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. For the home buyer it can be tough to absorb all the information within the 20 minutes or so that the REALTOR takes to explain this contract to you. However, the Contract to Buy and Sell real estate is a great tool to assist buyers as well as sellers in their real estate transaction.
After giving it careful thought, you have made the decision to offer on a home. You also 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, it is up to the buyer to do his or her due diligence to ensure that the home and all facts surrounding the property is 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:
- 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.
- 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.
- Section 4 determines purchase price and terms ie. financial conditions.
- Everything after that until section 28 is referencing and explaining in detail dates and deadlines of Part 2.
What do "Dates and Deadlines" mean?
As already mentioned above, this section sets deadlines by which documents or information has to be provided by the seller to the buyer, how long the buyer has to review -possibly object- and then by which date a solution to the problem has to be found.
What does "Objection" mean?
Google defines objection as: "...say something to express one's disapproval of or disagreement with something..." (...with the request to remedy the condition)
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 then can 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, which may sometimes just be the better choice - other times issues can be resolved.
Kinds 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 are a few options 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 once a resolution is signed, the transaction will continue?
- 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?
Only a few years ago, when Colorado Springs was still in a strong buyers market, especially the Inspection Objection was a way for the buyer to eek 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, to become the new active contract if the seller manages to terminate the senior (your) contract.
Be realistic. Don't ask the seller in an objection for very minor items and be very clear on what you will do if the seller does not respond to your objection ie. will you walk away from the contract or will you withdraw your objection and live with what you at first disagreed with.
Though the Colorado Contract to Buy and Sell is a very buyer friendly contract, 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, gives the seller an opportunity to terminate the contract. ie. any changes in the dates and deadlines, name change in contract etc. It seems minor but 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 what objections or changes you submit, create a strategy and discuss consequences of said strategy.
Objections in regards of health and safety, for example, could be, if not remedied by seller a deal killer for you, since this could be a hazard to you or your family. If you have a seller that really wants to sell you his house he will repair those items as probably each buyer will request to have those "health and safety issues" remedied. If the seller is not willing to remedy items that you found NOT acceptable, know ahead of time what your next step will be.
Best is not to gamble by submitting an objection "to see what the seller will do" or "to get more out of the seller". 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 make a decision if the property is worth it to you....?!
Should a seller not have signed the resolutions, but absolutely intended to do so but for some reason couldn't, then the contract may still be continued as it's considered 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.
**This is not legal advice. If you need help with a contract, please consult your real estate attorney.