Denver Real Estate

Buying Real Estate in Colorado

Denver’s market is fast paced so it is helpful to understand the buying process before you begin your home search.

Each state’s purchase process is different. Colorado is basically a title state, meaning there are no escrow companies. Instead, title companies perform an all-inclusive function in a real estate transaction acting as both an escrow agent and a title insurance agent. They also work up the closing documents, generally conduct the closing, and issue title policies. In other states, attorneys represent the parties to the transaction and handle closing and issuance of title insurance. Attorneys, in Colorado, may be retained to review transaction documents. Title companies, however, prepare the title work.

Your agent relationship options:

When purchasing a home in Colorado, Colorado Agency Law provides two brokerage relationships for the buyer to select from. Below are the two options available. We highly recommend you carefully read the following definitions. Once you begin the home purchase process our real estate agent must, by Colorado Agency Law, ask you to select the brokerage relationship you want to have with your agent.

Buyer’s Agent. A buyer’s agent works solely on behalf of the buyer and owes duties to the buyer which include the utmost good faith, loyalty and fidelity. The agent will negotiate on behalf of and act as an advocate for the buyer. The agent must disclose to potential sellers all adverse material facts concerning the buyer’s financial ability to perform the terms of the transaction and whether the buyer intends to occupy the property. A separate written buyer agency agreement is required which sets forth the duties and obligations of the broker and the client.

Transaction-Broker: A transaction-broker assists the buyer or seller or both throughout a real estate transaction with communication, advice, negotiation, contracting and closing without being an agent or advocate for any of the parties. A transaction broker must use reasonable skill and care in the performance of any oral or written agreement, and must make the same disclosures as agents about adverse material facts concerning a property or a buyer’s financial ability to perform the terms of a transaction and whether the buyer intends to occupy the property. No written agreement is required.

The Purchase Process:

Offer Form

An offer form ( or other interim instrument) is not used in Colorado prior to the preparation of the final Purchase Contract.

Purchase And Sale (Final) Agreement

The instrument that creates a valid, enforceable contract between Buyer and Seller is entitled.

Residential Contract To Buy And Sell Real Estate

The document was prepared by the Colorado Real Estate Commission. Your Broker is licensed to complete the form on your behalf.

Earnest Money Deposit

An earnest money deposit represents your sincerity in the attempt to purchase a property. At the time you write a contract on the home you want to buy, you will be expected to include a deposit of approximately three to four percent of the purchase price. By state law, your check will be deposited within one business day after your offer is accepted by the seller. Your money will be held in the listing Broker's escrow account until the closing. The deposit will then be applied to your closing costs and will become part of your down payment.

Contingencies

The following contingency clauses may be included in the Purchase and Sale Agreement:

• Obtaining loan approval.
• Sale and closing of Buyer's present home.
• Structural and/or component inspections at Buyer's expense.
• Radon inspection.
• The property appraising for at least the purchase price.
• Review of title documents including covenants, rules, and regulations of the subdivision when they exist.

Financing - Key Mortgage Instruments

The instrument providing evidence of the debt incurred is called the PROMISSORY NOTE, while the security for the debt is called the DEED OF TRUST. The Deed of Trust is recorded in the county records to establish the lender's lien against the property until the note is paid in full.

Sources Of Financing

Buyers in Colorado customarily submit mortgage applications to:

• Savings and Loan Associations
Mortgage Brokers Banks Credit Unions

Owner financing is usually in the form of a second mortgage or, in some rare cases, an assumption of the seller's present loan wherein the seller may continue to be liable for the note until it is paid in full.

Special Lender Fees

In addition to the interest rate discount points, loan origination fees, and closing fees, lenders charge other fees to borrowers in conjunction with closing the loan. These fees will vary depending upon market conditions. They are also different between lenders.

Closing

The closing is normally conducted by the Title Insurance Company who acts as the closing agent for the listing real estate broker. The selling real estate broker also attends the closing to assist the buyer in reviewing all closing documents and provides additional explanation of the documents whenever you need more information. In the state of Colorado, buyers must bring "good funds" to the closing. This means that the closing funds must be wire-transferred into the title company's escrow account prior to the closing or, the buyers need to bring a certified check or cashier's check to the closing. Personal checks can not be accepted.

Closer Duties

Initiates, prepares, orders, coordinates, and explains the following:

• Title Examination Mortgage Insurance (If applicable)
• Deed Preparation Title Insurance
• Disbursement of Funds Closing Settlement Statement
• Recording Pertinent Documents

Time From Agreement To Closing

The average time interval from the contract acceptance of the Purchase and Sale Agreement by both parties to closing (Transfer of Title) is 30-60 days.

Title Insurance

When property is being sold or refinanced, the lender and the buyer need a preliminary title commitment that will indicate exactly what recorded liens and encumbrances and recorded easements are currently in effect on the property. The title commitment will also indicate the vested owner of record and any restrictions on the use of the subject property .Title insurance is furnished to the lender with a lender's policy (mortgagee's policy) showing the lender as a lien holder on the property. A charge will be incurred by you as part of your closing costs to pay for the mortgagee's title insurance policy. When the closing of the property is final, the title company will record the necessary documents and issue a title insurance policy to you and your lender. This title policy insures that you have clear title to the property.

Types Of Deeds

Property in Colorado is conveyed by:

• General Warranty Deed -private party homeowner.
• Special Warranty Deed -Foreclosures or corporation sale.
• Corporate Warranty Deed -sale by a corporation.
• Personal Representative Deed -estate sale.

Buyer Default

If a buyer fails to close after all contingencies have been met, the earnest money deposit is customarily forfeited to the seller and divided with the listing broker (the amount received by the broker cannot exceed the total commission owed by the seller. The selling broker does not receive any portion of forfeited earnest money.)

Taking Title To Real Property

The three most common ways of taking title to real estate in Colorado are: A) in severalty, B) as tenants in common, or C) as joint tenants. Colorado state law prevents your broker from advising you on how to take title. It is strongly recommended that legal counsel be consulted to advise each buyer which type of ownership is best.

• Tenancy in Severalty: Ownership of property vested in one person alone rather than held jointly with another also called several tenancy or sole tenancy.
• Tenancy in Common: Tenancy in Common is a holding of an estate in land by two or more persons who need hold only by the unity of possession. As distinct from a joint tenancy, the tenants of a tenancy in common need not have the same proportionate share and subject to the rights of possession of the other tenants.
• Joint Tenancy: In a joint tenancy, all the co-owners are equally entitled to the use, enjoyment, control, and possession. The most distinguishing characteristic of the joint tenancy is the right of survivorship.

The right of survivorship which accompanies a joint tenancy ownership does eliminate some of the legal complications of probate in the event of the death of the parties. However, inheritance taxes are assessable and evidence of the death must be placed on record. Disadvantages of joint tenancy may arise if marital difficulties occur, or if one of the parties has obligations or responsibilities (children) resulting from a previous marriage. The financial and tax situation of the parties may also dictate that a tenancy in common ownership is best. Realtors cannot recommend how should take title to your home. It is strongly recommended that an attorney be consulted for a specific recommendation of how you should take title.

Property Inspections And/Or Engineers Report

If you are purchasing either a new home or resale property, you should have a structural and/or engineer's inspection completed on your home. There are numerous companies from which to chose. This visual inspection will determine the condition of the structure and foundation and identify defects that may need to be corrected. The cost of this service generally depends on the size of the home and the type of inspection requested.

Most inspections include:

• Appliances
• Basements
• Water or Plumbing Lines
• Garages
• Electrical
• Roofs
• Heating and Ventilation
• Attics
• Bath and Kitchen Fixtures
• General Maintenance and Mechanical Condition of Home
• Crawl Spaces

Warranty Service

Buyers or Sellers may purchase a home warranty policy that will protect against any repairs or replacement of certain appliances, heating, plumbing, and electrical items. As with most insurance companies, the coverage can vary and you may want to consult with a warranty services company to determine exactly what is covered and the cost of the policy.

Fixtures

Normally included in the Purchase and Sale Agreement:

• All Window Coverings
• Wall-to-Wall Carpeting
• Air Conditioning Equipment
• Venetian Blinds
• Lighting Fixtures
• Awnings
• Window Shades
• Mantels
• Heating System
• Storm Windows/floors
• TV Antennas, Rotors
• Trees, Shrubs, Plants
• Hot Water Heater
• Garage Door Opener
• Kitchen Ranges and Ovens
• Plumbing Fixtures
• Garbage Disposals
• Solar Panel & System
• Chandeliers and generally any thing that is permanently attached
• Hot Tubs & Spas

Personal Property

If you ask for personal property (as opposed to fixtures), it is referenced in the Purchase and Sale Agreement and transferred by a separate bill of sale at time of delivery of deed.

Adjustments

Customary adjustments computed as of the date of closing include:

• Fuel
• Rents
• Taxes
• Water Charges
• Sewer Use
• Homeowners Dues

Property Insurance Upon Seller Vacating

The seller’s homeowner’s policy remains in effect until closing if vacant; the following Items are generally covered:

• Vandalism
• Wind and Hail Damage
• Fire Damage

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