Colorado Real Estate – Contracts

vicarious liability

a principal’s liability for an agent’s acts performed within the scope of the agency; specifically excluded by Colorado statute from a principal’s liability unless the act or omission was approved, directed or ratified. (The employing broker is responsible to licensees actions)

Sam is an associate broker who wishes to purchase investment property. What must Sam do when the property is not listed with any broker?

Sam must disclose that he has a real estate license and he should tell his employing broker since the broker needs to know what is going on as he has potential responsibility in all of Sam’s real estate transactions.

What is typically not negotiable in the Contract to Buy and Sell Real Estate

mediation fee

Employing Broker "reasonable supervision" includes all of the following EXCEPT

attending first meeting with client (they do review contracts, review transaction files and maintain an office policy manual)

When a license law complaint is made to the Commission against a licensee, the licensee must:

Submit a written response to the Commission if requested

If an owner refuses to pay a broker an earned commission, the broker may properly seek relief by

An employing broker may sue a seller or buyer for commission pursuant to an exclusive right contract. Brokers working in commercial real estate sales or leasing may record their listing or sales contract with the real estate commission to assure them of receiving their commission.

A Buyers right to a "specific performance" remedy in the event of a Seller default in the Contract to Buy and Sell Real Estate:

Is the default remedy and as such the box need not be checked on the contract. Seller did not put up earnest money and thus cannot offer liquidated damages.

Writ of Attachment

An encumbrance issued by a court on a property of a defendant in a pending lawsuit for money damages. A writ of attachment is a court order to "attach" or seize an asset. It is issued by a court to a law enforcement officer or sheriff

Lis Pendens

a pending legal action, or a formal notice of this.

Publishing a foreclosure notice of sale in a newspaper is the duty of the:

Public Trustee

If an offer is given that fulfills all the terms of a contact and the seller rejects that offer – what happens?

The listing broker is entitled to a commission

According to the Contract to Buy and Sell, who pays for the appraisal?

Negotiated between buyer and seller

Which statement is false about unlicensed assistants?

An unlicensed assistant may be paid a commission by a licensee, based on the success of the transaction

A seller approached you saying they are unhappy with the broker currently listing their property and wants you to take it over, you

Prepare a listing agreement for after the current agreement expires

Judy Moore, is a licensee in the employ of ABC Real Estate, she may advertise her listing as:

Home for Sale. Suburban location. Contact Judy, ABC Real Estate 303-555-5555

Real estate sales contracts are "express" in that:

the parties to the contract declare terms, conditions and their intent in writing

Which of the following can terminate an agency relationship?

An agency relationship may be terminated by mutual agreement; revocation by principal; renunciation by agent; expiration of its term; extinction of its subject matter; death or incapacity of either principal or agent.

In addition to Federal law the Colorado Fair Housing laws added as a protected class:

Both sexual orientation and marital status

From whom may a Colorado real estate associate broker lawfully collect compensation?

his or her employing broker only

In a transaction that is subject to a licensee buyout agreement, if the buyer defaults, the seller may:

always sue the buyer for specific performance (liquidated damages is omitted from the contract)

How many days notice does a landlord have to give to evict a tenancy-at-will?

3 days

The maximum time allowed for the sale of an agricultural property, through the Public Trustee’s office after filing of the notice of election and demand (NED) to foreclose is:

For agriculutural properties the public trustee schedules the sale 215-230 days days (110-125 for residential) after the initial foreclosure action was recorded. The notice of sale is published in a local newspaper for 5 weeks. The public trustee also mails a copy of the notice to the borrower.

Regarding the broker/seller relationship under the terms of an Exclusive Right-to-Sell listing contract, which of the following statements are true?

The broker can take the listing without being an agent of the seller. A broker may list a property as either a Seller’s Agent or Transaction Broker. Only a Seller’s Agent is considered to be an "agency relationship." Transaction Broker is considered to be a "working relationship."

An agent sells a mobile home. Its purpose will be a residence, with the transfer of real property. What kind of license is needed?

Real estate license. The sale of real property requires a real estate license.

Chuck is a licensee who has listed the Carson’s’ home as a seller’s agent and it is now under contract. The Carson’s ask Chuck to also work with them to find and purchase a new home. What will be Chuck’s role in the purchase transaction?

he may be either an agent or transaction-broker depending on the mutual agreement

A tenant’s, written, estate for years lease will expire on May 1. In order to obtain possession on May 1, the landlord must give the tenant:

An estate for years lease requires no notice for termination.

If a landlord fails to refund the security deposit within one month (up to 60 days if specified in the lease) of the tenant surrendering the property, the landlord:

is liable for treble the amount wrongfully withheld

When a broker presents the Definitions of Working Relationships form to a purchaser:

this is not considered complete disclosure of agency. The definitions form is an explanation of types of agency – not a disclosure.

A broker acting as a transaction broker for a buyer, with no written agreement needs:

to provide the buyer with a copy of the "Brokerage Disclosure to Buyer" with the broker’s signature showing the date it was given to the Buyer. Even though the broker has no written agreement – the broker is still required to make a written disclosure as to their relationship. Absent a written agreement – the default relationship is transaction broker.

How many days after notice of discrimination does someone have to file a complaint under Colorado Fair Housing Laws with the Colorado Civil Rights Commission?

1 year

A rental agreement for less than how many months does not need to be in writing to be enforceable?

12 months

By executing a listing agreement with a seller, a licensed broker has:

agreed to use diligence in procuring a buyer. Procuring cause only becomes applicable when the property is sold. A trust account needs to be in existence only upon receipt of earnest money.

When you, as a licensee, are selling your own property:

you must inform all prospective purchasers that you are the owner as well as a licensee

Which would need to be registered with the CREC (Colorado Real Estate Commission) for a subdivision?

A 60 unit co-op building Explanation The Subdivision Developer’s Act affects the types of subdivisions that must be registered with the Commission. The following types of subdivisions within the State of Colorado, and subdivisions located outside the state if being offered for sale in Colorado, must be registered before offering, negotiating, or agreeing to sell, lease, or transfer any portion of the subdivision: * 1. Any division of real property into 20 or more interests for residential use; * 2. Subdivisions consisting of 20 or more time-share interests (a time share interest includes a fee simple interest, a leasehold, a contract to use, a membership agreement, or an interest in common); * 3. Subdivisions consisting of 20 or more residential units created by converting an existing structure (e.g., condominium conversions); and * 4. Subdivisions created by cooperative housing corporations with 20 or more shareholders with proprietary leases, whether the project is completed or not.

The approved Contract to Buy and Sell, "Property" includes:

The real property plus fixtures, improvements, and appurtenances

According to CP-22 Handling of Confidential Information, the sharing of confidential information is prohibited according to the rules set forth by ?

Designated Brokerage

Which of the following is a less-than-freehold estate?

Leasehold estate —- Under a less-than-freehold estate the holder does not have a title to the property. A less-than-freehold estate is a leasehold estate. A leasehold merely gives possession and use of the property, not title.

1) Whats the most you should pay for the property? Income: 6 units at $850 a mo., 9 units at $975 a mo., Vacancy Rate @ 5.5%, Cap Rate @ 9.5% Expenses – Mthly: $300 Res., $725 Depreciation, $450 Janitorial, $650 Mgmt., $1,250 Mortgage Pymt. – Qrtly: $425 Landscaping, $300 Advrt., (annual) $8325 Taxes.
$129,317.50
$521,456.91
$1,361,236.80
$2,129,343.75

$1,361,236.80

How many years do you have to keep transaction records?

4 years

Required Records for Trust Account

1. journal (check register – checks & deposits in chronological order) 2. Individual beneficiary ledger (separates one deals transactions for others) 3. Monthly reconciliation sheet (monthly reconciliation) 4. Property Transaction Files – listing contract – lead paint disclosure – contract to purchase property – earnest money (Note – you don’t have to keep public documents like deeds in your file for 4 years – these docs are accessible elsewhere and filed with the county. ) ex. deeds, title commitments, loan apps, lender disclosures…

What accounts can escrow money be stored?

1. buying agent escrow account 2. selling agent escrow account 3. title company 4. Any account acceptable by both buyer & seller 5. An account identified in a sales contract

How long do you have to deposit – security deposit into your escrow account?

Listing broker has 3 Business Day after notice of contract acceptance. Property managers have 5 days to deposit. (lease) Promissory note – written in contract to tell buyer when earnest money will be delivered (some people need to transfer funds but want to contract now)

What happens when you leave one broker to go to another?

Employing Broker is required to keep those records. It is wise to keep a copy for yourself. If a company is sold. the transaction files don’t transfer to the new company.

A broker managing how many properties must maintain a property management trust account?

7

A brokerage firm holding 4 earnest money deposits, and 15 security deposits for managed single-family residences must have a minimum of how many trust accounts?

3 Rule E-1 (h) A broker who manages less than 7 single-family residences may deposit rental receipts and security deposits and disburse money collected for such purposes in the "sales escrow" account" Elsewise, you need one escrow account for earnest money, one for rental receipts and one for rental deposits.

What are considered good funds?

cashiers check, teller check, wire transfer

Commission Rule F – Commission Approved Forms

1. Promissory Note – there is no form for this. Write in the contract that the promissory note will be replaced with a check within x days. (bring promissory notes available in case your buyer does not have a checkbook with them) 2. New home builders – no need to use forms 3. attorneys drawing up their own docs – no need to use forms 4. licensees – yes must use approved forms.

Square Footage Disclosure

As a licensee you must have a point of reference to where you got the sq footage and as long as it is a reliable source, county records, owner, etc you are covered. It is the buyers responsibility to verify it before they buy.

when are closing instructions completed? (defines the title company to close at)

Initiated when the listing is taken. (executed by closing agent at closing)

Lead Based Paint Disclosure

2 forms – 1. sellers requirements disclosure (prior jan 1, 1978) 2. pamphlet given to buyers.

How to Calculate Property Tax

1. Market Value – most logical price the property will sell for. (review county records) 2. Assessed Rate – set by county – different than market value. 3. Assessed Value – market value X assessed rate. 4. Mill Rate – determined by county. A mil = .001 = 1 mil Assessed value = $100,000 Mill Rate = 16.3 Mills = .0163 $100,000 X .0163 = $1630 = Mil Tax Rate

What is the assessed value & the property tax?
Market Value = $325000
Assessment Rate = 40%
Mill Rate = 16.8 mills
MV X AR = $130,000 (Assesed Value)

AV X MR (mil rate)
MATH

MV X AR = AV $325,000 x .40 = $130000 Assessed Value = $130000 Mill Rate 16.8 = .0168 mills AV X MR = Property Tax $130000 X .0168 mills = $2184 Property Tax

Is there any difference between a managing broker and a property manager for Escrow Accounts

No

What is the maximum number of property units a management company can manage before being require to use of separate accounts for each association and reserve accounts.

30

Define Conduit Broker

Broker that collects rents and passes money to owner.

Does a conduit broker need to keep escrow accounts?

No

Property Management – required records

1. rental ledger 2. Records organized by tenant and not unit. 3. Short-term management = guest folio

Same Owner Properties

All money can go into one escrow account. Money can move from one account to another as long as they are same type accounts.

Owners Property File – what has to be in it

1. Management agreement & addendums 2. Leases, occupancy records, guest agreements 3. Legal notices effecting tenants 4. Vendor contracts & repair authorizations 5. Schedules or reports commissions earned 6. Proof of timely collection & deposit of escrow funds (deposit of escrow within 5 days) 7. Management reports

Management reports must include…

1. account totals for classes of income & expenditures – Balance sheet – Income statement – owner’s list of accounts

If management contract is ended you need to…

make a copy of all records to do CYA. Must keep these records for 4 years. Financial statements, audits, sample leases, proof of account activity,

How often is reporting required to the property owner?

Within 30 days of months end (every 30 days)

The Accounting Rule (E1) says

Absent an agreement commissions, fees and other charges earned by the broker can only be collected from moneys owed to date. If a tenant pays 2 months in advance you can’t get paid on that future money.

What are the property management disclosures?

1. Lead Based Paint Disclosure 2. Broker relationship disclosure 3. property management compensation 4. If broker owns other companies they must disclose to owner. (affiliate business entity) 5. Markups are allowed but must be disclosed. If vendor charges $400/ month and owner was willing to pay $500/month. Property manager can take the difference as part of your compensation.

Handling of Security Deposits…

Security deposits are usually held in an escrow account. (legally can be put in same escrow account as rents). Security deposit cannot be delivered to owner without tenant being made aware. Name, address and where account will be held. If this decision is made later – tenants must be notified by registered mail. – Owner has financial responsibility to return those funds to tenants. – In the event of a dispute – PM releases the contact info of owner. (lose anonymous status)

What does RESPA stand for?

Real Estate Settlement Procedures Act

What does RESPA ensure?

To ensure that buyers are informed of all the settlement costs in a residential transaction. It is primarily focused to the parties of the transaction.

How many days in advance of closing must a HUD booklet be given to the buyers in advance of the loan application?

3 days

What does RESPA Apply to?

It applies to first mortgage transactions. Can apply to 2nd mortgages if they are taken out at same time of first mortgage.

RESPA

Buyer receives a good faith estimate. A settlement statement is completed on a HUD-1

Are agents allowed to receive any kickbacks from title companies? (RESPA governed)

No

RESPA – Escrow Monies (has rules for handling of escrow monies)

…

When is the settlement statement available?

Prior to the closing. (usually receive the morning or of when you show up to closing)

RESPA rules & regs website

hud.gov/offices/hsg/sfh/res/respa

Escrow Closing

1) used in all commercial closings 2) Used in most parts of USA 3rd party authorized as the escrow agent and handle all paperwork for that.

Face to Face Closing

Used in Colorado mostly.

Escrow Agent

1) ensures title is marketable & all imperfections have been removed. All liens and encumbrances have been settled.

If property closes what does escrow agent do next?

1) Agent records deeds 2) Pays of all liens 3. Records Documents 4) disburses funds

If property does not close, what happens?

1) transfer deed of trust back to seller 2) return all earnest money to buyer 3)

Colorado is a "good Funds" state

1) certified check 2) electronic transfer 3) teller check Personal check = no

Who is at a closing?

1. buyer 2) seller 3) buyers broker & sellers broker 4) sometimes a lender 5 ) attorney if needed 6 ) translator 7) closing agent

What is listing broker responsibility at closing?

1. Establish the time and date of the closing. (seller selects title company – set in listing contract) 2. They rep the seller if agency is involved. 3. Responsible for accuracy of closing docs.

What are buyer brokers responsibility at closing?

1. Rep the buyer if agency is involved. 2. Responsible for accuracy of closing docs.

What is the title companies role (closing agent)?

1. Provide title insurance 2. Conduct closing 3. act as a shrivener (scribe) at closing 4. Prepare closing statements – deed of trust – promissory note – settlement statement

What does the buyer have to bring to bring to closing?

1. drivers license 2. good funds 3.

List of Closing Documents at closing:

1. warranty deed (from seller to buyer) 2. loan payoff statement (from sellers lender) 3. Lien releases (from sellers lender) 4. Bill of sale (any personal property purchased) 5. COO – certificate of occupancy (new build only) – Make sure this is at closing – don’t close without it. 6. Copy of Survey or LLC 7. Loan Documentation + Truth in lending 8. Proof of insurance (Lender won’t issue funds without it) 9. Title Insurance 10. Name Affidavit 11. W9 (goes back to lender – so lender can report interest payments to IRS) 12. 1099 – Report that goes to IRS – tells what the sellers proceeds are from the sale. 13. Power of Attorney (not in all closing) 14. Promissory note – 15. Tax certification form (tax balance at closing date) 16. Deed of Trust (mortgage) – promissory note – security instrument (what happens if you don’t pay) 17. Floor certificate – verifies or not if a home is in a flood plain. 18. Real property transfer declaration – signed by buyer at closing – shows what property they received 19. Hud -1 & 20. 6 column settlement worksheet. 21. Utility Agreement (water prorated – closing company will pay balance) 22. Sales agreement (THE Contract & counteroffers)

Types of Deeds?

warranty deed – most guarantees – no prob with title nor any time in history. l

Purpose of Closing?

1. Transfer of title 2. Complete loan documentation

In Colorado, one half of the property tax was paid at the end of February by what date must the balance be paid to avoid a penalty?

June 15 is the latest that the balance can be paid to avoid a penalty First half of taxes February 28 Second half of taxes June 15 Full payment April 30

define mortgagee

lender

define mortgagor

buyer

A requirement of RESPA:

no seller may require the buyer to purchase title insurance from a particular title company

How is the broker’s fee usually shown on the settlement statement?

Debit to the seller, credit to the broker

When an out-of-state investor sells a property in Colorado, which of the following is required of the closing entity?

withhold up to 2 per cent of the selling price as possible income tax liability

An out of state investor sells a property in Colorado. The closing entity must withhold up to 2 percent of the

Selling price as possible income tax liability. The law is that the closing entity must withhold 2% OR the entire net amount whichever is less at closing for possible income tax liability when the person selling has an out of state address.

Define Novation.

One contract that replaces another.

What is the final step in the buy/sell transaction?

The closing.

Who prepares the closing statement?

The title company.

Who pays for title insurance?

The seller pays for basic policy.

Buyer Debits…

1. mortgage & lender fees 2. recording fees for deed 3. lenders title insurance policy (extra endorsements) 4. appraisal 5. survey 6. inspection fees 7. tax and hazard insurance escrows8.

Seller Debits

1. broker commission 2. basic title insurance (so title is transferable) 3. rents received (if rental) 4. transfer tax (not common in denver metro area – some resort areas) 5. Pay off their existing loan

Split Fees

1. mortgage insurance (assumed loans – paid in arrears) 2. taxes (paid in arrears) 3. water (split between buyer and seller) – if prepaid – credit to seller & debit to buyer (based on date of closing) Most times it is not split. Seller is responsible up to day of closing. Title co they collect money an average of last years monthly water bill x 3 (3 months of water bill in escrow for water bill – when water company sends bill to title co – the title co pays the water bill and credits the buyer for the balance) 4. Title closing fee (debit to buyer & seller & credit to closing agent)

Proration Rules

1. always calculated by the day. 2. 365 day calendar (banker calendar 360) 3. buyer owns the day of closing 4. paid in advance or arrears Paid in advance – Insurance (pay insurance for upcoming year) – HOA dues – Rent (buyer purchases unused balance from seller)- Paid in Arrears – Taxes (paid after end of year) taxes for 2008 will be paid in spring of 2009 – Interest (buyer pays seller to cover portion) First mortgage payment is due after the first full month after closing.

Reserve Accounts

Taxes, water and insurance are sometimes put in escrow. 1. Taxes & Insurance – make sure there is enough money next year to pay taxes and insurance. An average of last years taxes / 12.

The owner of a house has paid the advance water charge for three months beginning October 1. The owner sold the house, and it closed November 27. How much credit will the owner receive at closing? The total water bill is $95.
MATH

$95 / 92 days = $1.0326 X 35 days = $36.14

In the Colorado Contract to Buy & Sell encumbrances to be paid by the seller:

Must be paid at or before closing

Closing: Documentary Fee

This is the fee paid to the county clerk to setup the property taxes. Price based on 1 cent per $100 of house price.

Closing: Tax Certificate Fee:

This is documentation that tells what the exact property tax status is on the day of closing. This ensures that the there are no surprises. This is also a guarantee from the county that this is accurate and they can’t change it later.

Closing: Who pays the property taxes for the entire year at closing?

The buyer. (The seller has to pay for their prorated part to the buyer who in turn pays the count property tax department in full) The day of closing belongs to buyer.

Closing: Days of the months (write this down when starting test – important tip:

jan 31 31 feb 28 59 march 31 90 april 30 120 may 31 151 june 30 181 july 31 212 august 31 243 sept 30 273 oct 31 304 nov 30 334 dec 31 365 30 days hath september except april june and november. all the others have 31 days except February (28).

For a VA loan – how will the Buyer’s Loan Processing Fee be shown on a settlement sheet

The VA assigns this expense to the Seller. The Buyer can not pay it.

Interest on the loan assumed is shown as:

credit to the buyer & debit to seller

Title insurance endorsements appear on a closing statement as a:

credit to the broker – Endorsements are generally requirements by the lender for additional converage to be added to the title insurance policy.

Reserve’s are charged to the borrower at closing for:

property taxes, mortgage insurance, hazard insurance

The closing entity must withhold from the sellers proceeds up to 2% of:

The selling price as a possible income tax liability if the seller is from out-of-state

An FHA loan for $80,000 at 10.5% requires discount points paid at closing in the amount of 3%. Find the cash value of the discount points. MATH

80,000 x 3 % = 2,400

The IRS requires which of the following documents to be completed by the seller at the time of closing?

1099-s

Closing March 15, next payment due April 1. How many months of escrow can lender take for taxes?

3

Reserve’s are charged to the borrower at closing for:

property taxes hazard insurance mortgage insurance all of the above

The fee to notarize a Warranty Deed is charged on the settlement statement to:

seller (a warranty deed guarantees the buyer that of clear title on the real property)

In a new loan closing, sometimes a lender may make some of the payouts, such as recording fees, survey and reserve taxes before the closing. When these amounts are taken out of the loan, the remaining balance is the amount sent to the closing table and is called the Net Loan Proceeds. The Net Loan Proceeds are entered on the settlement worksheet:

Net Loan Proceeds: Debit broker single entry. ***Research new loan examples****

Out of state seller sold a property for $489,000. The property was highly leveraged resulting in cash proceeds to the seller of $5,500. How much should be withheld subject to the Colorado Department of Revenue Income Tax?

$489000 x 2% = $9780 The seller only received $5500 at closing. This is the net proceeds which is less than $9780 so all that is withheld is $5500.

Interest on the loan assumed is shown as:

credit to the buyer (????)

A lender requires the use of a Name Affidavit to identify:

all of the alias’ used by the borrowers

Interest in arrears is charged to the:

seller (arrears = pay at end = not paid yet. The seller lived in the property for part of the time so they have to pay for the interest on their loan while they were in the property)

A house is closed on July 16. The taxes of $546 for the current year have been paid, what is the prorated portion that the buyer owes the seller MATH

$252.81 Divide the total taxes $546 by 365 (number of days in the year = $1.4959 per day time the number of days from July 16 through Dec 31 remember that the day of closing goes to the buyer, therefore times 169 = $252.81

A $75,000 loan requires a $1,875 in discount points to be paid by seller and $375 in discount ponits to be paid by the buyer. This is how many total discount points?

$1875 + $375 = $2,250. I / V = R. $2,250 / $75,000 = .03

According to the Contract to Buy and Sell, who pays for the appraisal?

Negotiated between buyer and seller

The purchase and sale contract stipulates how many discount points a loan will incur and who will pay them. The Title Company uses this information to determine:

whether to debit the seller Discount points are a charge. Most often they are an incentive offered by the Seller to buy down (lower) the Buyer’s interest rate. 1 discount point is 1% of the loan amount. The IRS considers discounts points to be "prepaid interest" and thus tax deductable for the person paying them – in this case the Seller. The only place in the purchase contract where this is addressed is in Seller Concessions. Debit Seller.

The authority of the agent to act as the agent’s principal is usually given by the terms of the:

listing contract

The amount due from the buyer appears on a closing statement as a:

Credit to the buyer The amount due from the buyer appears on a closing statement as a credit to the buyer. This is a receipt for the money that the buyer has already paid. Remember that the closing is over!

The "holdover clause" in the Exclusive-Right-To-Sell Listing Contract protects the listing broker’s commission for disclosed buyers:

For the period of time specified in the contract, or if the "Shall Not" box is checked until the property is relisted with another broker

Which of the following is true concerning listings based on a "net price?"

they are legal in Colorado as long as the seller agrees, and the broker has the necessary form prepared by an attorney representing one of the parties to the transaction.

If the Loan Objection Deadline passes and there is no loan commitment by the lender, what happens to the contract if the buyer and seller have not signed an amendment extending the date?

The buyer is in default if he/she does not close

If an agent has a listing and transfers companies, does the listing stay with him/her and the new company OR does the listing remain with the original company?

It is the company’s listing, the company keeps the listing. The key point here is that contracts are with the company and not the agent.

What is the debit/credit entry when a buyer assumes a loan from the seller?

debit seller, credit buyer The seller still owes the amount that is assumed (debit seller). On an assumption, that the buyer will be making payments against the loan does not relieve the seller of the obligation that it be paid in full. The buyer will not be required to bring this amount to the closing (credit buyer)

When a licensee transfers from the employ of one broker to another, which of the following are responsible for surrendering the license to the Real Estate Commission:

the licensee and the former employing broker

In Colorado, who of the following is exempt from real estate license law?

>Property Manager renting single family home for a variety of owners Correct -> Investor who owns 12 investment properties and sells one to an owner-occupant. > Inactive licensee assisting a friend in filling out a purchase offer. > Attorney at law collecting a five percent commission for helping Explanation Private owners may always act for themselves and are not subject to real estate license laws. Attorneys are normally exempt from real estate license law while practicing law but must have a license to act as a broker. An inactive licensee is still bound by all rules of the commission, and the right-of-way specialist is exempt only for certain specific activities.

When setting up a showing, lock box information may be given:

to the buyer’s broker, after licensee’s information is taken and verified.

If the seller finds out he is not being transferred and defaults on the sales contract:

the buyer can sue him for specific performance and damages A seller does not have the option of liquidated damages. The buyer is allowed to sue for specific performance or for damages, or both.

When making a counter offer by using the approved Counterproposal form – how do you change dates?

Change only the dates that needed to be changed

If an employing broker leaves a real estate brokerage, what happens to the transaction records?

the brokerage retains the records as the company is responsible for maintenance of records Explanation Employing brokers are often salaried employees, they are not always the owner of a brokerage. Just like any company, if an employee leaves a brokerage s/he does not get to take records. The brokerage has legal repsonsibility for all transaction records and must keep them for at least 4 years. The only time an employing broker would be responsible for record retention would be if the company is shutting down.

The earnest money check is usually made out to:

the listing broker

The contract to purchase addresses the following issues:

pre-owned home warranty programs are available

If the buyer has asked the seller to pay points, the seller needs to understand:

a point is up front money paid to the buyer’s lender at closing

The Colorado Real Estate Commission was formed to:

protect the public

You hold open one of your listings that you took as a seller’s agent. A buyer comes through the front door and wants to buy on the spot. The following is true:

you can write the offer, so long as you disclose that you are a seller’s agent and indicate that in the offer to buy that he signs The buyer will be the customer and the seller is the principal. You cannot be a transaction broker to one part of the transaction and have an agency relationship with the other. You must receive permission from both parties to become a transaction broker.

When is an offer to purchase, considered accepted?

When the buyer’s broker is notified, that the offer has been accepted by the seller. Standard contract law states that a contract must be signed and accepted to be binding.

You submit an offer to the seller. They agree with price, inclusions, everything except the closing date. The proper way to handle this is:

the seller should sign a counterproposal with their preferred date of closing

If a seller prepares a counterproposal, to an offer to buy and it is turned down by the buyer:

the buyer can prepare a counter to the counteroffer. The buyer may prepare a new offer or you may counter a counteroffer. When the buyer has turned down the counteroffer s/he is allowed to write a new counteroffer, and submit it to the seller attached on top of the original offer and first counter. Countering a counteroffer is legal but generally considered to be bad form. Good form is to prepare a new offer.

A Colorado broker with residence out of state accepts an earnest money deposit on a property located in Colorado. He needs to:

open an escrow account in a Colorado bank

If your buyer is assuming an existing loan, and the loan balance is different from the amount that the seller’s stated:

this is determined by the way the offer to purchase is structured

"MEC" in the Contract to Buy/Sell Real Estate means:

the date upon which both parties have signed the contract.

A broker must offer:

only the relationships he or she chooses to offer

Based on the contract to buy and sell loan discount points:

May be paid by either party or a combination of both

A counterproposal:

amends the terms and conditions of a proposed contract to buy/sell

A growing crop, also known as emblements, is regarded as:

property of the tenant farmer Emblements are regarded as personal property even before harvest; thus a tenant has the right to take the annual crop resulting from his or her labor.

After taking the examination you must apply with the Real Estate Commission for your license within:

365 days

Right of rescission is part of:

Truth in Lending Act

The grace period to renew an expired license without penalty is:

31 Days

Broker written provisions inserted into a Commission approved form must:

use a different style font from the pre-printed areas

A three-day right of rescission applies to:

second mortgages Residential mortgages are exempt from rescission if the mortgage is created to finance the acquisition or initial construction of the consumer’s principal dwelling.

At the time of harvest, crops that require annual planting are generally considered to be

personal property

Keeping track of earnest money funds received in the course of a transaction is usually:

determined by mutual agreement in accordance with the contract

If scheduling a closing on the last day of the month, it is wise to:

schedule the closing as soon as possible, as the times fill up fast

A buyer submits an offer contingent upon the successful closing of their present home.

the listing agent should fully disclose all information to the seller

During the processing of the loan, it is:

the buyer’s responsibility to follow up with the lender

Home Inspectors

can enter the business without qualifications or training

A specific lien is…

A Mortgage

Who shall request the earnest money to be released, in good funds to the closing clerk, prior to closing?

Listing agent generally requests it from the broker at least 24 hours before closing. (In the event that the funds were not deposited with the Title company to begin with and the buyers agent is holding the funds)

Who is responsible for getting a copy of the contract to the lender?

Selling agent

Who should hire a closing company?

Seller

In order to be effective, a Commission-approved Counter Proposal:

must be attached to each copy of the original offer signed by the buyer

When the employing broker of a corporate brokerage is suddenly unable to continue in that position, to whom may the commission issue a temporary "hardship" license?

Colorado licensee approved by the corporate board of directors

An offer has been presented to the sellers of a property. The sellers do not want to accept it as it is. They ask their agent to change the terms through a counter proposal. The seller’s agent prepares the counter proposal and delivers it to the buyer’s agent. The buyers don’t want to accept the new terms the seller Is offering. What can be done?

As buyer’s agent you would tell them to rewrite the original contract A purchase contract can only have one counter attached, the buyer can’t withdraw a counter, and only sellers can withdraw the counter. They must sign another contract knowing what terms are acceptable.

According to RESPA, lenders must provide to applicants:

maximum amounts that could be collected at time of closing

The borrower has the right to inspect the HUD-1 Settlement Statement:

the business day immediately preceding the day of settlement

What advice, must you give your clients prior to closing?

Advise legal counsel prior to closing

If the transaction does not close:

the broker may only declare a forfeiture of earnest money upon (written) instruction of the seller

According to the rules and regulations of the Colorado Real Estate Commission, a broker is REQUIRED to recommend that:

the buyer have title reviewed by legal counsel

As a transaction broker in an exclusive right to sell listing contract, the listing broker must disclose:

Material facts about the property known to the broker

Which rule-of-thumb is being used to an investor who is told that a house renting for $900 a month should sell for about $90,000?

GRM – Gross Rent Multiplier is the ratio of the price of a real estate investment to its annual rental income before expenses such as property taxes, insurance, and even utilities for vacation rental properties

The holder of the earnest money must be clearly identified:

in the Contract to Buy and Sell Real Estate

The Colorado Contract to Buy & Sell establishes a Loan Objection Deadline if the buyer is getting a new loan. What is the effect of the deadline?

If the buyer cannot get a satisfactory loan by that date, the buyer may terminate the contract with written notice to the seller in order to get their earnest money back.

Who should determine time and location of closing?

It is a point of negotiation in the contract

Which is not required to be in the file for examination during audit?

1. Copy of the earnest money 2. Contract to Buy and Sell Real Estate 3. Disclosure of Brokerage Relations 4. Correct -> Warranty Deed (this is sent to buyer)

When a complaint against a licensee results in a possible suspension or revocation, a hearing is required. Which of the following presides over the hearing?

An Administrative Judge

An owner has refinanced his primary residence and decided to take cash out of the loan to buy a fixer-upper. If the closing is scheduled for today (Monday) on the primary residence, How early can the owner close on the fixer upper?

Since the right of rescission is 3 days, he will not get the check until 3 business days after the closing which would be Friday

Who is responsible for getting a copy of the contract to the Title Company?

Listing agent

The maximum amount of time a landlord can specify in a lease that they will hold a security deposit after lease termination is

60 days

In a real estate transaction, a broker should advise the buyer of the:

need for a title search

The Colorado-approved Amend/Extend Contract form should be signed:

before the sales contract has been fully executed

In the section on Purchase Price and Terms in a Residential Contract to Buy and Sell, which of the following is true concerning the entry for cash at closing?

It does not include the buyer’s closing costs, such as loan fees. The line item of cash at closing is entered in order to complete the math showing the sources of funds that equal the total purchase price. The amount does not include closing costs or new loan fees and is not intended to represent final figures.

If cash is received with an offer:

hold cash until contract has been accepted or withdrawn

Federal Truth-in-Lending laws are also known as

Regulation Z

The lender computed the interest for the previous month on a $120,000 mortgage loan balance at $825. What is the rate of interest? MATH

.0825 ($825 X 12 = $9900 (Annual Interest) / $120,000 = .0825 or 8 1/4 %)

Title passes from the grantor to the grantee:

when the seller signs the warranty deed and gives it to the buyer

A final walk-through provides all of the following except:

the final time to terminate the contract if not satisfied with the condition of the property

When a seller decides to counter an offer presented to him, which is true?

Seller should sign only the counter offer

Interpretation of the title commitment should be done by:

attorney or title company

When the license of the sole proprietor is suspended for two years, what is the effect on the affiliated associate brokers?

Affiliates licenses are inactive until they are hired by a new employing broker.

A broker has an Exclusive Right-to-Buy contract with a principal. Who is to be their customer?

seller

Recommendation of legal counsel provisions is included on all of the following documents except:

exclusive tenant contract Contract to Buy and Sell Real Estate Correct -> lead-based paint disclosure Commercial Contract to Buy and Sell Real Estate

Contract closing date is March 29. Buyer and seller want to close on the 27th. In order to do this, they must:

nothing, this is okay per the original contract

Regarding an Earnest Money dispute -If a lawsuit is filed, the broker may:

surrender the money in an interpleader action and request to be removed as a defendant

The parts of the property that are necessary or convenient to the existence, maintenance and safety of a condominium and are normally in common use by all of the condo residents are known as

Common Elements (not community property)

In this situation, the grantor promises to obtain and deliver any instrument needed to make the title good is the:

Covenant of further assurance. (not covenant against encumbrances)

Movable objects, which are not considered real estate, are known as

Personal Property (Not fixtures)

The earth’s surface extending downward to the center of the earth and upward into space, including all things permanently attached, but not the rights such as an easement, is known as:

Real Estate (Not Real Property)

The possession of land by one who claims to own at least an estate for life is known as:

Seisin Seisin is also known as the covenant of seisin, in which the grantor warrants that he is the owner of a property and has the right to convey it.

To the owner of the land an easement runs across, it is a/an

An Encumbrance (not an appurtenance) An easement is an encumbrance

A claim or interest revealed by a title search is called a:

A cloud in title (not a lein)

The law that requires real estate contracts to be in writing to be enforceable is the

statute of frauds

A listing contract under which the broker’s commission is contingent upon his producing a ready, willing, and able buyer before the property is sold by the seller or another broker is known as:

open listing

The type of lease, which is for an indefinite amount of time and may be cancelled by the landlord or tenant at any time is known as:

estate at will (tenancy at will)

The easement that is not created for the benefit of the land owned by the owner of the easement, but that attaches personally to the easement owner is known as an:

easement in gross (not easement by necessity)

A tenant rented an town-home, signing a 18-month lease. After the lease expired, the tenant paid 1 month’s rent and got a receipt. What kind of leasehold does the tenant have?

Tenancy at will (not tenancy for years)

A refusal to make reasonable accommodations in rules, policies, practices, or services when such accommodations may be necessary to afford such person equal opportunity to use and enjoy a dwelling is one definition of:

decriminalization

Oral Contract

Implied Contract (written = Express Contract)

Locate the number of acres contained in the following parcel: The NW1/4, NW1/4, NW1/4 and the S1/2, SW1/4, SW1/4.

There are 2 parcels in this description. The first is 640 acres divided by 4 =160 divided by 4= 40 divided by 4 = 10 acres. The second is 640 divided by 2 = 320 divided by 4 = 80 divided by 4 = 20 acres. 10 acres plus 20 acres = 30 acres.

The loan on a property is 80% of the appraised value, and the interest rate is 8% which amounts to $460 for the first month. Then what is the appraised value of the property?

First calculate the annual interest which is $460 X 12 = $5,520 then divide this by 8% = The loan amount of $69000 then divide this by 80% for the appraised value of the home $86,250

A loan company will provide a loan to Bill and Hillary for 75% of the appraised value of their home. The interest rate is 10.5%. The first monthly interest payment is $820. The bank requires 4 discount points (hint: a discount point is 1% of the loan amount) to obtain this interest rate. How much will the discount points cost?

$820 x 12 = $9,840 annual interest paid. $9,840 / .105 (annual interest converted to a decimal) = $93,714.28 Total Loan Amount. $93,714 x .04 (A discount point is 1% of the loan amount – you have 4 of them) = $3.749.57 in Discount Points

A house was purchased five years ago and is now listed for sale at a 30% profit. The original purchase price was $ 60,000. If the seller agreed to pay the broker a 5% commission on an offer he accepted that was $ 4000 below the listed price, how much will the seller receive?

$60,000 X 130% ( the original price 100$ plus the 30% profit) = $78,000 – $4,000 = $74,000 X 5% = $3,700; $74,000 (selling price) less commission $3,700 = $70,300

Angie sold her house for $84,000, which was 40% more than what she paid for it six years ago. How much did Angie originally pay for the house?

$84,000 / 140% ( the original price 100% plus the 40% increase) = $60,000

The net income from a commercial property is $66,000 the capitalization rate is 4%. What is the value of the property?

Divide $66,000 by 4% = $1,650,000 which is the value of the property

If the homestead exemption is not waived, the owner is protected:

from any debt The Colorado Homestead Protection Exception provides a $60,000 (This number changes with time) exemption from any debt, contract or civil obigation entered into after July 1, 1975. This exemption is for the head of family householder. Elderly or disabled individuals receive a $90,000 exemption. Generally, the exemption is waived as a requirement for getting a loan.

After the Sellers columns on a Settlement sheet have been subtotaled, to balance the two debit and credit columns, a credit to the Seller and a debit to the broker would represent:

Money owed by the seller When the Sellers credit column is less than the debit column you need to add a credit to make them both equal. This means the credit column (containing the sale price) is less than the debits (containing amoung items – money owed on the property). This Seller is "upside-down." This credit ends up representing money the Seller must bring to the Closing and give to the Broker to pay off debts. (A Broker Debit is a deposit into the escrow account and a check that has to be written).

Unless modified, the powers granted in a Colorado statutory power of attorney for property are:

General in scope

If mineral rights are not listed in the deed, and not previously transferred, the rights are:

transferred to the grantee (buyer) In Colorado, all mineral rights except water are transferred with the property unless otherwise indicated in the deed or if the rights were transferred (ie sold or given away) by a previous deed. The Seller is the "Grantor" (the creator of the deed), the Buyer is the "Grantee" (receives the deed)

A property manager may refuse to lease to:

A person addicted to or using illegal drugs

Which of the following is the ONLY section which must be a office policy manual?

Human Resource Benefits Commission Plan Backup Contracts Correct -> Brokerage Relationships Offered to Public There are only three sections which are mandatory, whereas there are a number that are suggested. The mandatory ones are: written brokerage relationship policy, a policy to protect confidential information and designation brokerage relationships.

The Seller holds security deposits in the amount of $1,000 from each of six tenants. On the settlement sheet:

Debit Seller & Credit Buyer $6,000 Security deposits are a surity against damage to a property. It belongs to the tenants and not the owner. When the property is sold – they must be transferred in whole to the new owner. Debit Seller Credit Buyer.

Which is not true regarding the Counterproposal form:

1. The purchase contract should not be signed by the person creating the counterproposal 2. The date and deadlines table can be omitted if not used 3.If a date or deadline is left blank it means "no change" Correct -> 4. The only changes allowed are purchase price and earnest money Whoever creates the counterproposal can make any change they want.

In addition to Federal law the Colorado Fair Housing Act added as a protected class:

Marital Status The Colorado statute also adds three more protected classes: ancestry, marital status and creed, for a total of ten protected classes, as compared to the seven under the Federal Fair Housing Act. Under the Colorado Anti-Discrimination Act ("CADA"), sexual orientation and gender identity have been a protected class in employment since August 3, 2007. On May 29, 2008, the Colorado General Assembly amended CADA and made sexual orientation and gender identity a protected class in housing, public accommodation, and advertising. Therefore if you get a question asking if sexual orientation is protected under Colorado Fair Housing laws – the answer is yes. Under the Colorado Fair Housing Act – no.

If an owner wants to make a single full payment for property taxes, what is the latest date by which this payment can be made?

April 30th Real property taxes may be paid as follows: if the owners wants to make payments, one-half is due on or before the last day of February and the remaining one-half on or before June 15. If the owner wants to make one full payment, the entire tax may be paid on or before the last day of April

Stan is a real estate broker in Colorado. He has identified a property for a fast food outlet and has asked four friends to contribute money to the purchase and gain partial ownership. Stan will manage the property and negotiate the lease for the fast food franchise. Which of the following is correct with regard to Stan’s role as a broker in this arrangement?

He must comply with state and federal securities laws in arranging this investment group.

A buyer is assuming a loan and the loan balance has turned out to be less than the assumption balance provided by the seller. How would this be handled according to the Residential Contract to Buy and Sell ?

The buyer may terminate the contract by written notice if the difference causes the buyer’s cash at closing to increase by a stated amount.

Recording Fee of Warranty Deed most typically would appear on the settlement statement as:

Debit Buyer

A Single Party listing: (FSBO)

Has no holdover clause Brokers often secure single-party listings because they have what they believe to be a good prospect for purchase. These listings are usually only for a few days, but occasionally the broker wishes to be protected for a longer period while the broker is negotiating with a particular prospective purchaser.

When a Seller decides to submit a Counterproposal in response to a Contract to Buy and Sell, the Seller:

Checks the Countered box, initials the original Contract and signs the Counterproposal To counter: the Seller would check the Countered box, initialing directly underneath in the space provided indicating the Seller is the one countering, The next step is to complete and sign the Counterproposal. The last step is to return the original offer and the counterproposal to the Buyer. The Seller does not sign the original offer as that would indicate acceptance.

When creating the listing agreement, the sellers informs you that they will not be filling out a Seller’s Property Disclosure form. What is your best response:

Inform the sellers that most buyers want the form The listing agreement does not require the sellers to fill out the form, however the purchase contract requires one be filled out and the buyers expect to receive one.

June is a listing broker in Colorado. When and how must she disclose to a potential buyer that she has a working relationship with the seller?

in writing, before providing specific real estate services

For a VA loan – how will the Buyer’s Loan Processing Fee be shown on a settlement sheet

Debit Seller The VA assigns this expense to the Seller. The Buyer can not pay it.

Out of state seller sold a property for $489,000. The property was highly leveraged resulting in cash proceeds to the seller of $5,500. How much should be withheld subject to the Colorado Department of Revenue Income Tax?

$5500 This question relates to the rules on Colorado withholding taxes. The rule is if the seller has an out-of-state address, the State directs at close a withholding of 2% of the purchase price or the entire net proceeds, whichever is less. This is to cover any potential State income tax liability for sellers. Since they live out-of-state, they likely do not file Colorado tax returns. Two percent of the selling price of $489,000 is $9780. Since $9780 is higher than the proceeds of $5,500, the lessor amount of $5,500 will be withheld as the potential tax liability.

All of the following must be disclosed to a tenant by a property manager EXCEPT:

Disclose name and address of the landlord

Regarding the Colorado Homestead Exemption, as indicated in the approved deed of trust forms, the buyer agrees that:

the trustor waives the right to the homestead exemption The trustor (buyer) waives all rights to the homestead exemption in all Colorado approved deed of trust forms. The buyer is the "Trustor" because the buyer originates the Deed of Trust to provide security for a loan, the Public Trustee is the "Trustee" as he/she receives and holds the Deed of Trust, the lender is the "Beneficiary" because it is their loan that is being protected i.e the benefit.

A counterproposal:

amends the terms and conditions of a proposed contract to buy/sell

Any excess funds above those required to pay off encumbrances realized at a foreclosure sale belong to:

mortgagor (owner of the property)

A deed of trust held by someone other than the public trustee is NOT:

Regardless of who holds the Deed of Trust, the transfer of ownership is real and not a notice of pending legal action.

A broker acting as a transaction broker for a buyer, with no written agreement needs:

to provide the buyer with a copy of the "Brokerage Disclosure to Buyer" with the broker’s signature showing the date it was given to the Buyer.

When a contract is rejected by the Seller, the seller should:

check the appropriate box and initial on the indicated line. The should not sign the contract. Instead there is a check box to indicate if the offer is being rejected or countered. The seller intials in the appropriate area.

How is the relationship handled when a buyer wishes to work with a broker to locate property to purchase?

Buyer and broker may agree to a relationship which could include agency, transaction-brokerage, or no working relationship between the parties The buyer has many options: he or she can be a unrepresented "customer" after appropriate disclosure, can sign an agency representation agreement, or can hire the broker as a transaction-broker either in an exclusive arrangement, oral agreement, or by default.

The Real Estate Commission approved Colorado Power of Attorney form

creates a limited agency agreement The Colorado Real Estate Commission approved Power of Attorney form is designed to establish a limited agency agreement sufficient to designate someone to sign on behalf of another for a real estate transaction. It is not designed to establish broader legal authority to act outside this limited legal scope.

Provisions of the Colorado Common Interest Ownership Act:

establishes the right of an HOA to place a lien on a property for unpaid HOA dues and assessments

A Corporation, LLC, Partnership must have E&O insurance for entity and employing broker.

True

Adverse possession matures into title after open, notorious and hostile possession for:

Without color of title it’s 18 years with color of title it’s 7 years