20 years ago, the Colorado Contract to Buy and Sell real estate consisted of 4 pages. It has now (as of 2016) morphed into 18 pages of deadlines, notices, and definitions. Realtors frequently go to continuing education classes to keep up with changes. It can be challenging to absorb all the information within the short amount of time that the REALTOR takes to explain this contract to you. The Contract to Buy and Sell real estate is a great tool to assist buyers and sellers in their real estate transaction.
After giving it careful thought, you have made the decision to make an offer on a home. You have a lenders’ pre-approval in hand and are now able to make a strong offer to the seller. After all parties have signed the contract, the buyer is responsible for their due diligence to ensure that the home and all facts surrounding the property are acceptable:
- Title information
- Any special assessments or taxes
- Condition of the home (ie. issues of Safety and Security)
- Value of the home, etc.
If an unsatisfactory condition or circumstance arises: the buyer may object and request the seller to remedy the condition, or terminate the contract if buyer and seller can’t come to an agreement.
Overview: 4 Major Parts of the Contract to Buy and Sell
Separate the Residential Contract to Buy and Sell into 4 parts for easier review:
1. Sections 1 and 2 provide a description of the property, land, and everything conveying with it or around it – or items that may be excluded.
2. Under section 3, find the second part consisting of dates and deadlines that will need to be observed, and will give either party the opportunity to terminate the contract if desired.
3. Section 4 determines purchase price and terms, i.e. financial conditions.
4. Everything after that until section 28 is referencing and explaining in detail dates and deadlines of Part 2.
What do “Dates and Deadlines” mean?
This section sets deadlines by which documents or information have to be provided by the seller to the buyer, how long the buyer has to review (and possibly object), and then by which date a solution to the problem has to be found.
What does “Objection” mean?
An objection is a powerful tool giving a buyer the opportunity to state an unsatisfactory condition of the property or anything pertaining to it. The buyer can then either terminate the contract or agree to a (hopefully) negotiated solution. This is a tool that should be used very carefully. Note that all objection deadlines were established to the [sole] benefit of the buyer, but they will open opportunities for the seller to terminate the contract.
If you indeed find any unsatisfactory conditions, you have a right to state them, request the seller to repair or remedy them, or to move on. Moving on may sometimes just be the better choice, but other times issues can be resolved.
Types of Objections
- Objections without a resolution following: Buyer may object AND terminate, at “the buyers subjective discretion.”
- Objections with a resolution following: In this scenario a few options are available that include the buyer AND the seller, and it is very important that the possible outcomes are discussed with your real estate agent. Do you want to:
- Object and terminate the contract?
- Object, negotiate a resolution with the seller, and continue the transaction once a resolution is signed?
- Object, and the seller does not propose a resolution, the contract will automatically terminate?
- Object, the seller does not propose a resolution, the buyer withdraws his objection and the transaction will continue?
When Colorado Springs was still in a strong buyers market just a few years ago, the Inspection Objection was a way for the buyer to eke out a few more concessions from the seller. In a sellers market, an inspection objection (or starting 2016 with the new contracts) ALL resolution deadlines may be used by the seller to let the contract automatically terminate.
This is particularly interesting to the seller when there is a much better back-up offer in place. The back-up could become the new active contract if the seller manages to terminate the senior (your) contract.
Be realistic. Don’t use an objection for very minor items. Be very clear on what you will do if the seller does not respond to your objection. Will you walk away from the contract? Will you withdraw your objection and live with what you at first disagreed with?
The Colorado Contract to Buy and Sell is a very buyer friendly contract, but the changes to the contract in 2016 will give the seller a few more rights and options. Bear in mind, that ANY changes to the contract that the seller has to agree to in an “Amend / Extend to the Contract” Form, give the seller an opportunity to terminate the contract. This can be any changes in the dates and deadlines, name change in contract, etc. If the seller has a much higher or otherwise better backup offer, the seller will try to get out of YOUR contract.
This means that you and your agent have to be very diligent and careful about what objections or changes you submit. Create a strategy and discuss consequences of that strategy.
For example, objections regarding health and safety could be a deal breaker for you if not remedied by the seller since this could be a hazard to you or your family. If you have highly motivated seller, they will likely repair those items. Each potential buyer will probably request to have those “health and safety issues” remedied. Plan ahead for your next step in case the seller is unwilling to remedy the items you found unacceptable.
It’s best not to gamble by submitting an objection just to to see what the seller is willing to pay for. Remember that this could give the seller an opportunity to terminate the contract and leave you without your dream home.
If a seller really wants to terminate your offer and take a back up offer, chances are you will have to take the home the way it is: no repairs, no additional concessions beyond the original contract, no changes. YOU have to to decide if the property is worth it to you.
If the seller absolutely intended to sign the resolution but for some reason couldn’t, then the contract may still be continued as it’s considered a meeting of the minds. However, it’s risky business to let a resolution deadline pass without a mutually signed resolution in hand or a objection withdrawal.
Questions? Email (email@example.com), call or text (719-321-0800).
**This is not legal advice. If you need help with a contract, please consult your real estate attorney.