Contracts and Regulations- 10
The seller's sole remedy in case of default by purchaser is to keep earnest funds received from purchaser Explanation "Liquidated Damages" means that the seller's sole remedy is to only keep all things of value received, usually the earnest money.
"Liquidated damages" refers to which of the following? The seller's sole remedy in case of default by purchaser is to keep earnest funds received from purchaser The seller's sole remedy in case of default by purchaser is to force him to continue with the sale The seller's remedy if the buyer defaults, and the seller can also sue the buyer for damages The seller's remedy if the buyer defaults and the seller can sue for specific performance
New construction contracts Explanation The builders write their own new construction contracts.
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
Brokers may not add exculpatory language to any commission-approved contract to which they are not a party, such as the Contract to Buy and Sell Explanation Violation of Rule F Some brokers include disclaimers, releases and other exculpatory language in addendums or additional provisions to the Commission approved real estate contract form to which they are not a party. Such conduct is a violation of the Colorado Real Estate Commission Rules and Regulations, specifically Rule F. A broker IS a party to a listing agreement - this is how they got hired. A broker IS NOT a party to the Contract to Buy and Sell Real Estate - only the Buyer and Seller are. Rule F-2(b) precludes a broker who is not a principal party to the contract from inserting personal provisions, personal disclaimers or exculpatory language in favor of the broker in the "additional provisions" section of a Commission approved form. Rule F-3(c) precludes a broker who is not a principal party to the real estate contract from inserting personal provisions, personal disclaimers or exculpatory language in favor of the broker in an addendum to a Commission approved form. Although an attorney representing a broker or brokerage firm can prepare an addendum to the real estate contract, the Commission interprets Rule F to preclude that lawyer from including personal provisions, personal disclaimers or other exculpatory language in favor of the broker in either the "additional provisions" section or in an addendum to the approved real estate contract.
Exculpatory language is when Brokers insert language such as personal disclaimers and releases into contracts. Which of the following is correct according to the Colorado Real Estate Commission regarding exculpatory language Exculpatory language limiting a broker's liability may not appear in listings or buyer relationship agreements Brokers may not add exculpatory language to any commission-approved contract to which they are not a party, such as the Contract to Buy and Sell Exculpatory language limiting the broker's liability may be added to the Contract to Buy and Sell only in addenda, not in additional provisions Brokers may add exculpatory language to any commission-approved contract to which they are not a party
The typing prevails Explanation Typing, or whatever form you use to fill in the contract blanks, prevails. This best shows intent of the parties.
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
bringing court action Explanation The broker must sue the seller for his/her commission. The broker cannot file a mechanic's lien, the CREC doesn't adjudicate commission complaints period, and it's against the law to cloud the seller's title.
If an owner refuses to pay the broker an earned commission, the broker may properly seek relief by: Filing a mechanic's lien Bringing a formal complaint with the division of real estate Bringing court action Bringing a quiet title action against the seller
Seller Explanation If any commission were to be paid, the seller would be responsible for payment.
If the purchase is not completed due to a default by the seller and the earnest money deposit is returned to the buyer, the seller's broker may seek compensation, if any, from: Seller Buyer Seller and buyer No one--he is not entitled to compensation
Business Opportunity Agreement Explanation Because of the diverse and complex agreements associated with business opportunities, they must be prepared by an attorney.
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
When purchasing a newly constructed home Explanation Builders use contracts prepared by their own attorneys.
Under which circumstance is it NOT necessary to use a Colorado Real Estate Commission-approved form? When purchasing a home in the resale market through a licensed broker When purchasing a newly constructed home When purchasing a duplex When purchasing a commercial property
Agreement to Amend/Extend Contract with Broker Explanation 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.
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
Company name, address, and identifying marks Explanation Broker may add firm name, address, phone number, trademark, and other identifying data.
Which of the following information may be added when a broker is printing approved forms? Company name, address, and identifying marks Information regarding homeowner's warranty plans Broker commission provisions Information that is nonspecific to transactions
This is the practice of law but it is specifically permitted by Colorado law Explanation 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.
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
At the time the purchase and sale contract is generated Explanation 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.
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
A tax deferred exchange of investment properties Explanation A l031 Exchange is a transaction in which a taxpayer is allowed to exchange one investment property for another by deferring the tax consequence of a sale. The transaction is authorized by 1031 of the IRS Code. The IRS Code actually reads: "No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like kind, which is to be held either for productive use in a trade or business or for investment." Requirements for a 1031 Exchange Timelines for a 1031 Exchange The investor (or exchanger) must follow the strict 45- / 180-day guidelines for an exchange. Once the exchanger sells his/her property (relinquished property) he/she has 45 days to identify property(s) of equal or greater value. Once identified, the exchanger has 180 days from the day he/she sold their property to acquire the property(s) identified (or 135 days from the end of the 45-day period). Like-Kind Property in a 1031 Exchange The investor must acquire "like-kind" property. This means that it must be other qualifying forms of real estate. For example, the exchanger could sell a duplex and purchase a commercial property, or he/she could sell a piece of land and buy an apartment building. The property just needs to be "like-kind."
A 1031 Exchange is: Changing a transaction broker relationship to a buyer broker relationship A tax deferred exchange of investment properties A tax deferred exchange of owner occupied residential properties A transaction where a promissory note will be exchanged for cash prior to closing
Modifying the terms of an Exclusive Right-to-Buy or Exclusive Right-to-Sell Listing Contract Explanation 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.while it is in process. You cannot amend a contract once it is complete (AKA "executed"), or terminated, or expired. More info: 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.
An Agreement to Amend and Extend With Broker is used for the purpose of: Modifying the terms of a purchase and sale contract that is being negotiated Modifying the terms of an accepted purchase and sale contract Modifying the terms of a broker to broker commission agreement Modifying the terms of an Exclusive Right-to-Buy or Exclusive Right-to-Sell Listing Contract
None of the above Explanation The broker would be a party to an Exclusive Right-to-Buy or -Sell Listing Contract, but not to a purchase and sale contract. All of the contracts listed in the answers are purchase contracts or related to a purchase contract, and the broker is never a party to a purchase contract, only the buyer and seller are. The broker IS a party to any service contract, which is the listing agreement - either to buy or sell.
Associate Broker Jane Holmes is a party to which executory contract? Contract to Buy and Sell Real Estate Counterproposal Agreement to Amend/Extend None of the above
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 Explanation 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.
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
Buyer Brown has no obligation whatsoever to Seller Smith Explanation 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.
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 offer
All of the above Explanation 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.
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
Is the practice of law but is specifically permitted by Colorado law Explanation 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.
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 not obligated under the terms of the contract Explanation A buyer is not obligated under the terms of a contract until the lead-based disclosure has been executed. More info:WARNING! LEAD FROM PAINT, DUST, AND SOIL CAN BE DANGEROUS IF NOT MANAGED PROPERLY Penalties for failure to comply with Federal Lead-Based Paint Disclosure Laws include treble (3 times) damages, attorney fees, costs, and a base penalty up to $11,000 (plus adjustment for inflation). The current penalty is up to $16,000 for each violation. Disclosure of Information on Lead-Based Paint and/or Lead-Based Paint Hazards Lead Warning Statement Every purchaser of any interest in residential real property on which a residential dwelling was built prior to 1978 is notified that such property may present exposure to lead from lead-based paint that may place young children at risk of developing lead poisoning. Lead poisoning in young children may produce permanent neurological damage, including learning disabilities, reduced intelligence quotient, behavioral problems, and impaired memory. Lead poisoning also poses a particular risk to pregnant women. The Seller of any interest in residential real property is required to provide the buyer with any information on lead-based paint hazards from risk assessments or inspections in the Seller's possession and notify the buyer of any known lead-based paint hazards. A risk assessment or inspection for possible lead-based paint hazards is recommended prior to purchase.
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
Sue the buyer for specific performance Explanation "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. More info: What Is a Licensee Buyout Addendum? by Maxwell Wallace, Demand Media A licensee buyout addendum is a form used in certain real estate and property transactions in the state of Colorado. The LBA is used only in the purchase and sale of properties between licensed real estate professionals and their own clients. History and Purpose The Licensee Buy Out Addendum to Contract to Buy and Sell Real Estate is intended to prevent improprieties and conflicts of interest in licensee/client transactions, as well as to make sellers contractually aware of the potential differences in selling to a licensed real estate professional as opposed to conventional buyers. Situations Dictating Use Licensed real estate agents are required to use an LBA when they enter into contracts to purchase properties concurrently with the initial listing of that property, when it immediately hits the market. Licensees also are required to use the LBA form when they are purchasing a property to facilitate its owner's purchase of another property, as well as when they continue to market that property to other potential buyers. Deleted Provisions Under the provisions of the licensee buyout addendum, several conventional provisions of standard real estate listing contracts reached under Colorado state law are deleted. Deleted provisions include a property's appraisal condition, liquidated damages or pre-assessed damages to the property, provisions related to the seller's financial default status and the broker's acknowledgments and compensation disclosure forms. Profit and Loss Stipulations Colorado's LBA also stands as contractual acknowledgment by a property seller that the buyer is a licensed real estate professional and any future profit or loss on a resale of the property is solely that of the buyer. Similarly, the LBA protects the property seller by acknowledging that any fees related to closing, holding and reselling the property are all absorbed by the buyer and not the property seller as the original or prior landowner.
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
The seller pays no commission 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 Explanation 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. More info: What Is a Licensee Buyout Addendum? by Maxwell Wallace, Demand Media A Licensee Buyout Addendum is a form used in certain real estate and property transactions in the state of Colorado. The LBA is used only in the purchase and sale of properties between licensed real estate professionals and their own clients. History and Purpose The Licensee Buy Out Addendum to Contract to Buy and Sell Real Estate is intended to prevent improprieties and conflicts of interest in licensee/client transactions, as well as to make sellers contractually aware of the potential differences in selling to a licensed real estate professional as opposed to conventional buyers. Situations Dictating Use Licensed real estate agents are required to use an LBA when they enter into contracts to purchase properties concurrently with the initial listing of that property, when it immediately hits the market. Licensees also are required to use the LBA form when they are purchasing a property to facilitate its owner's purchase of another property, as well as when they continue to market that property to other potential buyers. Deleted Provisions Under the provisions of the Licensee Buyout Addendum, several conventional provisions of standard real estate listing contracts reached under Colorado state law are deleted. Deleted provisions include a property's appraisal condition, liquidated damages or pre-assessed damages to the property, provisions related to the seller's financial default status and the broker's acknowledgments and compensation disclosure forms. Profit and Loss Stipulations Colorado's LBA also stands as contractual acknowledgment by a property seller that the buyer is a licensed real estate professional and any future profit or loss on a resale of the property is solely that of the buyer. Similarly, the LBA protects the property seller by acknowledging that any fees related to closing, holding and reselling the property are all absorbed by the buyer and not the property seller as the original or prior landowner.
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
To change the loan application deadline in an accepted purchase contract Explanation 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.
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
His or her own listing Explanation The Licensee Buyout Addendum need only be used if the agent is purchasing their own listing.
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
May be prepared by the legal counsel of the employing broker Explanation Real Estate Commission Rule F-3. Addenda (a) If a broker originates or initiates the use of a preprinted or prepared addendum that modifies or adds to the terms of a Commission-approved contract form which does not result from the negotiations of the parties (editor note: generally the Contract to Buy and Sell Real Estate), such addendum must be prepared by: (1) an attorney representing the broker or brokerage firm; or (2) a principal party to the transaction; or (3) an attorney representing a principal party. (b) An addendum permitted by this Rule F- 3 (a), shall not be included within the body of, or in the "Additional Provisions" section of, a Commission-approved form. (c) A broker who is not a principal party to the contract may not insert personal provisions, personal disclaimers or exculpatory language in favor of the broker in an addendum. (d) If an addendum is prepared by a broker's attorney, the following disclosure must appear on the first page of the addendum in the same sized type as the size of type used in the addendum: "This addendum has not been approved by the Colorado Real Estate Commission. It was prepared by (insert licensed name of broker or brokerage firm's) legal counsel." (e) If an addendum to a listing, tenant or right to buy contract (editor note: these are contracts the brokerage firm IS a party to), is prepared by a broker or brokerage firm, the following disclosure must appear on the first page of the addendum in the same sized type as the size of type used in the addendum: "This addendum has not been approved by the Colorado Real Estate Commission. It was prepared by (insert licensed name of broker or brokerage firm).
Some brokerage companies have standardized addendums they require agents to attach to all purchase or sale contracts. These addendums add to or redefine the terms and conditions of the contract to which they are attached and: May be prepared by any licensee of the brokerage firm Are not legal May be prepared by the legal counsel of the employing broker
An accepted Contract to Buy and Sell Real Estate Explanation 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. More info: 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.
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
Intent to Pay off Loan Explanation Intent to pay off loan is not a Colorado Real Estate Commission approved form.
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
After the purchase contract has been accepted Explanation The Amend and Extend is used with contracts between the buyer and seller - the most important one being the Contract to Buy and Sell Real Estate (Purchase Contract). The Amend and Extend With Broker contract is used for contracts between the client and their broker - principally the listing contract or the buyer agency agreement. They are often confused. For either to be used you must have an executory contract, i.e., a contract that is signed but not completed - it is in the process of being executed. Once a contract is complete - neither of these Amend/Extend agreements can be used.
The Colorado-approved Agreement to Amend/Extend form should be signed: Before the listing expires After the purchase contract has expired After the purchase contract has been accepted After the offer has been made
Before the sales contract has been fully executed Explanation 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. More info: 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.
The Colorado-approved Amend/Extend Contract form should be signed: Before the listing expires After the sales contract expired Before the sales contract has been accepted Before the sales contract has been fully executed
1978 Explanation Homes built pre-1978 must use the Lead-Based Paint disclosure form.
The Real Estate Commission requires the use of a Lead-Based Paint Disclosure form on all dwellings permitted prior to: 1976 1977 1978 1979
To get mutual agreement of the parties to any change in a deadline Explanation It is used to modify the Contract to Buy & Sell Real Estate.
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 help brokers conform to the Conway-Bogue Realty vs. the Colorado Bar Association decision Explanation The Conway-Bogue court decision ruled that real estate agents are practicing law without a license but are permitted to do so as long as agents use commission forms and comply with commission Rule F. Through the adoption and promulgation of Commission Rule F, it became compulsory for all real estate brokers licensed by the State of Colorado to use Commission approved forms in most of their contracting. 12-61-803(4) C.R.S. grants the Colorado Real Estate Commission statutory authority to promulgate standard forms for use by licensees. One of the major purposes of the rule is to help to insure broker compliance with the Colorado Supreme Court Conway-Bogue decision. A second purpose is to help promote uniformity in contracting to the end that the public is better protected. The privileges granted should not be abused by the real estate broker.
The purpose of Commission Rule F is: To help brokers conform to the Conway-Bogue Realty vs. the Colorado Bar Association decision To conform to UCC regulations To conform to RESPA To standardize forms for attorneys who perform closings
Checks the Countered box, initials the original Contract and signs the Counterproposal Explanation 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. 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.
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
"The printed portions of this form, except differentiated additions, have been approved by the Colorado Real Estate Commission." Explanation At the top of all Colorado Real Estate Contracts it states that any changes or additions must be differentiated from the printed type.
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.
Seller should sign only the counter offer Explanation To counter: the seller initials the original offer by the box he/she checked indicating it is countered. The seller does not sign the original offer (that would constitute acceptance). The seller's agent then indicates the counter offer on a Counterproposal form. The seller signs the Counterpoposal form. The original offer and Counterproposal are returned to the buyer or buyer's agent. 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.
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 Explanation To counter: the seller initials the original offer by the box he/she checked indicating it is countered. The seller does not sign the original offer (that would constitute acceptance). The seller's agent then indicates the counter offer on a Counterproposal form. The sellers signs the Counterproposal form. The original offer and Counterproposal are returned to the buyer or buyer's agent.
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
Returned to the purchaser with the counter offer form Explanation 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."
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
Only certain paragraphs are allowed to be omitted as not applicable Explanation 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 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
A licensee offers to purchase a property as an inducement to the Seller to purchase another Explanation Rule F-11 specifies certain conditions for the use of the Licensee Buyout addendum. Rule F-11 only applies in one or more of the following instances: When a licensee enters into a contract to purchase a property: (1) concurrent with the listing of such property; (2) as an inducement or to facilitate the property owner's purchase of another property; or (3) continues to market that property on behalf of the owner under an existing listing contract . . . More info: What Is a Licensee Buyout Addendum? by Maxwell Wallace, Demand Media A licensee buyout addendum is a form used in certain real estate and property transactions in the state of Colorado. The LBA is used only in the purchase and sale of properties between licensed real estate professionals and their own clients. History and Purpose The Licensee Buy-Out Addendum to Contract to Buy and Sell Real Estate is intended to prevent improprieties and conflicts of interest in licensee/client transactions, as well as to make sellers contractually aware of the potential differences in selling to a licensed real estate professional as opposed to conventional buyers. Situations Dictating Use Licensed real estate agents are required to use an LBA when they enter into contracts to purchase properties concurrently with the initial listing of that property, when it immediately hits the market. Licensees also are required to use the LBA form when they are purchasing a property to facilitate its owner's purchase of another property, as well as when they continue to market that property to other potential buyers. Deleted Provisions Under the provisions of the licensee buyout addendum, several conventional provisions of standard real estate listing contracts reached under Colorado state law are deleted. Deleted provisions include a property's appraisal condition, liquidated damages or pre-assessed damages to the property, provisions related to the seller's financial default status and the broker's acknowledgments and compensation disclosure forms. Profit and Loss Stipulations Colorado's LBA also stands as contractual acknowledgment by a property seller that the buyer is a licensed real estate professional and any future profit or loss on a resale of the property is solely that of the buyer. Similarly, the LBA protects the property seller by acknowledging that any fees related to closing, holding and reselling the property are all absorbed by the buyer and not the property seller as the original or prior landowner.
Which of the following requires the use of the Licensee Buyout Addendum to the Contract to Buy and Sell Real Estate? A listing associate's offer to purchase a listing immediately after it expires A broker is not offering a guarantee to sell the property, as an inducement to list with his company An associate in the brokerage wishes to purchase another associate's listing A licensee offers to purchase a property as an inducement to the Seller to purchase another
There is no obligation for a licensee to prepare any legal documents Explanation Commission approved forms must be used by the broker.
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
