Real Estate Lawyer and Divorce Lawyer Blog(Vol I.7)
by Craig Franklin Chambers, Esq. The Littleton Lawyer.
I have been a Littleton divorce and family law attorney and a real estate attorney in Littleton, Denver, Centennial, Highlands Ranch, and the surrounding areas for sixteen years and a Colorado real estate broker for over thirty years. In my law practice, I often conduct legal reviews of residential real estate contracts for parties, usually for the Buyer, in a real estate transaction.
The question often arises as to whether you really need an attorney in a Colorado residential real estate transaction.
The real estate brokers are limited to using the standard Colorado Real Estate Commission Contract for the purchase of residential real estate. That contract is designed to protect the buyer more than the seller, and there are numerous ways for a buyer to get out of the standard contract.
The Buyer's contingencies are expressly set forth as objection deadlines in the contract. If the Buyer requests to terminate the transaction before, for example, the inspection deadline, the appraisal deadline, the insurance deadline, or the loan conditions deadline, the Buyer can terminate the deal and get his earnest money refunded.
While the Buyer can easily terminate the contract if timely requested, the Seller cannot as a general rule get out of the contract. Builders who are not using licensed brokers in the transaction are not required to use the approved forms. Builders often use their own purchase contracts that, unlike the standard forms, are more favorable to the Seller than the Buyer.
The purchase of a new home and new construction raises issues not found in a typical resale real estate transaction. These issues include the risks of purchasing a home that has not yet been constructed including soils reports, structural and craftsmanship warranties, forfeiture clauses for the customization of upgrades for the home, and a different choice of alternative resolution including possibly a binding arbitration clause.
The real estate contract and the accompanying addendums are all legal forms. The real estate broker, in filling out the forms, is practicing law, however legally, without a law license. The standard contract states the form has "important legal consequences" and that the "party should consult legal and tax or other counsel before signing."
On the standard Colorado Real Estate Commission form, the residential contract advises the parties to seek legal counsel. Practically speaking, in light of that written advisement, if you proceed with the transaction without legal counsel it is hard to argue in court that you did not have the opportunity to seek professional aid or legal representation in understanding and negotiating the contract, or that you were taken advantage of. It is difficult to argue---after the fact---that you did not agree to the terms of the agreement you were signing..
Despite this notice, most people proceed with a residential real estate transaction without an attorney. They trust the title company to close the transaction in accordance to the terms of the contract. With all the costs for a down payment, closing costs and pre-paids, inspections and appraisal involved in purchasing a home, the desire to save the cost of an attorney review is understandable.
A real estate transaction is an important transaction for a person both personally and financially. A contract is a meeting of the minds. Should a dispute ever end up in litigation, the court will look at the language contained in the four corners of the page in interpreting what the parties intended when they signed the contract. All the terms of the transaction, no matter how small, need to be in writing. The terms need to be clear and easily understandable.
Different buyers have different levels of sophistication and experience in business and real estate transactions. If the transaction has unusual terms or requirements, additional provisions or forms---if no brokers (FSBO) or only one broker is involved in the transaction---if there are trust issues between you and your broker or the opposing side---or if the Seller is a builder who is not using the standard Colorado Real Estate Commission approved forms---I strongly recommend that you consult with an attorney prior to signing a real estate contract.
An attorney review does not cost much, relative to the size of the transaction. An attorney who specializes in Colorado residential real estate transactions should be familiar with the relevant issues, and the legal fees for an attorney review of a residential real estate contract should not run more than a few hours.
Should there be a dispute, the costs of real estate litigation can be staggering. The main consideration as to whether to hire an attorney is that you understand and willingly accept all of the terms of the transaction as well as the process and risks of a real estate transaction.