees should disclose IMMEDIATELY that they are licensed if they have
interest in a property or if they are a principal in the sale of a property.
MUST DISCLOSE IN WRITING, IN ANY CONTRACT, THAT YOU ARE A
LICENSED AGENT IN THE STATE OF COLORADO WHEN BUYING OR
SELLING A PROPERTY
(Test Yourself Pg. 6)
Colorado Exam: Part 1
 Licensing in Colorado
 Types of Licenses
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Broker Associate
 Anyone with less than two years experience must work under an
employing broker
Independent Broker
 At least 2 years experience, may work alone, may NOT hire or
supervise other brokers
Employing Broker
 May employ other brokers and is responsible for supervision
 Must have an office that is open to the public
 Non-Resident Brokers
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May collect commissions
Must keep all trust funds and accept legal action in Colorado
Colorado Exam: Part 1
 License Rules
 Renewal
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Every 3 years, expires at midnight on the anniversary date
Continuing Education
 24 Hours of CE qualifying classes every license cycle
 4 hour Annual Update Course EVERY YEAR
 If one is missed – 3 options
 Take and pass state portion of the exam
 24 hour Brokerage Administration (allowed only once during career)
 24 hour Broker Transition (allowed only once during career)
 May take state portion of the licensing exam to satisfy 24 hour requirement
31 Day grace period to renew. On day 32 license becomes inactive
Licensees on inactive status (voluntary or involuntary) must complete CE
Requirements
 Business Brokerage – must be licensed if real property is involved
 Real Estate Options – must be licensed
 Real Estate Securities – securities license required
Colorado Exam: Part 1
 Licensing Exemptions
 Regularly salaried employee who is an on-site manager
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May NOT negotiate terms of leases)
 Regularly salaried employee of a new home builder
 Attorney
 Inactive licensee working for either of the first two
 Transfer and Inactive Licenses
 Individual licensees and their employing broker must notify CREC when
changing firms
 Brokerages changing physical locations
 Inactive licensees may NOT perform activities requiring a license or earn
commissions – may perform unlicensed duties
 Inactive brokers do not need Errors and Omissions Insurance (E&O)
 Professional liability insurance
Colorado Exam: Part 1
 Commission Rebates and Referral Fees
 May NOT pay a referral fee to an unlicensed person (RESPA)
 May rebate a commission
 Referral fees may only be paid to licensees with business offices
 Out of State Brokers
 Must have an office in the state where they are located
 Must agree to hold earnest money or escrow funds in a Colorado trust
account
 Must agree to be subject to Colorado courts
Colorado Exam: Part 1
 Errors and Omissions Insurance
 Protects Brokers against loss from oversights in filling out forms and
conducting business
 Does not protect against fraud
 Who Must Carry?
 Every Active Licensee
 Includes the Employing Broker
 AND any corporation or LLC doing business as a firm
(Test Yourself Pg. 11)
Colorado Exam: Part 1
 Brokerage Relationships in Colorado
 Agency
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Single Agency ONLY: agent only for one party
 Fiduciary responsibility, act in upmost good faith, loyalty and fidelity
Dual Agency is not legal
Shall not disclose price, terms or motivation
Care, Obedience, Loyalty, Disclosure, Accounting, Confidentiality
 Transaction Broker
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Default in Colorado
If agency is not in writing you are a transaction broker (or non-agent)
Facilitate the transaction
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NOT an advocate for either party
Use “reasonable skill and care”
Must disclose material facts actually known
Arm’s length
Colorado Exam: Part 1
 Brokerage Duties – Regardless of Agency Relationship
 Exercise Reasonable Skill and Care
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Perform the terms of any written or oral agreement
Present all offers to and from the client in a timely manner
Disclose any adverse material facts actually known by Broker
Advise client regarding the transaction and when to obtain expert
advice
Keep the client fully informed
 Shall not disclose
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Price
Terms
Motivation
Material information about the client UNLESS required by law or
would be dishonest or fraudulent not to
Stigmatized property
Colorado Exam: Part 1
 Additional Duties of an Agent
 Promote interests of the client with the upmost good faith, loyalty, and
fidelity
 Seek a price and terms that are acceptable to the client
 Council the client as to any material risks or benefits of the transaction
actually known by Broker
Colorado Exam: Part 1
 Designated Broker
 The broker that Buyer or Seller signs an agency agreement with
 “Designated” by the Employing Broker via office policy manual
 Buyer Listing or Seller Listing is owned by the office
 Employing Broker has no agency agreement with the client
 In-Company Transactions
 Brokers do not exchange confidential information even if they are in the
same office
Colorado Exam: Part 1
 Customers
 Third party who has not engaged a broker
 Fair and Honest Dealings
 Disclosure of all material facts
 Disclosure
 Disclose, disclose, disclose
 Broker has no duty to conduct an inspection of a property or verify
accuracy of statements made UNLESS it’s obvious
 May only disclose confidential information with written permission of
the client
 Stigmatized Property
 NOT a material fact in CO – does not need to be disclosed
Colorado Exam: Part 1
 Rule E-35: Disclosure of agency relationship is required at the first
reasonable opportunity
 Before acquiring any confidential information
 Brokerage Disclosure to Buyer OR to Seller
 When an agency relationship already exists
 Disclosure to the other party
 Not a contract
 Definitions of Working Relationships
 Not a contract or a disclosure
 Informational purposes only
 Defines the working relationships between a buyer or seller and a broker
in Colorado
(Test Yourself Pg. 20)
Colorado Exam: Part 1
 Requirements Governing Activity
 Trade Names
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Name of your business – must be registered with CREC
Brokers must do business using ONLY their registered trade name
Brokerage’s name as registered must appear on all advertising
Broker Associates’ info NOT required but allowed
 Brokerage Administration
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Reasonable supervision
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High level of supervision for licensees with less than two years
experience
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Receive, read, and sign an office policy manual
All Contracts reviewed by Employing Broker
Attend or be available to answer all questions for closings
Written office policy
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Method for designating brokers
Allowed to delegate supervision
Colorado Exam: Part 1
 Record Keeping
 Must be kept for 4 years!
 Complete copies of all agreements and documents including HUD-1
 Personal Assistants
 May:
Show property
 Create marketing materials
 Distribute materials regarding properties prepared by a licensee
 May NOT:
 negotiate terms or conditions
 independently draft or fill in contracts
 offer opinions advice or interpretations
 distribute any information not prepared by a licensed broker
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Colorado Exam: Part 1
 Rule E-13: Sign Crossing
 A licensee shall not negotiate a sale, exchange, lease or listing contract
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of real property directly with an owner, for compensation, if owner has
written, unexpired, exclusive contract with another licensee
Same for buyers
Licensee may not initiate contact
If licensee is contacted by buyer or seller then may respond
May enter an agreement for a future exclusive right to become effective
upon termination or expiration of existing agreement
(Test Yourself Pg. 27)
Colorado Exam: Part 1
 Trust Accounts
 Separate Account to hold money belonging to others
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Earnest Money, Security Deposits
 Must be in place prior to accepting funds
 Only setup by Employing Broker or Independent Brokers
 Required Trust Accounts
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Sales Trust Account - $ related to sales transactions pending closing
Management Trust Account - $ in connection with property management
services
Security Deposit Trust Account – refundable security deposits
Advance Rental – rental $ collected in advance (vacation rentals)
Owner’s Association - $ held on behalf of an association
 Must have “Trust” or “Escrow” in the name
 Must be a government insured institution – NOT a credit union
Colorado Exam: Part 1
 Setting up Trust Accounts
 Must have “Trust” or “Escrow” in the name
 Must be a government insured institution – NOT a credit union
 Must be in the name of the Employing Broker OR Corporation
 Operation of Trust Accounts
 Employing Broker is personally responsible for funds and supervision of
the account
 Must be able to withdraw funds without a co-signer
 Broker may use personal funds to maintain the operating cost of the
account
 Must NOT comingle operating funds
Colorado Exam: Part 1
 Commingling and Conversion of Funds
 Comingling: mixing of funds belonging to others with operating funds
 Conversion: using one person’s funds to pay another
 Trust Account Documentation
 Account Journal – Chronological Record
 Account Ledger – Separates funds by a single beneficiary (SS#, Tax ID)
 Broker Ledger – Shows Broker’s personal funds
 Safeguards
 Frequent Reconciliation
 Separation of Duties
 Outside Audits
 RE Commissions Assistance
Colorado Exam: Part 1
 Earnest Money
 Must be deposited within 3 business days of acceptance of the offer.
 May be deposited with a third party with permission of the parties
 Promissory Notes for EM
Must have a due date prior to closing
 Listing Broker is responsible for presenting the note for collection from
the buyer
 Must be “Good Funds” prior to closing
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Colorado Exam: Part 1
 Property Management Trust Accounts
 5 business days to deposit money received into a trust account
 Deposits must be returned to tenants within 30 days unless lease states
60 days
 Tenant must receive an accounting for any reductions
 Brokers managing their own properties must have separate account for
each property.
(Test Yourself Pg. 34)
Looking Ahead
 Settlement Statements (Beginning pg. 57)
 Document fee in Colorado: $ 0.01 per $100 of property value
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Price paid to record a Deed
 Debits vs. Credits
 Buyer owns the day of closing
 365 Day Year (Calendar Year) unless otherwise stated
 6 Column Worksheet, HUD -1
 Both Brokers are responsible for accuracy of closing statements
 Good Funds at Closing
 Cashier’s check from a commercial bank, teller’s check (bank check), wire
transfer, cash
 Personal checks, business checks, money market checks, etc are NOT good
funds
 2% Non-Resident Seller Income Tax Withholding
 Closing entity must withhold either the seller’s net proceeds OR 2% of the
selling price – whichever is less
 Principle Residences are exempt
For Next Time
 Pages 35 - 56: Colorado Contracts
 Review copies of the contracts as you read
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Exclusive Right to Buy, Exclusive Right to Sell
Brokerage Disclosure to Buyer
Disclosures: Lead Based Paint Disclosure, Source of Water Addendum, Seller’s
Property Disclosure, Square Footage Disclosure
Contract to Buy and Sell (Residential)
Counterproposal
Inspection Objection and Inspection Resolution
Notice to Terminate and Earnest Money Release
Change of Status
Closing Instructions
Amend / Extends (2 Types)
 Pages 57 – 66: Closing and Settlement
 Prepare the 6 column worksheet – blank version provided (make
additional copies)
 Pages 67 – 74: Additional Topics