THIS IS A SUMMARY OF LAW AND IS PROVIDED TO YOU AS GENERALLY GOOD ADVICE. IF YOU HAVE MATTERS RELATING TO THIS OR OTHER LEGAL SUBJECTS, BUT ARE NOT AN ATTORNEY, WE ADVISE YOU TO CONSULT WITH ONE.
This information is provided as a service to the home buying and home selling public by the:
Colorado Bar Association
(Real Estate Law Section)
1900 Grant Street, Suite 900
Denver, CO 80203
303/860-1115
Colorado Bar Association
Colorado Association of REALTORS ®
309 Inverness Way South
Englewood, CO 80112
303/790-7099
Colorado Association of Realtors
Colorado Real Estate Commission
1900 Grant Street, Suite 600
Denver, CO 80203
303/894-2166
Colorado Division of Real Estate
EQUAL HOUSING OPPORTUNITY
Do I Need a Lawyer?
Generally, buying or selling a home is the largest financial transaction of one's life. These real estate transactions give rise to a number of legal questions that a lawyer with real estate background and experience is best equipped to answer. ONLY a lawyer and NOT a lender, title company, or a real estate broker or REALTOR® can give you legal advice. This information is intended to assist the homebuyer and seller in assessing the need for a lawyer and to foster the broker/REALTOR®/lawyer roles and relationships.
How Much Will a Lawyer Cost?
There are no set fee schedules for lawyers, and individual lawyers charge different fees (which may include hourly or flat fees) for different services. Before you hire a lawyer, you should ask the lawyer to explain to you what fees you can expect. You may also wish to discuss limiting the lawyer's involvement in the transaction to specific tasks such as reviewing the contract, reviewing the title commitment and related title documents, and reviewing the closing documents. Any such limitations should be reflected in a written agreement with the lawyer.
What If I Don't Have a Lawyer?
If you don't have a lawyer, there are many ways to find one. You can ask your friends, your associates at your job, your broker or REALTOR®, consult with a lawyer referral service in the Colorado Bar Association, or confer with a member of the Real Estate Section of the Colorado Bar Association.
Can I Rely On Others?
Lenders - Since a lender wants primarily to protect its loan and security, the lender's position is mostly compatible with that of the buyer. However, the lender's and the buyer's interests may differ. For example, lenders receive different types of title insurance coverage and documentation than buyers. Also, a lender often orders and receives for its own records such important items as a survey, environmental report (if appropriate), and appraisal on the property being bought. Frequently, these items are not delivered to the buyer unless requested. A lender's evaluation of these documents quite often is not as stringent as a buyer's review should be. The important thing to remember is that lenders cannot give the legal advice, which may be necessary to protect the buyer's interests, and a buyer cannot rely on the lender for protection.
Title Insurance Companies - Title insurance is not strictly speaking, insurance. It is a contract which agrees to indemnify the holder of the insurance policy, within the policy limits, for loss sustained by reason of certain defects in the title, provided the loss does not result from a defect excluded by the policy provisions. However, title insurance policies contain many exclusions and exceptions, which leave gaps in the buyer's protection. It is extremely important for buyers to understand what these exclusions and exceptions are, to review the actual documents, and to evaluate their effect on a buyer's title (and the scope of title insurance coverage). A lawyer can often help a buyer or seller understand these important documents and to negotiate for the elimination of some of these exclusions and exceptions from the title policy.
Typically, as a service to (and for a small fee paid by) the real estate brokers, title companies prepare the deed and bill of sale conveying title to the real estate and inclusions. A lawyer can review these documents and ensure their compliance with the contract terms. Furthermore, title companies prepare numerous other documents which parties are asked to sign at closing, many of which protect just the title company. Buyers and sellers should understand these documents before signing them. A lawyer can help with this review as well.
Real Estate Brokers/REALTORS® - In transactions where real estate brokers act as agents or transaction brokers and receive only a commission, the Colorado Supreme Court allows contracts to be prepared by brokers/ REALTORS® under specific circumstances. (Note that those brokers who are members of the Colorado Association of REALTORS® are also known as REALTORS®, who are governed by a Code of Ethics). These must be prepared on standard contract forms approved by the Colorado Real Estate Commission generally by filling in the blanks with information obtained from the usual sources. Real estate brokers/ REALTORS® are not lawyers, and cannot give legal advice. The buyer should always remember that in real estate transactions, several forms of brokerage relationships exist. These include exclusive seller or buyer agent, dual agent, and transaction broker. Sometimes due to circumstances arising during a transaction, these relationships can change. Therefore, each person working with a broker/ REALTOR® should clearly understand the relationship that the broker/ REALTOR® has in the transaction. This includes such important things as confidentiality of that party's negotiating considerations and motives. Parties should request and review the Brokerage Relationship Disclosure forms with the broker/ REALTOR® before proceeding. A lawyer with real estate background and experience can be helpful to parties in understanding these forms before they are signed.
When Should I Consult a Lawyer?
In general, when making the decision about whether or not to consult a lawyer, remember the advice printed on the Colorado Real Estate Commission approved real estate contracts, (which contracts are used in many real estate transactions):
This form has important legal consequences and the parties should consult legal and tax or other counsel before signing.