Addenda and disclosure forms (seller disclosure, lead paint, short sale, square footage, source of water, wire fraud)

Bottom line: a disclosure is a fact the buyer is entitled to know, in writing. An addendum is an extra form attached to the main contract to cover one special situation. Learn which is which, who must give it, and what happens if it is missing.

Seller's Property Disclosure

The seller's written statement of what the seller knows: condition, repairs, leaks, past problems. It covers knowledge, not guarantees. Under C.R.S. 38-35.7-104 and -112 the water and radon disclosures can sit in either the contract or this form. Brokers must not help hide a known problem.

Lead-Based Paint Disclosure

Required for housing built before 1978 (42 U.S.C. 4852d). The seller discloses known lead paint, delivers any reports and the federal pamphlet, and the buyer gets a test window (federal default 10 days unless changed by agreement). All parties and brokers sign.

Short Sale Addendum

A short sale is a sale where the price is less than what the owner owes on the mortgage, so the lender must agree to take less. The addendum tells everyone that the sale depends on the lender's approval, which can be slow and is not in anyone's control. It typically explains what happens if the lender does not approve, and how long the buyer will wait. Brokers must not promise the lender will approve. Read the current form for the termination rights and timing, since they differ between versions.

Square footage disclosure

When a broker advertises the square footage of a home's living area, the broker must disclose the source of that number on the Commission-approved form (Rule 6.11). A broker does not have to measure, but if the broker does, the broker must:

• say how it was measured,
• say it is for marketing and not for a loan or valuation, and
• advise independent measurement if exact size matters (Rule 6.11.A).

If the number comes from elsewhere (building plans, a prior appraisal, the assessor), the source and its date must be disclosed in writing in a timely manner (Rule 6.11.B). The broker may not use a source known to be unreliable, and must flag obvious mismeasurement.

Source of water

The Commission must require residential listing contracts, contracts of sale, or seller disclosures to state the source of potable (drinkable) water: a well, a water provider (with name, address, website and phone), or neither (describe it). The notice also warns that some providers rely on nonrenewable groundwater, so the buyer may wish to check long-term supply. If it is a well, the seller must also give a copy of the current well permit if available. If the seller complies, the buyer has no claim under this section against the seller or a licensed broker for damages due to inadequate water supply (C.R.S. 38-35.7-104(1)-(2)).

Wells and the well permit

A well permit is the state engineer's permission to use a well, and it sets limits like use and quantity. When ownership changes, the permit owner must update name or contact information with the state engineer, on the state's form, within 63 days of the change (C.R.S. 37-90-143(2)). Practical point: a buyer of a well property should ask for the permit, check its use limits (a household-only well may not water a pasture), and update the record after closing.

Common interest community disclosure

A common interest community is a development where owners belong to an association and pay dues (HOA, many condos and townhome projects). Residential contracts in one must carry, in bold type, a notice that the property is in a community subject to a declaration, that the owner must join the association, pay assessments, and may face a lien and foreclosure by the association for non-payment, and that changes to the property may need architectural approval (C.R.S. 38-35.7-102(1)). The duty is the seller's. If the seller fails to give it, the buyer has a claim for actual damages directly and proximately caused, plus court costs.

Special district disclosure

A special taxing district (a metro district, water or fire district, etc.) can borrow money and repay it through extra property taxes on land inside it. The required bold notice (C.R.S. 38-35.7-101) warns that mill levies (the tax rate per $1,000 of assessed value) may rise if the district cannot pay its debt, and tells the buyer to check with the county treasurer, the tax certificate and other county offices. The duty is the seller's, and the buyer's claim is for damages plus court costs.

Radon disclosure

Colorado law (C.R.S. 38-35.7-112) says each residential sale contract must carry a bold-faced notice: the state health department recommends that all buyers test for radon and mitigate if elevated. Also, the contract or the seller's disclosure must state what the seller knows about radon testing, the latest reports and any mitigation system, and the buyer must receive the state's radon brochure (electronic or paper). Radon is a radioactive gas from soil that can build up indoors.

Wire fraud warning

Criminals pose as title companies or brokers and email fake wiring instructions, so the buyer sends closing funds to the thief. Standard contract language now warns buyers to verify wiring instructions by calling a known number. Brokers should repeat the warning, never email full account numbers carelessly, and keep safe records (Rule 1.48 defines safe and secure handling of electronic information).

Example with real numbers

A buyer purchases a $500,000 Boulder County home in a metro district and an HOA.

1. Special district: mill levy 60 mills on an assessed value of $35,000 (hypothetical). Tax = 60 x $35,000 / 1,000 = $2,100 a year. If the district's debt problem pushes it to 80 mills, tax = $2,800, or $700 more a year.
2. HOA dues $350 a month = $4,200 a year. Unpaid, the association can lien the home.
3. Square footage: listing says 2,000 sq ft. Source: assessor record. The broker has disclosed the source and date. Actual measured size is 1,900. At $250 per sq ft, that is a 100 x $250 = $25,000 gap in price per foot. Because the source was disclosed and the buyer was told to measure if it mattered, the broker has followed Rule 6.11.
4. Radon test shows 6.0 pCi/L. The seller's earlier test report must be handed over, and mitigation may cost the seller a credit negotiated through the inspection objection.
5. The title company sends wiring instructions for the $100,000 down payment. The buyer calls the number in the title company's published directory, not the email, before wiring.