In Colorado, real estate brokers are not licensed to practice law and/or give legal advice. Yet licensed brokers can prepare contracts to buy and sell houses as a daily course of business. Colorado brokers are allowed to render services to real estate clients to a greater degree than in many states. This allowance dates back to the infamous (at least in the Colorado real estate industry) Conway-Bogue case. The bottom line of the decision was that brokers were allowed to work with contracts in real estate transactions without an attorney only if they filled in the blanks of standard and approved forms.
Part of the issue back then, however, was that there were no defined standard and approved forms. The Conway-Bogue Case dates back to 1957, but it wasn’t until 1971 when the Colorado Real Estate Commission was directed to adopt Rule F by the Attorney General, to provide Real Estate Commission approved contracts and forms for brokers.
When I first started selling real estate in 1978, the standard form to list a house was one page and the standard form to sell a house was one page. Now, 40 years later, the real estate industry has evolved, and legislative and economic conditions as well as lending rules have changed.
I recently took the new contracts class for the forms that licensed brokers will be required to use on January 1, 2019. The body of the Contract to Buy and Sell Real Estate (Residential), printed out to 19 pages! Remember, in 1978, it was only ONE page. That doesn’t even count the multi-page additions of a variety of required disclosures. It seems like a lot! After four decades working in the real estate industry, the changes and additions each year never seemed like a lot to me. But now as I look back and see how those revisions have added up, I have to say, “WOW!”
All of these updates to the contract come about from the Forms Committee of the Colorado Division of Real Estate. Some of the revisions are submitted because of new Federal or Colorado Legislation. Other edits and additions are introduced to solve problems that occurred because issues were not clarified. For example, the early one-page contract from the 1970s had no Inspection Provisions. Back in the “old days,” there was definitely the approach of Caveat Emptor or “buyer beware”.
Now, looking at the 19-page contract we will be using starting on January 1, I can see how it is really is an amazing work of art. Having “grown up” seeing every single clause added to the contract for the past 40 years, I have an understanding of the situation that created the need for many of the new clauses. At the same time, it’s important to be aware that some new clauses are approved, but then are removed the following year because in practice, they didn’t really function the way the Forms Committee thought they would. The end result is that, in most cases, our Standard Real Estate Commission Form allows us to help buyers and sellers come to an agreement that results in a real estate closing where everyone is smiling.
There are many changes to the 2019 contract. Some of them are merely “housekeeping” items or industry terminology changes, and others are more significant and adjust the normal course of business. To see them all, here’s the redline version of the Contract to Buy and Sell (Residential), which compares the contract we were using in 2018 to the new one for 2019, available on the Division of Real Estate website at: https://drive.google.com/file/d/14nlLsfNA4mzr7gAcW-cDlzgRuhrXWFW_/view.
A quick summary of the updates:
- Many of the changes in the new contract are one-word updates. For example, the word “objection” was changed to “termination” numerous times.
- In the personal property section, a reference is made to a new form, allowing for some personal property to be transferred outside of the contract. Resort brokers should like this addition as they often sell homes furnished down to the dishes and silverware.
- The Loan Objection clause is changed to Loan Review and some of the provisions within it have changed. The Lender Property Requirements section has been clarified.
- The Homeowner’s Association Section has been changed to match the current legislation.
- The Off-Record Title section excludes any New Survey or Improvement Location Certificate.
- There is new language on disclosing Adverse Material Facts that appear after contract, but before closing.
- The Lead Based Paint Disclosure date is agreed upon in the dates and deadlines instead of being at time of contract.
- A Special Warranty Deed is now the default deed in the contract for conveyance of title.
- There is a new section for FIRPTA and Colorado 2% Withholding. I found it entertaining that the new clause doesn’t say what FIRPTA stands for. You know though, right? It stands for Foreign Investment in Real Property Tax Act!
- The Counter/Rejected box at the end of the contract has been removed.
Again, this is just a quick summary of some of the revisions. Go to the link above to see all of them! Remember, Licensed Real Estate Brokers are only licensed to fill out standard forms, and are required to advise buyers and sellers to seek legal advice on any legal matters they do not understand.
By Duane Duggan. Duane is an award-winning Realtor and author of the book, “Realtor for Life”. He has been a Realtor for RE/MAX of Boulder since 1982 and has facilitated over 2,500 transactions over his career. Living the life of a Realtor and being immersed in real estate led to the inception of his book, Realtor for Life. For questions, e-mail Duane at DuaneDuggan@boulderco.com, call 303.441.5611 or visit boulderco.com.