CONTRACTS AND REGULATIONS 10
All the following contracts fall under Commission Rule F except: open listing agreements exclusive tenant contract to buy and sell real estate new construction contracts
new construction contracts The builders write their own new construction contracts.
The Definitions of Working Relationships form has the effect of: establishing an agency relationship disclosing the different types of relationships that are available complete disclosure of agency as required by Colorado statute disclosing only the types of relationships that the broker prefers to offer
disclosing the different types of relationships that are available The definitions form does not establish a specific relationship with a buyer or seller - only discloses the type of relationships that are available.
When a broker prints the approved forms for use in his office, and he is inserting special wording in Italics, what statement must appear at the top of the first page? "The printed portions of this form, except differentiated additions, have been approved by the Colorado Real Estate Commission." "The printed portions of this form have been approved by the Colorado Real Estate Commission." "The printed Portions and the name of the company have been approved by the state Real Estate Commission." None of the above have to be printed at the top of approved forms.
"The printed portions of this form, except differentiated additions, have been approved by the Colorado Real Estate Commission." At the top of all Colorado Real Estate Contracts it states that any changes or additions must be differentiated from the printed type.
The Real Estate Commission requires the use of a Lead-Based Paint Disclosure form on all dwellings permitted prior to: 1976 1977 1978 1979
1978
When a licensee wishes to extend the effective period for a listing agreement, which of the following is appropriate? Extension letter prepared on company stationery and signed by the seller Agreement to Amend/Extend Contract with a Broker Agreement to Amend/Extend Contract Alter the date on the original listing and have seller and broker initial the change
Agreement to Amend/Extend Contract with a Broker When a specific form exists, brokers are required to use the approved form for that function. In this situation, there is a specific form, Agreement to Amend/Extend Contract with a Broker, for altering any terms of a listing or other contracts between the broker and a member of the public.
Under Commission Rule F, all of the following are approved forms except: Contract to Exchange Real Estate Agreement to Amend/Extend Contract Business Opportunity Agreement Change of Status
Business Opportunity Agreement Because of the diverse and complex agreements associated with business opportunities, they must be prepared by an attorney.
Buyer Brown makes an offer on Seller Smith's house. Seller Smith counters Buyer Brown's offer at a higher price. Buyer Brown rejects Seller Smith's counter offer. Seller Smith then agrees to accept Buyer Brown's original offer. Buyer Brown has no obligation whatsoever to Seller Smith Buyer Brown must proceed with the purchase, due to Seller Smith's acceptance Seller Smith can sue Buyer Brown if Brown does not proceed with the contract Buyer Brown has three days to accept Seller Smith's acceptance of the of
Buyer Brown has no obligation whatsoever to Seller Smith A counter offer is a formal rejection of the original offer, thus relieving the purchaser of all obligations to perform under the original offer. More info on Counterproposals: Can you counter a counter? This is one of the eternal questions in real estate that has been asked by students and agents for years. To describe this in simpleez, what this question addresses is the situation whereby the Buyer sends the Seller an offer, the Seller is mostly but not entirely agreeable, so the Seller sends the Buyer a Counterproposal, most often asking for more money. Now here is the big moment! If the Buyer wants to bargain a bit, but not to the extent the Seller wants, should they send the Seller another Counterproposal or a brand new purchase contract? And why does this blow agents and students heads up for so many years? The reason is not a legal issue. It is perfectly legal to respond to a Counterproposal with another Counterproposal. However, it is considered a bad practice. Through the years the Real Estate Commission has swung from emphasizing this as such a bad idea many agents thought it was forbidden, to saying it is still a bad idea, but since it is legal and we despair of ever getting agents not to do this, we will not beat you up for it. Why is it a bad practice? Playing dueling Counterproposals makes it really easy to confuse the parties as to what exactly are the final terms of an agreed contract. For example, let's assume the original offer was for $200k closing January 31, Earnest Money of $1,000, Inspection Objection in 30 days. The Seller sends a Counter asking for $210k, closing January 1, Earnest Money of $5,000, Inspection in 10 days. The Buyer Counters the Counter with $205K and closing on January 15. The last Counter is accepted. What are the final terms of this agreement? What are the odds that someone is confused? That is why Countering a Counter is a bad idea. Much better to finish up with a clean contract containing the final agreed terms and conditions than hope everybody has the same understanding. BTW,what are the final terms and condition of our example? Whelp, the first Counterproposal constitutes a rejection of the original offer as it stands. The second Counterproposal constitutes a rejection of the first Counterproposal in its entirety, however the terms of the original offer as amended by the second Counterproposal still stands. The final terms and conditions look like this: Price is $205k, the Earnest Money is $1,000, Inspection is 30 days, the Closing is January 15. Are you confused? Countering a Counter is a bad idea.
To change the price of a listed property, the broker must: Get the Seller's approval and confirm it on Brokerage Firm letterhead Change the listing contract using an Agreement to Amend/Extend form Change the listing contract with an Agreement to Amend/Extend With Broker form Inform the multiple listing service immediately
Change the listing contract with an Agreement to Amend/Extend With Broker form The listing price is approved by the Seller in a listing contract. This contract must be amended when the listing price changes. The Agreement to Amend/Extend contract is used to change the conditions of a contract the broker IS NOT a party to such as the Contract to Buy & Sell. The Agreement to Amend/Extend With Broker is to be used for changes to contracts the broker IS A PARTY to such as the the Listing Contract or Buyer Agency Agreement.
When a Seller decides to submit a Counterproposal in response to a Contract to Buy and Sell, the Seller: Checks the Countered box, signs both the original Contract and the Counterproposal Checks the Rejected box, initials the original Contract and signs the Counterproposal Checks the Countered box, initials the original Contract and signs the Counterproposal Carefully signs and submits only the Counterproposal
Checks the Countered box, initials the original Contract and signs the Counterproposal To counter: the Seller would check the Countered box, initialing directly underneath in the space provided indicating the Seller is the one countering. The next step is to complete and sign the Counterproposal. The last step is to return the original offer and the counterproposal to the Buyer. The Seller does not sign the original offer as that would indicate acceptance.
When sections are omitted from the preprinted portions of a Real Estate Commission approved contract: You are not allowed to omit any part of an approved contract Only certain paragraphs are allowed to be omitted as not applicable You must request the approval of the Real Estate Commission
Only certain paragraphs are allowed to be omitted as not applicable Whenever a section which is allowed to be omitted from any approved contract is omitted (such as the Seller Financing section of the Contract to Buy and Sell when the buyer is getting a new loan from a bank), you cannot remove it completely. You need to either: 1) cross it out cleanly such that someone can see what you are crossing out, 2) put n/a for "not applicable" in all the blank fields of the paragraph, or 3) if you are using a contract software package the software will remove the paragraph, but leave the title of the paragraph with the words "omitted as not applicable" next to it.
When a seller decides to counter an offer presented to him, which is true? Seller should sign the original offer as well as the counter offer Seller should not sign either the original offer or the counter offer Seller should sign only the counter offer Seller should sign the original offer only
Seller should sign only the counter offer
When a seller wishes to counter an offer made by a purchaser, which of the following documents should be signed by the seller? The purchase and sale contract The counter offer The purchase and sale contract and the counter offer The purchase and sale contract after the appropriate changes have been stricken or changed and initialed
The counter offer By signing the purchase and sale contract the seller is agreeing to those terms and is bound by the terms of the contract. The counter offer changes the terms so by signing that, the terms of the counter are changed but the rest of the contract remains the same. Changing and initialing is a poor practice.
In which of the following instances would you use the Agreement to Amend/Extend Contract? To make changes in the purchase price of an offer that has not been accepted To change the loan application deadline in an accepted purchase contract To change the time allowed to accept an offer to purchase All of the above
To change the loan application deadline in an accepted purchase contract The Agreement to Amend/Extend Contract is used to changes the conditions in an accepted contract to purchase. It cannot be used to change the conditions of an offer as an offer has not been accepted. If you want to change the terms or conditions of an offer prior to acceptance, you need to rewrite the contract or use a counterproposal.
The purpose of Commission Rule F is: To reduce the licensee's liability To have forms for all transactions To encourage compliance with Conway-Bogue To require disclosure
To encourage compliance with Conway-Bogue Commission Rule F is to help Colorado real estate licensees comply with Conway-Bogue.
The approved Agreement to Amend/Extend contract form is used: To notify the Seller of any change in deadlines Add information to an offer that does not belong in "additional provisions" To notify the Buyer of a deadline they missed To get mutual agreement of the parties to any change in a deadline
To get mutual agreement of the parties to any change in a deadline It is used to modify the Contract to Buy & Sell Real Estate.
The Colorado Withholding Tax applies only to non-Colorado residents selling property in Colorado. The withholding is: 2% of the purchase price 2% of the loan amount 2% of the purchase price but may not exceed $5000 2% of the purchase price or the net proceeds of the sale whichever is less
2% of the purchase price or the net proceeds of the sale whichever is less The withholding tax which is for income tax purposes is 2% of the selling price or the seller's net proceeds, whichever is less.
Which form should be used when the licensee wishes to extend one of his listings? Extension letter prepared by the attorney of the brokerage firm Agreement to Amend/Extend Contract Agreement to Amend/Extend Contract with Broker Alter the date on the original listing and have the seller initial the change
Agreement to Amend/Extend Contract with Broker This is the specific form to be used for this purpose and to make any other changes regarding the listing of the property. Remember, the listing contract is the one between client and agent and the only contract to which the agent is a party.
The seller's property disclosure indicates the condition of all but which of the following? The appliances The title The heating and cooling system The electrical system
The title The title to the property is addressed the the Exclusive Right to Buy Sell (Purchase Contract).
The Colorado Real Estate Commission has approved all but which of the following forms? Closing Instruction and Earnest Money receipt Earnest Money Promissory Note Agency/Subagency Disclosure Intent to Pay off Loan
Intent to Pay off Loan Intent to pay off loan is not a Colorado Real Estate Commission approved form.
Regarding filling in blanks in a standard commission approved form, this Is the practice of law and must be done by attorneys Is not the practice of law Must be done entirely with preapproved standard clauses Is the practice of law but is specifically permitted by Colorado law
Is the practice of law but is specifically permitted by Colorado law Filling in blanks in a standard commission approved form is the practice of law but is specifically permitted by Colorado law based on the Conway-Bogue decision of the CO Supreme Court.
Filling in blanks in a standard commission approved form is: Is not the practice of law Is the practice of law and must be done by attorneys Must be done entirely with standard preapproved clauses Is the practice of law but is specifically permitted by Colorado law
Is the practice of law but is specifically permitted by Colorado law The Colorado Supreme Court decided that the practice of filling in blanks of standard CREC approved forms by real estate licensees is authorized, approved, ok and legal, but that it still constitutes the practice of law.
Which statement is true? There is no obligation for a licensee to prepare any legal documents A licensee is not responsible for any documents prepared by their broker The broker is not responsible to provide accurate closing statements A licensee is responsible for fees charged for the preparation of legal documents when an attorney representing the purchaser or seller prepares them
There is no obligation for a licensee to prepare any legal documents
Fees for the preparation of legal documents at a closing are to be paid by: the buyer or seller, when prepared by the attorney representing the parties to the transactions the licensee when delegating legal documentation preparation to an agent for their clients the licensee if preparing legal documents and closing their own transaction all of the above
all of the above They may all pay for the preparation fees. The rules regarding who pays for legal document preparation at a closing are a part of the Conway-Bogues court decision that allows a real estate agent to practice a limited form of law. The short version of this ruling as it pertains to contracts and closing documents is that anybody but the real estate agent can draft legal documents.This is logical when you understand that the real estate commission has no jurisdiction over buyers and sellers. Therefore they and their attorneys can create legal documents. Interestingly, an attorney for the brokerage company can create legal documents. Real estate agents can only fill in the blanks on contracts approved by the real estate commission, but we are generally responsible for the cost of legal preparation of closing documents. There is a limit to this; we are not responsible for the cost of preparing documents should the parties decide to use their own lawyers. As a practical matter, the title company prepares the legal documents that are required of the agent. They typically charge us a cursory $5 for this service, as we are the rainmakers that bring them the lucrative title insurance business. Legally, they have to charge us something and so the $5. Here is the legal explanation that covers this area: Closing Fees: Commission position statement CP-7, Closing Costs, and Rule E-37 state that there is no obligation for a broker to prepare any legal document as part of a real estate transaction or closing. However, as the result of the Conway-Bogue decision (see Chapter 5, "Landmark Case Law and Opinions"), brokers may prepare certain legal documents and complete standard and approved forms. Certain fees are generally charged for preparation of real estate documents and closings: (1) a fee for closing and preparing non-legal documents such as the settlement statements, and (2) a fee for preparing legal documents executed by the parties, i.e., contracts, deeds, notes, deeds of trust, mortgages, and other security instruments. Upon agreement of the parties, fees for preparing non-legal documents may be charged to anyone. However, in the absence of an attorney representing one of the parties to the transaction, the broker must pay any fees for preparing legal documents. The broker must ensure that the proper parties pay for the closing costs. Brokers may charge (with written authorization from the parties) for the transactions that they close "in-house," when such charges are not tied to preparation of legal documents. The broker may not designate his or her own attorney to prepare the documents, and then pass these charges to the parties, as if the attorney were representing them.
A counterproposal: is a rejection of a proposed contract to buy/sell amends the terms and conditions of a proposed contract to buy/sell use is mandatory to modify the terms and conditions of a contract to buy/sell is used to counter the purchase price only of a proposed contract to buy/sell
amends the terms and conditions of a proposed contract to buy/sell The key here is "supersede and replace." This is not merely a rejection of an offer, it is amending the original offer, not rejecting it entirely.
The Agreement to Amend\Extend is used to change the terms of: an offer being negotiated an Exclusive Right-to-Sell Listing Contract an accepted Contract to Buy and Sell Real Estate an Exclusive Right-to-Buy Listing Contract
an accepted Contract to Buy and Sell Real Estate The Agreement to Amend/Extend Contract is used only to amend the terms and conditions of a sales contract while it is in process. You cannot amend a contract once it is complete (AKA "executed"), or terminated, or expired. First make sure you understand the difference between the Agreement to Amend and Extend and the Agreement to Amend and Extend With Broker. Both agreements are used to alter the terms and conditions of a contract. The Agreement to Amend and Extend is used to alter the terms of the sales agreement between the buyer and seller. The Agreement to Amend and Extend With Broker is used to amend the terms of an agreement with the client and their broker such as a listing agreement or buyer agency agreement. As to why would you extend a contract before it is executed, understand the difference between the terms "executory" and "executed". When a contract is signed by all parties it is in "executory" status. This means it is in process but not complete. When it is "executed" this means it is complete, i.e. fully performed. Real Estate Commission rules say that you cannot amend the terms of an agreement after it has been expired, executed or otherwise terminated. When a closing occurs, the deal is done, the associated listing and sales contracts are fully executed, can't be changed, done, dead, history, ex-contracts, ended, finished, achieved, accomplished, done with, taken to the bank and all over including the shouting.
When an initial contract for sale of property is different than the contract forms approved by the Colorado Real Estate Commission, the contract should be prepared by: broker representing the seller a real estate attorney broker representing the buyer an attorney representing one of the parties to the contract
an attorney representing one of the parties to the contract
Closing instructions are to be signed by all parties: at the time the purchase and sale contract is generated at the time the transaction is closed when the title commitment is reviewed when the closing time and place has been established
at the time the purchase and sale contract is generated\ Closing instructions are to be generated by the listing broker when the property is listed, so that they are ready for the buyer's signature as soon as a purchase contract is offered. Although not an absolute rule, the Real Estate Commission prefers the closing instructions are signed by both parties at the same time a purchase contract is signed by both parties. In this way, the closing instructions are signed prior to earnest money being turned over to the closing company. Note: closing instructions appoint the closing agent (title company) and give them authority to do their job
When a seller is in default in a transaction, pursuant to a Licensee Buyout Addendum, the buyer's remedy is to: have the earnest money returned sue the seller for specific performance sue the seller for specific performance if the specific performance box has been checked sue the seller for actual damages only
have the earnest money returned The licensee is entitled to have their earnest money returned if there was any (usually there is none) and continue performing per the other terms of the contract.
Licensee Buyout Addendum are to be used when a real estate broker is purchasing: his or her own listing a listing of any broker in the office a property listed by any broker all of the above
his or her own listing The Licensee Buyout Addendum need only be used if the agent is purchasing their own listing.
Relative to a Contract to Buy and Sell Real Estate: information must be abbreviated to fit within the preprinted blanks information may be added outside of the body of the contract preprinted information always takes precedence over inserted information inserted information must be typed or computer-generated
information may be added outside of the body of the contract Information may be added outside the body of the contract. It may be done on an addendum, or amend/extend form, and included with the contract or attached to the contract.
If a Lead-Based Paint Disclosure form is not executed at the time of the sale of a dwelling built prior to 1978, the purchaser: may sue the seller for damages is not obligated under the terms of the contract is entitled to an inspection paid for by the seller may suffer damages as a result of caveat emptor
is not obligated under the terms of the contract
In transactions requiring the use of a Licensee Buyout Addendum: the seller has a choice of whether or not to pay a commission the buyer has a choice of whether or not a commission shall be paid the seller pays no commission the seller pays a reduced commission
the seller pays no commission The seller pays no sales commission pursuant to a Licensee Buyout Addendum. Usually, the licensee has negotiated a price low enough to cover what his/her commission would be and any anticipated holding costs.
If a printed form says one thing, but typing in a blank space says something contradictory: the contract is void for uncertainty the typing prevails the printed form prevails the contract is void because of the conflict
the typing prevails Typing, or whatever form you use to fill in the contract blanks, prevails. This best shows intent of the parties.
Broker Betty meets a young couple at an open house who are looking to purchase their first home. The couple asked if the Broker thought they had enough income to qualify for a loan to purchase the property. Realizing this information is of a confidential nature Broker Betty makes the agency disclosure that her office policy and state statute require. The buyers are very skeptical about making a commitment and have been coached by family members not to sign anything. They refuse to sign the signature block on the Brokerage Disclosure to Buyer form. Betty should: refuse to answer unless they sign answer the question, then ask them to sign once again call their attorney and make the disclosure to him make a note of the date and time the disclosure was made and reference the fact that the buyers declined to sign the form - then have the discussion
make a note of the date and time the disclosure was made and reference the fact that the buyers declined to sign the form - then have the discussion Brokers are required to make agency disclosure. Buyers are not required to sign the disclosure. It is acceptable to note the date and time the disclosure was made, and indicate that the buyers declined to sign the form.
In order to be effective, a Commission-approved Counterproposal: must be attached to each copy of the original offer signed by the buyer must be signed by the seller at the same time he signs the original offer after the original is signed by both parties the counterproposal must be signed by both parties the original offer must only be signed by the seller but the counterproposal must be signed by both parties
must be attached to each copy of the original offer signed by the buyer This is stated as a note on the bottom of the counterproposal. The counterproposal changes the terms and conditions of the original offer. As such, it does not stand alone and must be combined with the original offer to create an updated full offer.
When a seller makes a counter offer to a purchaser, the earnest money check is: held by the seller until the purchaser signs the counter offer held by the listing broker until the purchaser signs the counter offer deposited in the listing broker's trust account within one banking day returned to the purchaser with the counter offer form
returned to the purchaser with the counter offer form Legally, the earnest money should be returned to the buyer as the counteroffer form has the effect of rejecting the original offer of which the earnest money was a part. Do not confuse "legal" with "practical." Legally - as stated, the earnest money should accompany the written counteroffer. Practically - many negotiations are performed electronically or by phone. In these cases, the earnest money check does not go back and forth. However, the State exam tests on the "legal" and not on the "practical."
A seller must provide a Seller's Property Disclosure form based on which of the following? seller's opinion of condition at the time of the contract seller's current actual knowledge results of a professional property inspection advice of the listing agent regarding the condition of the property
seller's current actual knowledge The Property Disclosure of the Residential Contract to Buy and Sell specifies that the form should be completed by the seller (not the broker) and based on the seller's current actual knowledge.
In a transaction that is subject to a Licensee Buyout Addendum, if the buyer defaults, the seller may: sue the buyer only if the specific performance box has been checked sue the buyer for specific performance only keep the buyer's earnest money as liquidated damages keep the buyer's earnest money as liquidated damages if the liquidated damages box has been checked
sue the buyer for specific performance "Liquidated Damages" (buyer loses earnest money) is deleted in a Licensee Buyout Addendum to a Contract to Buy and Sell Real Estate. The remedy should the buyer/broker get cold feet is "Specific Performance" meaning the seller can sue for damages and force the agent to buy.
The Licensee Buy-Out Addendum to a Contract To Buy and Sell Real Estate becomes a binding contract with the listing company when: the listing company supervising broker signs the seller & the licensee sign the seller signs the buyer, and the broker sign
the listing company supervising broker signs It is PERSONALLY binding on the seller and the agent (buyer) when they sign the contract. Although there is a place at the bottom for the supervising broker's signature, that signature is not mandatory. If the supervising broker does not sign, this agreement is NOT BINDING on the listing company. In the addendum it says "NOTICE TO SELLER: THIS CONTRACT IS BINDING ONLY UPON THE BUYER (LICENSEE) WHO PERSONALLY SIGNS ABOVE, UNLESS THE SUPERVISING BROKER OF THE BROKERAGE FIRM WORKING WITH SELLER SIGNS HERE:"
Which of the following is true about licensees filling in blanks on a standard commission-approved form? This is the practice of law and must be done by attorneys This is not the practice of law This is the practice of law but it is specifically permitted by Colorado law This must be done entirely with preapproved standard clauses
this is the practice of law but it is specifically permitted by Colorado law The Colorado Supreme Court issued a decision that the practice of filling in blanks by real estate licensees is authorized, but that it still constitutes the practice of law.
