Colorado is one of those states that leads the country in terms of its real estate practices and the Colorado Divison of Real Estate is usually on the ball by offering approved forms for all components of the real estate process, whether you’re buying or selling a home or condo. As real estate brokers, we’re required to use Real Estate Commission approved forms so we don’t cross the line and appear to practicing law by drafting up contracts. Real Estate consumers, including buyers and sellers, can find most of the forms used in a Colorado real estate transaction online.
New Colorado Real Estate Commission Contracts
We usually get new forms every year or so that we’re required to adopt in our practices as real estate agents and REALTORS. There is actually a committee in our state that puts together contracts to include, remove and alter various terms and language to remain consistent with changing Colorado and address issues in the changing real estate marketplace. For example, in the Colorado Contract to Buy and Sell Real Estate (CBS1-5-09), language was recently added to make sure all parties are aware that sellers are required to provide carbon monoxide detectors near bedrooms, to conform with a new law passed this past year.
Paragraph 11 in this same contract states sellers are required to disclose if a property has ever been used in the manufacture of methamphetamine, or meth, a nasty substance with highly toxic ingredients that can linger and are an environment hazard.
Real Estate Investors and the Colorado Foreclosure Protection Act (CFPA)
The Colorado Foreclosure Protection Act was passed by the Colorado Legislature to protect homeowners facing foreclosure from scams and unethical practices marketed at protecting them but in many cases causing more harm. To comply with this Act, the Colorado Real Estate Commission created Paragraph 30 in the most recent Contract to Buy and Sell Real Estate which has already caused a lot of problems since it doesn’t allow real estate agents, brokers, or even investor buyers to submit an offer for a home in default that will be held as an investment using the Commission approved Contract to Buy and Sell. The current language says any home in default falls under this Act without defining “default.” Technically, “default” is one day late on a mortgage payment, not 30 days, 90 or when a Notice of Election and Demand (NED) is filed.
The current contract says any purchase offer written on a property in default not being used as a primary residence by the buyer cannot be written on the contract.
So, what’s an investor looking to purchase a home from a seller looking to avoid foreclosure and frequently in a short sale situation to do?
According to the Colorado Real Estate Commission, the answer is consultant an attorney and have them write the contract, adding more costs to the process for not adding a whole lot of value. The Commission knows this is a glaring gap and has reconvened the Forms Committee to correct this which may take a couple months.
How Mile High Urban Living Can Help the Investor Buyer
The Colorado Real Estate Commission is allowing attorneys to create templates that comply with the Foreclosure Protection Act for their clients. As an affiliate of the Innovative Real Estate Group, we’re fortunate to be represented by a top notch real estate law firm Frascona, Joiner, Goodman, and Greenstein. They have already professionally prepared a contract that complies with the Act that our brokers can use, giving investors working with our team an advantage since other investors using the “approved” contracts are technically void. And, you don’t have to pay extra for the attorney’s time!
Contact us to find out more about how this may affect you and how we can put together your next investment deal to compl with the law.
{ 4 comments… read them below or add one }
If my property is going to foreclosure, or if I’m able to do a deen in lieu of foreclosure, what happens to the listing realtor’s commisions?
Thanks
Tom, great question. If your home is currently on the market for sale and the foreclosure completes or you do a deed in lieu, your real estate agent isn’t compensated.
If you’re hope is currently in foreclosure, you have a pretty short timeline in which you can sell it even for less than you owe, known as a short sale. It’s extremely vital your real estate agent knows how to handle a short sale since it’s much better for your financial future to have a negotiated contract for your lender to accept less than to lose your home.
Check out this blog post for more information : http://blog.milehighurbanliving.com/sellers-set-yourself-up-for-short-sale-success.html.
If I am an investor and am purchasing a property via short sale, how long must I hold this property before I can resell so I am not violating their sensitivity to “flipping” the property shortly thereafter? My plan was to do some fix ups, find a lease-option buyer, and close sometime in the spring. Is that enough time or do I need a full 12 months? Thanks!
JB
JB, the timelines are up to you and you avoid the grey area by not having a back to back closing, meaning you resell the property immediately, often the same day, that you purchase it.
As long as your lender knows it’s an investment property it shouldn’t be an issue and the tax implications are the bigger thing to consider.
If you hold for 12 months and fix up the property, you can resell and have the profit taxed under the rate of capital gains rate. Holding less than 12 months may have it taxed as personal income.
This is general information and will vary depending on how you finance it and if you’re paying cash, out of a retirement account, etc. Feel free to drop us a line if we can help you with specific scenarios.
Cheers!