Although Colorado real estate form contracts do not expressly address situations like COVID-19, there are ways to handle effects on real estate transactions. CRES and our Colorado attorneys are analyzing the situation to anticipate legal and practical challenges that face real estate professionals and consumers.
Here are some insights and thoughts:
Brokers and agents MUST discuss the following risks with their clients NOW. These discussions should be documented in writing with the client acknowledging receipt to avoid future questions about whether the client was provided risk-related information.
National and Colorado government authorities are trying to preserve the status quo by putting the economy on pause mode for the next 30 to 90 days as resources are focused on stopping the spread of COVID-19 and treating the nation’s ill.
Expect more shutdowns from other service providers in the real estate industry such as title companies, lenders, inspectors, and state and county government offices.
In anticipation that the clerk and recorder offices in your location will close, advise buyers to confirm in writing that the title company will, at least on a short-term basis, provide gap coverage to buyers and their lenders from the date of closing until documents can be recorded. Advise buyers that this may be only a temporary solution.
It may come that title companies are unable or unwilling to close pending transactions until the clerk and recorder offices reopen. Brokers should warn buyers and sellers that further closings of government offices could adversely impact their ability to close their real estate transactions.
Brokers should advise buyers and sellers that extending closing dates may be necessary because of business and government closures. Brokers should encourage buyers and sellers to plan to accommodate requests to extend closing dates and other reasonable requests where and when possible to avoid magnifying the crisis on a personal level.
Brokers representing buyers currently under contract need to be vigilant in advising buyers on deadlines. Buyers under financial duress, such as those facing days or weeks without work, still may be able to terminate if the loan termination deadline has not passed. Brokers may need to take immediate action by obtaining an extension of the loan termination deadline to protect a buyer’s interests.
Those buyers past the loan termination deadline may not have a right to terminate the purchase contract and their earnest money is at risk.
The Colorado Real Estate Commission approved form contracts for the sale of real estate does not expressly address what is to happen in the event of a state or national emergency. Consequently, brokers should advise their clients to consult with an attorney as to what rights a buyer or seller may have with respect to any earnest money dispute or the performance of their contract obligations.
Buyer’s agents and transaction-brokers must disclose adverse material facts actually known by the broker to the seller, including material facts concerning the buyer’s financial ability to perform the terms of the transaction. C.R.S. §§ 12-10-405(3)(a) & 12-10-407(2)(b)(VII).
Remind buyers of this obligation to avoid hard feelings of betrayal by their broker of disclosing highly sensitive, personal financial information.
All buyer personal financial information received by the seller’s agent and the seller should be treated with the utmost confidentiality and not disclosed to others.
Brokers must pay particular attention to contracts containing contingencies to avoid a cascading domino effect. A buyer’s earnest money in a purchase transaction may be at risk if the buyer is unable to close on the sale of the existing property because the buyer in the sale transaction may be experiencing financial problems and may be unable to close.
Authors: James M. Meseck | Attorney Rachel E. Ryckman | Attorney E. Catlynne Shadakofsky | Attorney
White and Steele, P.C. 600 17th Street, Suite 600N Denver, Colorado 80202
This blog/website is made available by CRES Insurance Services for educational purposes to give you general information and understanding of legal risks and insurance options, not to provide specific legal advice. This blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Claims examples are for illustrative purposes only. Read your policy for a complete description of what is covered and excluded.
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