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Colorado Real Estate Broker License: Free Study Course

Contract to Buy and Sell Real Estate (Residential), part 1: parties, price, terms, deadlines

Colorado Real Estate Contracts and Regulations · 3 study hours

Bottom line: The residential Contract to Buy and Sell is built around a price-and-terms table and a Dates and Deadlines table, so reading the dates and the money correctly is most of the job.

Bottom line: the contract is a form with blanks. If the right dates and dollar figures are in the right boxes, the deal has a clock and a closing. If not, someone loses earnest money.

The form and the rules that govern it

Colorado has a Commission-approved Contract to Buy and Sell Real Estate (Residential). A broker must use a Commission-approved form when one exists and fits the deal (4 CCR 725-1 Rule 7.1.A). Brokers fill in the blanks. They may add their firm's name and identifying data, and initial lines at the page bottom (Rule 7.2). Deleting or changing the printed body of a Commission-approved form is not permitted unless the rule says so. Extra terms go in the Additional Provisions, and they must result from the parties' negotiations or instructions (Rule 7.3.A). A broker must tell parties that standard forms have legal effect and that they should consult an attorney (Rule 7.1).

Rule 7.2 lists a few parts that may be modified or deleted, including the Dates and Deadlines table (the text "omitted-not applicable" must replace deleted text but the caption stays). Know that the table is where the clock lives.

Parties and property

The first sections identify the buyer and seller by full legal names, the street address, county, legal description, and the property's tax or parcel number. A mistake here can cloud the deal, so match names to how the seller holds title.

Inclusions, exclusions and fixtures

  • Fixtures are items attached to the property so firmly they are treated as part of it: a built-in oven, light fixtures, a water heater, a furnace. They go with the house unless the contract excludes them.
  • Personal property is movable stuff: a refrigerator, a washer, furniture. It goes only if the contract says so as an inclusion.
  • Exclusions list items the seller keeps, such as a chandelier with family value.

Be specific. 'Washer and dryer' invites a fight about which washer; add make and location. Brokers must use the form's pick-list approach rather than guess.

Purchase price and terms table

This table shows how the buyer pays:

  • Purchase price: the total agreed number.
  • Earnest money: the buyer's deposit, held by the earnest money holder. A broker who receives it must deliver it to the holder and get a dated, signed receipt (Rule 5.12.A).
  • New loan: the mortgage amount the buyer will get from a lender.
  • Assumption or seller carry-back: other loan types, if used.
  • Seller credits or concessions: money the seller gives toward the buyer's closing costs. It lowers what the seller nets.
  • Cash at closing: the rest the buyer must bring.

The numbers in the table must add up. The sum of earnest money, loan, other items and cash at closing must equal the purchase price.

Disclosures that live in the contract

Colorado law requires two bold notices in every residential sale contract where they apply. One warns of special taxing districts that can carry debt paid from property taxes (C.R.S. 38-35.7-101). The other warns that a property in a common interest community (HOA) carries dues, rules and possible liens (C.R.S. 38-35.7-102). Lesson c2-08 covers both.

The Dates and Deadlines table

The table gives each task a name, a due date, and sometimes a time. Typical rows include: the Alternative Earnest Money Deadline, record title, off-record title, survey, owners' association documents, the loan application and loan conditions, appraisal, inspection, Due Diligence documents, Closing, and Possession. (Row names vary with form version; read each one.)

How deadlines are counted

  • Calendar days count every day including weekends and holidays.
  • Business days skip weekends and legal holidays.
  • The form states how to count; the usual plan is that Day 1 is the day after the contract date and the deadline is a fixed date. The form also says what happens when a deadline falls on a weekend or holiday. Read that section of the specific form version.
  • MT means Mountain Time. A deadline of 5:00 p.m. means Colorado time, not the buyer's home time zone or the lender's.

Time is of the essence

Time is of the essence means the dates are firm: missing one is a real breach with real consequences, and the other side may use the contract's remedies. Colorado's form includes a statement of this idea. The consequence is why brokers calendar every deadline the day the contract is signed.

Why you must not give legal advice

A broker may complete the form, explain what it says, and recommend the parties get a lawyer. A broker who gives legal advice on title exceptions is practicing law without a license (Rule 6.14.F).

Example with real numbers

A buyer buys a Boulder County house for $500,000 with $10,000 earnest money and an 80% loan.

  1. Loan: $500,000 x 0.80 = $400,000.
  2. Down payment: $500,000 - $400,000 = $100,000.
  3. Earnest money already paid: $10,000 (credited at closing).
  4. Cash at closing for the price: $100,000 - $10,000 = $90,000.
  5. Check: $10,000 + $400,000 + $90,000 = $500,000.

Add a seller credit of $5,000 toward the buyer's costs and the buyer's cash for the price does not change. The credit pays closing costs, so the buyer's total cash falls by $5,000. Closing costs (lender fees, title, prepaid taxes and insurance) are on top of the price; if they are $9,000 then the buyer brings $90,000 + $9,000 - $5,000 credit = $94,000 in total.

Deadline example, illustrative only: contract date Monday, June 1. If the inspection deadline is 10 calendar days later, it falls on Thursday, June 11 at the time on the form, in MT. If it were 10 business days, count only Monday to Friday and it lands later, on Monday, June 15. The same words yield two different dates, which is why you read the table.

Law cited

Key terms

Commission-approved form
A form the Real Estate Commission publishes for brokers to use when it fits the deal.
Fixture
An item attached to the property so it is treated as part of it, like a built-in oven or furnace.
Personal property
Movable items like a fridge or furniture that go only if the contract says so.
Inclusion
Something the contract says goes with the house.
Exclusion
Something the seller keeps.
Earnest money
The buyer's good-faith deposit, held by a neutral holder.
Seller concession (credit)
Money the seller gives toward the buyer's costs.
Cash at closing
What the buyer still must bring at closing after earnest money and the loan.
Dates and Deadlines table
The section listing each task, its due date and time.
Calendar day / business day
A calendar day counts every day; a business day skips weekends and holidays.
MT
Mountain Time, the time zone used for deadlines.
Time is of the essence
A legal phrase meaning dates are firm and late performance is a breach.
Additional Provisions
Extra terms the parties add in a section of the form, from their own negotiation.

Flashcards

Must a broker use a Commission-approved form?

Yes, when one exists and fits the deal (Rule 7.1.A).

Where do added custom terms go?

Additional Provisions, from the parties' negotiations (Rule 7.3.A).

Fixture vs. personal property?

A fixture is attached and goes with the house; personal property goes only if listed.

Price math: $500,000, 80% loan?

Loan $400,000; down payment $100,000.

Cash at closing for $500,000 / $10,000 earnest / 80% loan?

$90,000 (before closing costs).

What does MT mean?

Mountain Time.

Calendar vs. business days?

Calendar counts all days; business days skip weekends and holidays.

What does time is of the essence mean?

The dates are firm and late performance is a breach.

Who has the duty to deliver earnest money to the holder?

The broker who received it, with a signed dated receipt (Rule 5.12.A).

Can a broker advise on title exceptions?

No, that is practicing law; recommend an attorney (Rule 6.14.F).

Quiz: 10 questions

Tap an answer. It shows right or wrong and opens the reason. Your score is saved in this browser and counts in the study app.

  1. A broker may use an Attorney Form instead of the Commission-approved Contract to Buy and Sell when:

    1. A The seller prefers it
    2. B The broker's firm likes its own wording
    3. C A Commission-approved form does not exist or is not appropriate
    4. D The price is above $1 million
    Show answer and why

    Answer: C. A Commission-approved form does not exist or is not appropriate

    Rule 7.1 says use the Commission-approved form when one exists and is appropriate. Preference is not a reason.

    4 CCR 725-1 Rule 7.1

  2. A buyer pays $500,000 with $10,000 earnest money and an 80% loan. Cash at closing for the price (before closing costs) is:

    1. A $90,000
    2. B $100,000
    3. C $110,000
    4. D $80,000
    Show answer and why

    Answer: A. $90,000

    Loan $400,000, down payment $100,000, minus the $10,000 already paid = $90,000. $100,000 forgets the earnest money credit.

    4 CCR 725-1 Rule 7.1

  3. An item firmly attached to the house, such as a built-in oven, is generally a:

    1. A Personal property item that leaves
    2. B Fixture that goes with the house unless excluded
    3. C Exclusion by default
    4. D Closing cost
    Show answer and why

    Answer: B. Fixture that goes with the house unless excluded

    Fixtures are treated as part of the property. Personal property goes only if the contract includes it.

    4 CCR 725-1 Rule 7.1

  4. Which is NOT normally part of the purchase price and terms table?

    1. A Earnest money
    2. B New loan
    3. C Seller credits
    4. D Inspection report findings
    Show answer and why

    Answer: D. Inspection report findings

    Inspection findings are handled by inspection objection deadlines, not the money table.

    4 CCR 725-1 Rule 7.1

  5. What does 'time is of the essence' mean?

    1. A Dates are firm and missing one is a breach
    2. B Dates are suggestions
    3. C Only the closing date counts
    4. D Weekends are skipped
    Show answer and why

    Answer: A. Dates are firm and missing one is a breach

    It makes timing a binding term. Treating dates as suggestions is the opposite.

    4 CCR 725-1 Rule 7.1

  6. A contract is signed Monday, June 1. A deadline of 10 calendar days after that lands on:

    1. A Monday, June 15
    2. B Friday, June 12
    3. C Sunday, June 7
    4. D Thursday, June 11
    Show answer and why

    Answer: D. Thursday, June 11

    Day 1 is June 2, so day 10 is June 11. June 15 is the answer for 10 business days.

    4 CCR 725-1 Rule 7.1

  7. A buyer's lender is in Texas. The contract says a deadline is 5:00 p.m. MT. The deadline is:

    1. A 5:00 p.m. Central Time
    2. B 5:00 p.m. Mountain Time
    3. C Midnight
    4. D The lender's closing time
    Show answer and why

    Answer: B. 5:00 p.m. Mountain Time

    MT is Mountain Time, the stated zone. Local time of any party does not change it.

    4 CCR 725-1 Rule 7.1

  8. The buyer and seller want to add a rule that the seller leaves the swing set. Where does that go?

    1. A Written on the margin of the earnest money check
    2. B Anywhere; the broker can erase printed text
    3. C Additional Provisions, arising from the parties' negotiation
    4. D A separate oral promise
    Show answer and why

    Answer: C. Additional Provisions, arising from the parties' negotiation

    Additional provisions must come from negotiation or party instruction. Erasing printed form text is not permitted except where Rule 7.2 allows.

    4 CCR 725-1 Rule 7.3.A

  9. A broker is asked, 'Should I object to this utility easement on the title?' The broker should:

    1. A Recommend the buyer examine title exceptions and consult an attorney
    2. B Give a legal opinion
    3. C Ignore the question
    4. D Tell them to accept it
    Show answer and why

    Answer: A. Recommend the buyer examine title exceptions and consult an attorney

    Giving advice on title exceptions is the unauthorized practice of law; the broker must recommend an attorney.

    4 CCR 725-1 Rule 6.14.F

  10. Which money statement must be true for the price table to work?

    1. A Cash equals price
    2. B Loan equals earnest money
    3. C Seller credits equal the price
    4. D Earnest money plus loan plus other items plus cash at closing equals the price
    Show answer and why

    Answer: D. Earnest money plus loan plus other items plus cash at closing equals the price

    The pieces of payment must add up to the price. Cash alone is only the remainder after the loan and deposit.

    4 CCR 725-1 Rule 7.1

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