Preparing the Offer
Your technical expertise must be thorough when drafting and preparing an offer for the buyer.
Provide the buyer with a detailed right price analysis for the neighborhood where he/she has selected the home, so that he/she can make an informed decision on pricing.
You will also need to be knowledgeable of market trends for the area. Are new developments anticipated that may flood the inventory? Are there plans for road widening projects, or are other city, county or association assessments imminent? Do not rely on the information provided by the listing agent in ascertaining whether you have given full disclosure of material facts to your buyer.
Once the price and terms have been determined, review all other aspects of the contract with the buyer. i.e. dates, names with initials, without initials, etc.
Before you write the offer, go to Dropbox and download the form named Contract Preparation Checklist. Make sure you have all the answers before starting to write the contract.
All offers, counter offers and any other forms used shall be completed using the approved CREC forms.
Log into CTM econtracts
Go to Clients Database and select New Client
Fill in all of the pertinent data. Do not start your contract until you have all of the information. It is extremely difficult to go back and re-do everything!
Writing the Offer
You should have a copy of the PDC (Public Records either from Realist Tax or the county assessor).
You should have a copy of the Contract Preparation Checklist.
In econtracts, select Create New Contract
Start with the Exclusive Right-to-Buy Listing Contract. This is the Buyer Agency contract. This allows you to represent the Buyer during the transaction.
Para. 3.4 – Property
Make the description as vague as possible. I use things like “Single Family Home in Northern Section of Metro Denver” or “condo complex with no stairs to unit”.
Para. 3.6 – Term
This can be as short as one day, or as long as 6 months. In the market we are in in 2015, I would make it at least 3 months.
Para. 7.1 Listing Brokerage Firm or Seller May Pay.
Buyer IS Obligated to Pay.
Check this box. Please read the entire paragraph. This will take in a For Sale by Owner, or something else that may be strange.
Para. 7.2.1 Success Fee
This is the amount offered by the seller as published in the MLS.
Para. 11 Brokerage Services: Showing Premises
Add None to the empty box.
Para. 11.2 Brokerage Firm has access to to the following multiple listing services…
Denver, Colorado Springs and Fort Collins Multi-Listing Services
Para. 18 Additional Provisions
Usually this is “None”. If you are showing only one property to a buyer, add the address of the property.
Next, fill out the Definition of Agency form. HAVE THE CLIENT SIGN THIS FIRST. It’s easy, and it really isn’t a contract. It’s a mind game.
Now you are ready to fill out the Contract to Buy and Sell Real Estate (Residential)
If you are working with an unmarried couple, explain the difference between Joint Tenants and Tenants in Common. If it is a single person, in “other” put Severalty.
Para. 2.5.1 Other Fixtures
This is where you add all of the appliances, spell it out – white Kenmore dishwasher, black GE refrigerator, etc.
2.5.2 Other Personal Property
Para. 2.5.3. Parking and Storage Facilities.
If you are doing a contract for a condo you need to figure out the parking spaces. If it is included in the legal description then it is Ownership, if not, Use Only.
If there is a storage unit on the property, make sure to add it in. If there is a number add the number – Storage Unit #5
Para. 2.6 Exclusions
Add anything that the seller has excluded or that the buyer wants to have removed.
Para. 2.7 Water Rights, Well Rights, Water and Sewer Taps
If you have a property with water rights, please call me!
Para. 3 Dates and Deadlines – Based on a 30 days close – There is a printable table in DropBox for you to use as well.
Item #1 – Used if you have an out-of-town buyer and you won’t have the earnest money for several days.
Item #2 Record Title Deadline – about 7 to 10 days after the contract acceptance date.
Item #3 Record Title Objection Deadline – 3 days after Item #2
Item #4 Off-Record Title Deadline – Same as Item #2
Item #5 Off-Record Title Objection Deadline – 3 days after Item #2
Item #6 Title Resolution Deadline – 5 days after Item #2
Item #7 First Right of Refusal Deadline – Talk to me if you have this issue
Item #8 Association Documents Deadline – about 14 days after acceptance date
Item #9 Association Documents Objection Deadline – 16 days after Item #8
Item #10 Seller’s Property Disclosure – 2 days after acceptance deadline
Item #11 Loan Application Deadline – this should have already been done before you write the offer. Put “Done” in the date line.
Item #12 Loan Objection Deadline – 25 days after acceptance deadline
Items #13, 14, 15, 16, 17 and 18 normally do not apply. Call me if for some reason they do.
Item #19 Appraisal Deadline – 22 days after acceptance deadline
Item #20 Appraisal Objection Deadline 24 days after acceptance deadline
Item #21 Current Survey Deadline – 15 days after acceptance deadline
Item #22 Current Survey Deadline – 2 days after Item #21
Item #23 Current Survey Resolution Deadline – 3 days after Item #21
Item #24 Inspection Objection Deadline – 10 days after acceptance date
Item #25 Inspection Objection Deadline -2 days after Item #24
Item #26 Property Insurance Deadline – 15 days after acceptance deadline
Items #27, 27, 29 Due Diligence dates – These apply if your client is buying a property that will have a renter that is staying after closing.
Items #30 Conditional Sale Deadline – This is the same date as closing. You use this if your client has to close on a home before closing on the new one.
Item #31 Closing Date – This depends on your clients and the negotiations. Generally it is 30-45 days after writing the contract.
Item #32 Possession Date and Item #33 Possession Time. Ideally it is at Delivery of Deed. At the time of closing. IF YOUR BUYER IS NOT TAKING POSSESSION AT THE DELIVERY OF DEED DATE, THEN MAKE SURE YOU FILL OUT A POST OCCUPANCY AGREEMENT
Items #35 and 35 – Acceptance Deadline – Make is as quickly as possible. If at all possible, less than 24 hours, and up until 10 pm.
Para. 4 Purchase Price and Terms
Item #3 – New Loan. You will need to know from the lender what type of loan your clients are obtaining.
Item #9 Cash at Closing. This only pertains to the down payment.
Para. 4.2 Seller Concessions – This is where you put in anything you are asking the seller to contribute toward closing costs and pre-paid items.
Para. 4.3. Earnest Money – There is no designated amount of earnest money that is required with an offer. It is desirable, however, to obtain a minimum of approximately $500.00 or 1%. This is good faith money; consequently, deposits should be larger on loan assumptions, owner financing and all cash offers. Generally, the MLS shows what the earnest money is.
In a tight market, add another $1000 or any amount that will make your offer stand out.
Para. 6.3. Cost of Appraisal – Generally, the buyer will pay for the appraisal. Some lenders will actually collect for the appraisal cost at the time the clients decide to work with the lender.
Para. 7.1. Owner’s Association Documents.
Here is a quick summary of the documentation you need from the HOA
All condo declarations, bylaws, operating agreements, rules and regulations, party wall agreements.
Minutes of the most recent Annual home owners’ meeting.
Minutes of HOA meetings for the past 6 months.
Annual and most recent balance sheet.
Annual and most recent income and expenditures statement.
Reserve Study, if applicable
There may be a charge to the seller to procure the documents. Sometimes there is an HOA website where all of these documents can be found and downloaded. It is the responsibility of the Seller to get these to the buyer.
Para 8. Title Insurance, Record Title and Off-Record Title
Your buyer has the opportunity to use the title company of his/her choice.
If the seller is using one of the “big”title companies: Land Title, Chicago Title, Stewart, Fidelity National Title, First American Title, I would go ahead and let the seller use one of these and therefore, the seller pays for the title insurance.
If the title company is one of the smaller ones, then explain to the buyer that it would be wise to pay the extra title insurance and choose to work with a larger, reputable company. If there are any title issues on down the road, many of the smaller companies may be out of business and your client will be out of luck.
8.1.3 Owner’s Extended Coverage – Always opt for this. The Title Commitment WILL … and this should be paid by the seller.
Para 9. Current Survey Review. For metro neighborhoods, choose 9.1.1 Improvement Location Certificate.
Ranch properties, properties with 5+ acres, you should ask the seller to provide a Survey Plat.
10.6 Due Diligence. Unless there is a rental contract that is being transferred to your buyer, this section is N/A.
Also, if you know that there is a street going in around the property, a commercial property is being built that would obstruct a mountain view, etc. This is the place to ask for documentation for your buyer.
Para 12.3 Closing. put Listing Agent.
13. Transfer of Title.
There are a number of types of deeds. The most common is a General Warranty deed. There is a Sheriff’s Deed, Personal Representative Deed and others. If you have a question about what type, as the listing agent.
15. Closing Costs, Closing Fee, Association Fees and Taxes.
15.2 Closing Services Fee. THIS IS THE FEE THE TITLE COMPANY CHARGES TO DO THE PAPERWORK. IT IS TYPICALLY SPLIT 1/2 BUYER AND 1/2 SELLER.
15.3 Status Letter and Record Change Fees.
Status letter is paid by seller, transfer fee by buyer.
15.4 There is no Transfer Tax.
15.5 Private Transfer Fee. If you are buying a property in Stapleton, Lowry and a few others around the area, there may be a Private Transfer Fee. If you are in doubt, call the listing agent.
15.6 Water Transfer Fees. Please call me.
16.1 Taxes. Always – Most Recent Mill Levy and Most Recent Assessed Valuation.
16.3 Association Assessments. Special assessments are paid by the seller.
… and that there No Exceptions …
16.4 Other Prorations. Water … continuing loan, and HOA dues if applicable.
17. Possession. No Leases or if there are note the leases, length of time remaining, etc.
19. Causes of Loss … and Walk-Through
Your buyer has the right to do a final walk-through before closing. Try and go a day or two before so if you find something wrong it can be corrected before closing.
30. Additional Provisions. Check in DropBox for a list of clauses to put in here.
Anything specific with regard to the contract needs to go here.
31. Attachments. Items like Power of Attorney, Death Certificate, etc. goes in here.
31.2. Disclosure forms include: Lead-based Paint Disclosure if house was built before 1978. THIS MUST BE SIGNED AT THE TIME THE CONTRACT IS ACCEPTED.
Square Footage Disclosure, Listing Company Closing Instructions, Source of Water Addendum and any others that may be pertinent.
33. Broker’s Acknowledgements and Compensation Disclosure.
THIS IS WHERE YOU GET PAID SO PLEASE FILL IT IN!
Brokerage Firm’s compensation … mark Other and type in Seller and/or Listing Brokerage Firm.
34. THIS IS FOR THE LISTING BROKER. DO NOT FILL ANY OF THIS OUT.
- Square Footage
Square footage can be the source of litigation. It should be filled out by the listing broker and then given to the selling agent or the buyer.
However, if that did not occur, it could be filled out by the selling agent, also. One solution utilized by several firms is to employ the services of an appraiser who does a “limited appraisal” which only indicates the square footage of the property. These are usually inexpensive and definitely a seller expense. Think of using them when the property is hard to measure, has large open second floor areas allowing you to see the lower floor, or interior spaces under eaves, which may be susceptible to differing interpretations of usable square footage.
- Stigmatized Property
Colorado law prohibits a real estate agent from giving information to the buyer that may cause the property to become stigmatized.
Most agents working with a buyer have more of an affinity with the buyer than the seller. So they tend to tell the buyer information about any stigma that affects the property. DO NOT TELL THE BUYER ANYTHING IF IT DOES NOT PERTAIN TO MATERIAL DEFECTS.
- Colorado’s Law
(a) Facts or suspicions regarding circumstances occurring on a parcel of property which could psychologically impact or stigmatize such property are not material facts subject to a disclosure requirement in a real estate transaction. Such facts or suspicions include, but are not limited to, the following:
(1)That an occupant of real property is, or was at any time suspected to be, infected or has been infected with Human Immunodeficiency Virus (HIV) or diagnosed with Acquired Immune Deficiency Syndrome (AIDS), or any other disease which has been determined by medical evidence to be highly unlikely to be transmitted through the occupancy of a dwelling place; or
(2)That the property was the site of a homicide or other felony or of a suicide.
(b) No cause of action shall arise against a real estate broker or salesperson for failing to disclose such circumstance occurring on the property which might psychologically impact or stigmatize such property.
- Writing the Offer
- Print out the PDC from the MLS
- Legal Description
- Seller’s name
- Collect all buyer data needed Contract Preparation Checklist
- Buyer’s legal name
- Address, City, State, Zip
- Phone number and fax number
- Email address
- Prepare Buyer Agency Agreement if not already done.
- Prepare Definitions sheet if not already done.
- Fill out necessary agent items on all disclosures, and buyer data.
- Review or update the CMA for the property looking for any changes.
- Collect all house data needed
- Possession issues
- Inclusions – use specifics
- Exclusions (will they be hauled off by seller)
Condo Parking Spaces
- Print off contract and meet with buyer or email to buyer and review on the phone. You will need to fax or email the Buyer Agency Contract, the Definitions form, and all the disclosures.
YOU NEED ORIGINAL SIGNATURES ON THE PURCHASE CONTRACT, BUYER AGENCY AGREEMENT, AND DEFINITIONS PAGE.
- You will need two copies of the Buyer Agency Agreement, one for Buyer’s Best Choice and one for the buyer.
- You will need two copies of the Definitions, one for Buyer’s Best Choice and one for the buyer. 3. You will need four copies of the Purchase Contract, one for Buyer’s Best Choice, one for the listing agent, one for the seller and one for the buyer.
- Disclosures, you will need three copies, one for Buyer’s Best Choice, one for the listing agent and one for the buyer.
- Attach the pre-qualification letter.
- Attach cover letter regarding the buyer and the selling the offer.
- Make a copy of the earnest money check for the Buyer’s Best Choice file.
- Deliver contract, disclosures, earnest money check, lender letter and cover letter with your business card to the listing agent or the listing agent’s office. Get a receipt from the listing company for the earnest money.