For Sale By Owner (FSBO) Contract - What you need to know

By: Kent Jay Levine, Esq.

Summary

Buying or selling real estate in Colorado can be complex. The purchase price is normally substantial to both Buyer and Seller. Accordingly, it is recommended that if a licensed real estate broker is not involved in the transaction, the parties should hire their own attorney to draft or review the contract. (They may want to have counsel even if a broker prepared the contract!!) The recommended contract form is the Contract to Buy and Sell Real Estate approved by the Colorado Real Estate Commission. If you prepare the contract form yourself, review the reference tool Boxes and Blanks.

Introduction

Many buyers and sellers, in order to save money, sell or buy a property, residential, income or commercial, by themselves. This is fully understandable. Substantial money can be "saved". However, the functions performed by a real estate broker still need to be fulfilled. While the author encourages the parties to hire and have their own real estate broker to assist in the transaction, the economics of the transaction may be such that it will not support the real estate brokerage commissions, absent a "short sale". Accordingly, the seller will need to "find" a buyer, or the buyer must "find" a property. Once this is accomplished, and the parties are able to agree upon an acceptable price and terms for the purchase and sale, a contract between the buyer and seller must be prepared. The purpose of this article is to focus on the preparation of such a contract.

If a Broker is not engaged by the Seller to market the property, nor the Buyer to locate a property, the Broker is not lawfully able to prepare the contract. Rather, there are two choices: (1) the parties could prepare the contract themselves; or (2) either Buyer, Seller or both, could hire a lawyer to prepare or review the contract.

Do not "assume" because the attorney is licensed to practice law that the attorney is familiar with the details found in the contract form used in the transaction.

Colorado Real Estate Commission Contract to Buy and Sell Real Estate

The author recommends using, as the contract form, the Colorado Real Estate Commission's Contract to Buy and Sell Real Estate. While I am definitely biased in favor of the Commission approved form of Contract to Buy and Sell Real Estate, it is still the form to use in buying and selling real estate in Colorado. Please do not buy a "contract" form from an office supply location or online source.

The Commission's Contract to Buy and Sell Real Estate form has numerous advantages:

1. It is standard throughout the entire state of Colorado.

2. It is been approved and adopted by the Colorado Real Estate Commission, an agency of the State of Colorado.

3. The forms are easily accessible online at http://www.dora.state.co.us/real-estate/index.htm

4. All the title companies in Colorado are familiar with the form and how it works.

5. The contract form approved by the Colorado Real Estate Commission strikes a fairly even balance between both buyer and seller.

6. It is localized for Colorado property and the practices and customs observed in the state of Colorado.

7. The current contract form has evolved over years and thousands of hours of work by multiple individuals.

8. A real estate broker is required to use the Commission's standard and approved Contract to Buy and Sell Real Estate.

9. The author has continuously been a principal participant in the drafting of the Contract to Buy and Sell Real Estate approved by Colorado Real Estate Commission.

10. It's Free!!!

Who Should Prepare the Contract

Again, it is recommended that both Buyer and Seller each hire their own attorney to prepare or review the Contract to Buy and Sell Real Estate.

If Buyer or Seller are still determined to prepare the contract themselves, a very helpful tool is the electronic reference titled Boxes and Blanks. Note: to make full disclosure, I must admit that I am the author of Boxes and Blanks. It is a "how to" reference on filling in the more than 300 "boxes" and "blanks" contained in the form.

Boxes and Blanks may be ordered on line from Bradford Publishing Company's web site:http://www.bradfordpublishing.com/Legal-Forms/CBS-Guides-Boxes-Blanks/Boxes-Blanks-CBS1.

Conclusion

Buying or selling real estate in Colorado can be complex. The purchase price is normally substantial to both Buyer and Seller. Accordingly, it is recommended whether or not a licensed real estate broker is involved in the transaction, the parties should hire an attorney to draft or review the contract. The recommended contract form is the Contract to Buy and Sell Real Estate approved by the Colorado Real Estate Commission. If you prepare the contract form yourself, review the reference tool Boxes and Blanks.