Selling or purchasing property without a broker, let alone an attorney, has become an increasingly common practice, but there are a number of pitfalls you should be wary of if you decide to do so. Below are just a few of the considerations you should keep in mind:
1. The purchase and sale agreement is a complicated document, and you should read it thoroughly before signing. Although most residential purchases (and many commercial purchases) in Colorado are conducted using a version of the Colorado Real Estate Commission’s standard Contract to Buy and Sell Real Estate, there are situations where an alternative form of purchase and sale agreement is used, especially where the deal is atypical or where the seller is a large, national corporation that prefers its own form. Even in situations where the Colorado Real Estate Commission’s form is used, there are numerous pitfalls for the unwary. For example, Section 3 contains deadlines which may or may not be applicable and which must be strictly adhered to at the risk of default or the loss of termination rights. Likewise, there are numerous decisions that need to be made by the parties, such as what type of deed will be used or whether or not the title commitment will contain Owner’s Extended Coverage. Further, Section 30 allows for the inclusion of additional provisions, which may be required if there are any atypical business terms that the parties wish to include. Any such terms should be drafted carefully and precisely so as to avoid any ambiguity which could result in costly future disputes.
2. In between the execution of the purchase and sale agreement and closing, the buyer will have the opportunity to conduct due diligence. This may include obtaining a survey, a title commitment, HOA documents, zoning reports, inspections and/or an environmental report. These documents should be carefully reviewed prior to the applicable contingency deadlines in the purchase and sale agreement. For example, the title commitment will include exceptions from coverage which are listed on Schedule B of the commitment. The title company will not insure against any damages resulting from said exceptions and if they remain on the final title policy issued by the title company the buyer assumes any risk related thereto. In some circumstances, the title company may be willing to remove or endorse over certain exceptions. Issues such as title defects, environmental conditions, zoning problems and structural issues can greatly reduce the value of a property and can be used to re-negotiate if objected to prior to the applicable contingency deadline under most purchase and sale agreements.
3. Closing documentation should always be reviewed carefully, even when prepared by a title company. Settlement statements should be checked to ensure there are no computational errors and that the prorations accurately reflect the purchase and sale agreement. The deed should be reviewed to ensure that the legal description and the names of the parties are correct and to further ensure that title is being transferred only subject to the agreed upon exceptions to title, especially if a title commitment has not been negotiated. Failure to do so can result in costly disputes in the future.
Note that the above is only a small sample of the matters to consider and the potential issues and pitfalls that can arise when selling or purchasing a property on your own.
