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Colorado Real Estate Broker License: Free Study Course

Who does what at closing, and the broker's duty for an accurate closing statement

Real Estate Closings · 3 study hours

Bottom line: Closing is the day the deal becomes real: the title company runs it, the lender and buyer send money, and the broker must make sure each client gets an accurate, complete, signed closing statement.

Bottom line: A broker does not have to be the person who runs the closing, but a broker who has a client in the deal is on the hook for that client getting a correct closing statement. This lesson shows who is in the room and what you must do.

What "closing" means

Closing is the meeting (or the process, if everyone signs separately) where the buyer and seller sign the papers that transfer the property and the money. Funding is a different step: it is when the lender actually sends the loan money and the closing agent confirms every dollar has arrived. Sign on Friday, fund on Monday is common. Until the deal is funded and the deed is recorded, the sale is not finished. Recording means filing the deed with the county clerk and recorder so the public record shows the new owner.

Who is at a Colorado closing

  • Seller. Signs the deed and receives the net money after debts and costs are paid.
  • Buyer. Signs the loan papers and the deed-related forms, and brings the cash needed.
  • Closing agent. A neutral person or company that collects the documents and money, follows the written instructions, and pays everyone. In Colorado this is usually a title company (a business that checks who owns the property and sells title insurance). It can also be an attorney. A broker may even prepare and close the papers, but then the broker owns the accuracy of them (4 CCR 725-1 Rule 6.19.B).
  • Lender. The bank or mortgage company that lends the buyer money. It sends loan documents and wires the loan amount to the closing agent.
  • Brokers. The listing broker (for the seller) and the buyer's broker (for the buyer), or one broker helping both as a transaction-broker. A transaction-broker helps both sides without being anyone's advocate.
  • Others you may see: the seller's mortgage servicer (who sends a payoff figure), an HOA manager, a notary, and a surveyor or inspector whose bill appears on the statement.

The closing instructions

The closing agent works from written closing instructions: a short signed form where the buyer, seller, and brokers tell the agent when to record, what to pay, and what conditions must be met first. The Real Estate Commission publishes an approved closing-instructions form for this. Treat the form like a checklist for the agent. If the instructions and the contract disagree, stop and fix it before closing day. I describe the form by its title only, because section numbers change between versions.

The broker's duty: the closing statement

A closing statement is the page (or pages) listing every dollar for each side: price, loan, costs, credits, and the bottom number. Colorado law makes it a disciplinary matter if a licensee fails "to provide the purchaser and seller of real estate with a closing statement of the transaction" (C.R.S. 12-10-217(1)(j)). The Commission can fine up to $2,500 for each separate offense, and can censure, put on probation, suspend, or revoke a license (C.R.S. 12-10-217(1)).

Rule 6.19.A spells out the duty in plain terms:

  • The broker who has a brokerage relationship with a consumer is responsible for the proper closing of the transaction.
  • The broker must make sure the consumer receives an accurate, complete, and detailed closing statement that the broker signs.
  • A broker with a firm must deliver closing statements to the firm along with the other closing documents, immediately following closing.

Rule 6.19.C adds that the broker must review the closing documents and attend closing or be reasonably available. If you cannot attend, another broker designated by the firm may do it for you and takes on joint responsibility with you for accuracy, completeness, and delivery of the signed closing statement. The employing broker still has the duty to supervise (C.R.S. 12-10-217(1)(r)).

Closing files must be kept. Records the Commission requires must be kept four years (C.R.S. 12-10-217(1)(k); Rule 6.20 on transaction files).

Good funds

A broker or firm may not disburse, or authorize disbursing, money until it has been received and is available to withdraw right away (Rule 6.19.E; C.R.S. 38-35-125). A check that has not cleared is not good funds.

Wire fraud basics

Most closing money moves by wire, a bank-to-bank electronic transfer that is nearly impossible to pull back. Criminals break into email accounts, watch a deal, then send a fake message that looks like the title company, with "new" wiring instructions. The money goes to the thief. Your defenses:

  • Never act on emailed changes to wiring instructions. Call the title company at a phone number you already had from a trusted source, before sending money.
  • Tell your clients early, in writing, that the title company will not change instructions by email.
  • Do not send account numbers by ordinary email; use secure delivery.
  • If a wire goes wrong, call the bank and the title company at once. Speed gives the best chance of a recall.

Example with real numbers

A $500,000 Boulder County house. The buyer borrows 80%, so the loan is 500,000 x 0.80 = $400,000. The buyer already gave $10,000 in earnest money (a deposit held by the broker or title company to show good faith). The buyer's closing costs are $6,500. The seller owes a $280,000 loan payoff, a 5% commission, a $50 documentary fee, and a $1,450 owner's title policy.

  1. Buyer's total bill: $500,000 + $6,500 = $506,500.
  2. Less credits: loan $400,000 + earnest money $10,000 = $410,000.
  3. Buyer must wire: $506,500 - $410,000 = $96,500.
  4. Commission: $500,000 x 0.05 = $25,000.
  5. Seller proceeds: $500,000 - $25,000 - $280,000 - $50 - $1,450 = $193,500. (500,000 - 25,000 = 475,000; - 280,000 = 195,000; - 50 = 194,950; - 1,450 = 193,500.)

Check that funds in equal funds out. In: 400,000 + 10,000 + 96,500 = $506,500. Out: seller proceeds 193,500 + payoff 280,000 + commission 25,000 + doc fee 50 + title policy 1,450 + buyer's third-party costs 6,500 = 506,500. They match to the penny, and this check is what you do before signing a statement.

Your signature on a statement that does not balance is the exact mistake Rule 6.19 punishes.

Law cited

Key terms

Closing
The meeting or process where the buyer and seller sign the papers that transfer the property and the money.
Funding
The moment the lender sends the loan money and the closing agent has confirmed every dollar has arrived.
Closing agent
The neutral person or company (usually a title company) that holds documents and money, follows the instructions, and pays everyone.
Title company
A business that researches who owns a property, sells title insurance, and often runs the closing.
Closing instructions
A signed form telling the closing agent when to record, what to pay, and what must happen first.
Closing statement
The itemized list of every dollar going in and out for the buyer and seller.
Recording
Filing the deed with the county clerk and recorder so the public record shows the new owner.
Wire transfer
A fast bank-to-bank electronic payment that is very hard to reverse.
Wire fraud
A scam where criminals pose as the title company by email and send fake wiring instructions.
Good funds
Money that has arrived and can be withdrawn right away; a broker may not disburse before this.
Earnest money
A deposit by the buyer, held by a broker or title company, to show good faith.
Transaction-broker
A broker who helps both sides without being the advocate of either.

Flashcards

Who must make sure a client gets an accurate, complete, signed closing statement?

The broker who has a brokerage relationship with that client (Rule 6.19.A).

When must a broker deliver closing statements to the firm?

Immediately following closing, with the other closing documents (Rule 6.19.A).

Where is the failure-to-provide-closing-statement rule?

C.R.S. 12-10-217(1)(j).

Maximum administrative fine per offense?

$2,500 for each separate offense (C.R.S. 12-10-217(1)).

Closing vs funding?

Closing: signing the papers. Funding: the lender's money arrives and is confirmed.

Who may attend closing if the broker cannot?

Another broker designated by the firm, who then shares responsibility for accuracy and delivery (Rule 6.19.C).

What are good funds?

Money received and available for immediate withdrawal; do not disburse before (Rule 6.19.E; C.R.S. 38-35-125).

Best defense to wire fraud?

Call a known phone number to confirm wiring instructions; never trust emailed changes.

How long must records be kept?

Four years (C.R.S. 12-10-217(1)(k)).

Who usually runs a Colorado closing?

A title company as the closing agent; sometimes an attorney or a broker.

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. Under 4 CCR 725-1 Rule 6.19.A, who is responsible for making sure a consumer gets an accurate, complete, and detailed closing statement signed by the broker?

    1. A The broker who has a brokerage relationship with that consumer
    2. B Only the title company, because it prints the statement
    3. C The lender, because it funds the loan
    4. D The county clerk and recorder, because it records the deed
    Show answer and why

    Answer: A. The broker who has a brokerage relationship with that consumer

    The rule puts the duty on the broker who has the relationship. The title company may prepare the paper, but that does not remove the broker's duty.

    4 CCR 725-1 Rule 6.19.A

  2. What is the maximum administrative fine the Commission may impose for each separate offense under C.R.S. 12-10-217(1)?

    1. A $250
    2. B $25,000
    3. C $2,500
    4. D $10,000
    Show answer and why

    Answer: C. $2,500

    The statute caps the fine at two thousand five hundred dollars per separate offense. Larger numbers confuse this with other penalties.

    C.R.S. 12-10-217(1)

  3. Which of these is NOT normally a party or participant at a Colorado residential closing?

    1. A The closing agent
    2. B The lender or its representative
    3. C The listing broker
    4. D A Real Estate Commission investigator
    Show answer and why

    Answer: D. A Real Estate Commission investigator

    The Commission investigates complaints later; it does not attend closings. The other three are normal participants.

    C.R.S. 12-10-217(1)

  4. A buyer and seller sign everything on Friday afternoon, but the lender's money arrives Monday morning. What happened Monday?

    1. A Closing was cancelled
    2. B Funding
    3. C Earnest money was forfeited
    4. D Escrow was created
    Show answer and why

    Answer: B. Funding

    Funding is when the lender's money arrives and is confirmed. Signing alone is not enough to finish the deal.

    4 CCR 725-1 Rule 6.19.E

  5. A broker may not disburse funds until they are:

    1. A Received and available for immediate withdrawal
    2. B Promised by the buyer's lender
    3. C Listed on the closing statement
    4. D Approved by the seller
    Show answer and why

    Answer: A. Received and available for immediate withdrawal

    Rule 6.19.E and C.R.S. 38-35-125 require good funds. A promise or a line on a statement is not money in the bank.

    4 CCR 725-1 Rule 6.19.E; C.R.S. 38-35-125

  6. Two days before closing, an email that looks like it is from the title company says the wiring instructions have changed. What should the broker's client do?

    1. A Reply to the email and ask if it is real
    2. B Wire the money to the new account today to avoid delay
    3. C Call the title company at a phone number already known to be correct
    4. D Forward the email to the lender and wait
    Show answer and why

    Answer: C. Call the title company at a phone number already known to be correct

    Replying uses the same channel the thief controls. A call to a trusted number is the only reliable check.

    General wire-fraud practice (no Colorado section)

  7. A $500,000 sale: loan $400,000, earnest money $10,000, buyer's total bill $506,500. How much must the buyer wire at closing?

    1. A $106,500
    2. B $96,500
    3. C $90,000
    4. D $100,000
    Show answer and why

    Answer: B. $96,500

    506,500 - 400,000 - 10,000 = 96,500. Forgetting the earnest money gives $106,500; ignoring costs gives $90,000.

    4 CCR 725-1 Rule 6.19.A

  8. The listing broker cannot attend closing. Under Rule 6.19.C, what may happen?

    1. A Nobody needs to review the documents
    2. B The seller becomes responsible for the statement
    3. C The responsibility moves to the lender
    4. D Another broker designated by the firm attends and shares joint responsibility
    Show answer and why

    Answer: D. Another broker designated by the firm attends and shares joint responsibility

    The designated broker takes joint responsibility with the absent broker for accuracy, completeness, and delivery of the signed statement.

    4 CCR 725-1 Rule 6.19.C

  9. A broker licensed with a firm finishes a closing on Tuesday. When must the closing statement go to the firm?

    1. A Immediately following closing
    2. B Within one year
    3. C Only if the firm asks
    4. D Before the contract is signed
    Show answer and why

    Answer: A. Immediately following closing

    Rule 6.19.A requires delivery to the firm along with the other closing documents, immediately following closing.

    4 CCR 725-1 Rule 6.19.A

  10. A closing file is audited. For how long must the broker keep the records the Commission requires?

    1. A One year
    2. B Seven years
    3. C Four years
    4. D Ninety days
    Show answer and why

    Answer: C. Four years

    The statute requires possession of the required documents or records for four years.

    C.R.S. 12-10-217(1)(k)

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