Colorado Real Estate Contract: Different Types and Key Terms to Include

What is a Colorado Real Estate Contract?

A Colorado real estate contract, sometimes called a purchase and sale agreement, is a contract that is negotiated between a buyer and a seller to facilitate the sale of real property. These contracts are most commonly used when purchasing an existing residential property.

Colorado has a specific agreement that is used to buy and sell residential property called the Colorado Real Estate Commission’s Contract to Buy and Sell Real Estate. This form makes the buying and selling process uniform in Colorado and most real estate brokers will utilize this specific contract when guiding clients through the buying and selling process.

Common Colorado Real Estate Contracts

In addition to the Colorado Real Estate Commission’s approved contract used to purchase real estate, there are a couple other types of contracts that may be used when dealing with real estate. These contracts include:

• Real estate assignment contract. Used when purchasing “distressed properties” as a wholesale investment strategy. This contract allows the buyer to assign the contract to a second buyer.
• Lease agreement. Used when a landlord wants to rent their property to a tenant for use in exchange for a monthly rent.
• Commercial property purchase agreement. Used when buying or selling a commercial property that is zoned for business purposes like an office building or storefront.

4 Essential Elements of a Colorado Real Estate Contract

A Colorado real estate contract must include specific elements to make the document a valid and legally binding agreement. Using the Colorado Real Estate Commission purchase agreement takes the guess work out of contract drafting, but if a real estate broker chooses to draft their own real estate contract, it should contain these 4 essential elements:

1. Identification and contact information of the buyer and the seller
2. Description of the property
3. Agreed upon purchase price
4. Closing date and method of transferring the title

What Must Be Included in a Colorado Real Estate Contract?

A Colorado real estate contract needs to include certain information to ensure that both party’s interests are protected during the transaction. Every real estate contract should include the following essential information which can be found on the Colorado Real Estate Commission’s approved form:

• Deadlines. During the home buying process, there will be several deadlines that both parties must be aware of. The contract should lay out what tasks need to be completed, like a home inspection, and the deadline to complete these tasks.
• Earnest money deposit. An earnest money deposit is paid by the buyer once the seller accepts their offer. This deposit shows the seller that the buyer is serious about purchasing the house.
• Financing. The buyer will usually need to secure financing to purchase the house. The contract should include all applicable information relating to financing and a contingency that allows the buyer to back out of the contract if they cannot secure financing.
• Inspections. Colorado law requires sellers to fill out a Colorado Real Estate Commission approved property disclosure form. This form allows the seller to disclose the condition of the property and any issues that could affect the value of the property.

Can a Buyer Terminate a Real Estate Contract in Colorado?

Yes. Under certain circumstances, a buyer can terminate a real estate contract in Colorado. The Colorado Real Estate Commission contract provides buyers with eleven opportunities to terminate the contract without losing their earnest money deposit.

These opportunities include contingencies that protect the seller if they cannot get approved for financing, if there is an issue with the property title, if the house doesn’t pass inspection, or if the property doesn’t appraise.