How a Home Buyer Can Terminate a Contract to Purchase Real Estate in Colorado
Preface & Disclaimer
Please understand this post is a summary intended to help potential buyers and sellers before they negotiate an actual contract. This is not legal advice. If you need help with a contract, please consult your real estate agent and if you do not have one, please call me. It is in your best interest to be fully informed about all aspects and decisions with the Colorado Contract to Buy and Sell.
The Colorado Approved Contract to Buy and Sell Real Estate is a well thought out document that provides a wonderful set of rules for both Buyers and Sellers. The document is a legal document only once both parties have signed either the original offer or a counterproposal. For a link to the 2014 contract, click this
Spirit of the Document
The Colorado Real Estate Commission writes contract law with the assumption that the seller has owned a home, may have purchased it and may have lived in the home for sale. The assumption is that the buyer may have never owned a home or bought a home before. As a result, the due diligence is completely up to the buyer. In addition, the buyer has a few ways to exit a contract if it does not suit the buyer.
The seller has to sell the home. Of course the contract does have two “outs” for the seller. One is Inspection, the other is Appraisal.
Lets start with the Inspection Objection, since it is the most likely way a Home Buyer Can Terminate a Contract to Purchase Real Estate in Colorado. Click the link to the contract above and look at Section 10.
Buyers typically conduct a general inspection, a radon inspection and a sewer inspection. The radon results take 48 to 72 hours before they are available. My take on the inspection is that it is a chance to identify issues that are Safety, Security and Surprise. If the issue is true safety, like Carbon Monoxide, Mold, Exposed Electrical and broken glass, Sellers, please be ready to repair the issues or provide the buyer a credit. Security will feel just as important to the buyer. Windows and Doors should lock. Surprise is never fun. There can be an issue the seller has not noticed that could have a significant impact on the home’s value and functionality, like a broken sewer.
1. The buyer can terminate and provide or not provide a reason or the actual inspectors report at inspection.
2. Most buyers will take option two which is to object to some of the issues that came up during the inspection. The seller can agree to repair the objections, reject all objections or propose an alternative resolution. A strong agent is important during inspection negotiations.
3. The buyer may take the property as is at the inspection.
Overall, if the buyers and sellers do not come to a mutually acceptable inspection resolution, the contract automatically terminates.
The longest contingency in a contract to buy and sell is the buyer’s loan objection. Read section 5 of n-a__n-a_CBS1-8-13_10950690_2622282 . The buyer must be completely satisfied with all terms of a loan in the buyer’s sole discretion. Most buyers at 25 days in are not going to get cold feet over a payment, but they sure have the right to walk and blame rates, terms or availability of a loan. This is a very important aspect to both buyers and sellers. Sellers, this is usually the last hurdle and if the buyer chooses not to close after the Loan Objection deadline, you may be entitled to the buyer’s earnest money. The lender also needs to be ok with the value and condition of the property. This is confirmed during the appraisal process.
As an agent, we watch the two issues above as closely as possible to make sure your contract is as stable as possible during the process. There are of course a total of 16 pages of terms and issues with the Contract to Buy and Sell, however when someone asks me ” How a Home Buyer Can Terminate a Contract to Purchase Real Estate in Colorado ” . The two issues above are the most likely and the most carefully watched.
Again, there are 16 pages in a contract and nothing beats having a professional Real Estate Agent review each paragraph of your contract so you are prepared for any twists or turns in the process.
Please call or email if I can answer other questions about contracts or the process.