A. The Metro Denver Multiple Listing Service (MLS)
B. Contracts and Related Legal Issues
C. Closing and Delivery of Property
D. Reported Square Footage
E. Inspections
Note: This is not intended to be a complete guide to real estate transactions. When we first meet you we will have a Buyer Orientation, cover as much as we can about purchasing property and, hopefully, answer all your questions as well. Meanwhile, this section is directed to those relocating to Colorado and highlights some of those areas that are unique to Colorado and/or Denver.
The Metro Denver Multiple Listing Service (MLS)
The Denver MLS covers all of Metro Denver from the Jefferson County foothills on the west to eastern Adams and Arapahoe counties and from Broomfield and Brighton on the north to Parker, Castle Rock, Highlands Ranch and other Douglas and Elbert County communities on the south.
We are very fortunate to have one comprehensive MLS that gives us a single source of information on all homes for sale in the entire metro area, both new and formerly owned. This assures you, the Buyer, that you can work with one agent to access every home for sale, no matter the location, no matter what company listed the home or what builder offers the new home for sale.
When any home, new or resale, is listed in the MLS, it includes an offer of compensation to the cooperating Realtor. This protects the Buyer from becoming liable for payment under a Buyer Agency Agreement. Prior to showing you a home, you will know in advance that the seller has agreed to pay our fee!
In the case of a new home being offered for sale directly by the builder, there are some specific rules to follow. First, all builders who are also members of the Builder-Realtor Council have agreed that they will not adjust the price of the home, up or down, to reflect either the payment or the non-payment of a commission to your Realtor. Therefore, it makes good sense for you to have your own Realtor by your side to be your advocate when you negotiate with a builder. Second, the builder agrees to pay us as your Realtor/Buyer Agent provided that:
A. One of us accompanies you on your first visit to the home or the builder's model home/sales office and properly registers you as our client;
B. One of us is with you at the time you negotiate and sign the purchase agreement; and,
C. One of us is with you at the closing.
If you are thinking about a new home, let us help you. Builders often write their own contracts which are grossly one sided in their favor. If you let us, we can be with you every step of the way. It doesn't cost you a cent to have us as your advocate at your side, but you must follow the rules!
The MLS provides a variety of tools to make your time and ours more productive. Because we are "on-line" with the MLS computer, our information is always the most current. We can search the database for only those homes matching your criteria. Examples include: area, number of bedrooms and baths, square footage, style, basement finish, garage space, location of laundry or master bedroom, year built and a host of other parameters. By narrowing our search to those items critical to your needs, we can maximize the use of our time and yours.
Additionally, we can specify those features most important to you and program the MLS computer to notify us whenever a new listing matches your specifications. If you are looking for a hard to find home or one in limited supply but high demand, this can be an extremely valuable service that insures you will have an opportunity to see every home that meets your needs immediately upon its coming to market!
With the depth of resources available through the MLS, it is no longer necessary for a buyer to work with several agents to insure he doesn't miss an opportunity. You need only be confident that the Realtor you select has the knowledge, experience and equipment to make maximum utilization of those resources!
Title Insurance
In Colorado, the seller typically purchases title insurance for the buyer. The buyer, in turn will purchase title insurance to cover his lender. The latter piggy backs on the former, however, at a fraction of the cost. The seller's cost could be from several hundred to a couple of thousand dollars, depending upon the sale price. The buyer's cost will typically run from $150 to $350, depending upon his lender's requirements.
Since the seller is purchasing the title insurance, it is customary for the seller to select the Title Company. This same title company will also handle the closing (as opposed to an attorney in many states). As buyer's agents, we are normally only concerned that the title company is one of good reputation with financial integrity, the same concerns one would have when purchasing any kind of insurance.
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Contracts and Related Legal Issues
We are indeed fortunate in Colorado to have a very active and progressive Real Estate Commission, which takes seriously its responsibility to the public. Unlike many states where contracts are written on forms prepared by a Realtor Association, the Commission has prescribed the form and content of "Commission Approved" contracts for most every possible real estate transaction including Listing Agreements, Buyer Agency Agreements and Purchase and Sales Contracts. The Purchase and Sale Contract automatically provides for the most common contingencies, including the buyer's inspection, seller's property disclosure, loan approval, appraisal and satisfactory title insurance commitment. There is amply room to add additional provisions specific to the transaction.
The Commission Approved contracts are so comprehensive that most buyers and sellers rarely engage an attorney, In fact, under Colorado law, your real estate agent is granted a limited license to practice law. We can, for instance, explain the legal effect of the contracts and their various components and clauses. We can fill the blanks and we can assist you in adding terms and conditions specific to the transaction. We cannot, however, give you legal advice or draft non-commission approved contracts and forms. For example, we can explain the difference between joint tenants and tenants in common, but we cannot advise you as to which legal alternative is the most appropriate in your circumstances.
It is usually not expensive to engage an attorney to review and comment on your purchase contract, title and loan matters and closing papers. We often recommend it in the case of first time homebuyers or any other client who may not be comfortable with contracts and their related issues, alternatives and decisions.
Should you wish to involve an attorney in your transaction, we suggest you interview and bring one on-board in advance of actually viewing property. Often, the need to move quickly can determine success or failure when bidding on your dream home. By involving your attorney in advance, he will already be familiar with your needs and circumstances and the form of the contract offer and can respond quickly when needed. If he has particular concerns, he can communicate them in advance to be sure we address them when we write the offer.
We would be pleased to work with whatever attorney you choose. If you don't know one, we suggest you first try your corporate attorney, if you have one. Your company may offer his services to you at no charge. Otherwise, ask us. We know several well regarded attorneys who handle these types of transactions for a modest fee.
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Closing and Delivery of Property
Closings in Colorado are usually done at the "table" with all the parties present. The date is agreed to and specified in the Contract. This is in sharp contrast to many states, which close in escrow. Table closings are usually great fun. The buyer and seller often meet here for the first and only time. Stories are shared, keys are exchanged and the buyer learns much from the seller about the neighborhood and all the little idiosyncrasies that every lived in home must have!
If attending the closing presents a logistical problem, we can arrange to close by mail or overnight courier. Should one, but not all parties on the deed be present, a Power of Attorney for the absent party will be necessary. Should you anticipate any of these situations, discuss immediately with us, so the appropriate arrangements can be made well in advance. Please be aware that our company policy does not permit us to act for you under a Power of Attorney since it would create a conflict of interest.
Your lender will provide you with a "good faith estimate" at the time of your application that will detail all the expected expenditures and the funds you will need to close. Within 24 to 48 hours before the closing the Title Company will prepare the actual closing settlement statements and fax to us to we can review them with you in advance of closing.
In Colorado, real estate closings require "good funds", usually represented by funds being wire transferred to the closing agent in advance or by a cashier's check presented at the closing. If you must consolidate funds at your bank from other savings or investment accounts, be sure to do it well in advance of requesting your bank to issue the cashier's check. Banks normally require your funds to be collected before they can draw against them to write the cashier's check! If you have questions, talk to us. We can help you coordinate these activities.
With regard to occupying the property, Denver is unique in all the world! In most locations you will take occupancy immediately upon closing. In Denver, it is common practice for the Seller to take 3 to 5 days or more to move out after the closing! We don't like it and neither do most of our out of town buyers who are not accustomed to this practice. Nevertheless, if the Seller occupies the house, better you should know in advance so that you are not surprised and can anticipate and plan around it. No rent is normally paid for this short holdover period.
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Reported Square Footage
Unlike many areas of the country, the square footage of the Denver home, as reported in the MLS, will normally only include those floors, which are above ground. Basements, even those which are professionally finished, are not to be included in the reported square footage. Total finished square footage is reported separately so watch for it. thus a 1500 square foot ranch may have a full, finished basement, effectively doubling the usable living area! Be careful, however. In the mountains the opposite is true, the finished portion of the basement is included in the home's reported square feet. Also, the information in the MLS is only as good as the Realtor who inputs it. Most follow the rules, making it easy to compare one house to another on paper. The few who don't, however, can make it tougher on all of us!
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Inspections
The contract on a resale home will contain a provision allowing for the buyer's inspection of the property. It will also detail what happens in the event the inspection reveals the property to be in unsatisfactory condition. Although the inspection clause was originally intended to apply to structural defects, system failures such as heating, air conditioning, plumbing and electrical, roofs and other major items, the contract is clear that the house must be satisfactory to the buyer in the buyer's sole discretion.
Because this clause is so clearly in favor of the buyer, the seller's agent will expect us to complete the inspection within a week or so after acceptance of the contract. Should a problem arise, it is in the best interests of all the parties to identify it and come to a resolution, if possible, as quickly as possible.
The buyer is responsible for selecting his inspectors. Upon request, we will be happy to supply the names and resumes of inspectors used by other clients with satisfactory results. You should expect the inspector to review the integrity of the structure, test and/or inspect all building systems, plumbing, electrical, heating, air conditioning, appliances included in the sale, windows, floor tile, bath tile, cabinetry and a host of other items. Anticipate the inspection to last from 1 ½ to 2 ½ hours. The buyer should be present for the entire inspection. The inspector normally expects to be paid upon completion of the inspection. Average cost should be $175 to $225. Very large or very small properties may be more or less, respectively.
In Colorado, we have many different varieties of expansive soils which, when they become wet, expand many times over. Homes are specially engineered to deal with expansive soils and properly designed landscaping will draw water away from the foundation. Despite all the precautions, structural problems can still result. A good, experienced inspector should be able to distinguish between the common cracks in drywall and in basement floors and walls and significant structural problems requiring remedial action.
In addition to the basic inspection, the buyer may wish to consider secondary inspections for radon gas, termites and lead-based paint.
Radon is the test we most often recommend. Radon is a cancer-causing radioactive gas, which filters up through the ground and collects in homes, particularly in areas with poor ventilation such as the basement. If high radon levels are found, there are ways to fix the problem. Radon Mitigation will typically cost in the range of $600 to $1,000. It is usually appropriate to ask the seller to mitigate radon. Relocation companies that buy employee houses demand strict adherence to federal guidelines. If you do not test for it now, you could be stuck with a bill for mitigation when you make your next transfer. If this doesn't apply to you, then the location, style and use of the home may influence your concern about radon gas. You should discuss the pros and con's of the test and the EPA guidelines with your inspector. Depending upon the testing method, it could cost another $75 to $150.
In the past we have rarely had termite problems in Denver because of our semi-arid climate. There has, however, been a noticeable increase in recent years in areas with unusual dampness. Should the property be located in an area known to have problems or should your inspector encounter a suspicious area within the home, an additional inspection by a professional termite inspector may be recommended.
If the home was built before 1978, the chances are it has lead based paint. Although you have a right to have a test done to determine the presence of lead based paint, the practice is not wide spread and can be relatively expensive. At the time of contract, you will be presented with a disclosure document that gives you the opportunity to test if you so choose. Most buyers waive their right to test, recognizing that the home probably does have lead based paint and that they should take proper precautions, particularly with children. We will provide you with an EPA booklet, which fully describes the dangers of lead-based paint and how to protect yourself and your family.
