Denver CO First Time Home Buyer Series – Understanding the Real Estate Contract (Part 7)

Understanding the process of writing an offer and having that offer accepted is a very important part of the home buying process. There is no binding agreement for the purchase until the contract is drawn up, agreed to and signed by all parties. Most home buyers when they start the process are excited about finding the right home, having their Realtor® prepare the offer and getting it in front of the sellers for signatures. Until all signatures are in place there is no agreement. (Anything expected or agreed to in the purchase of a home should be clear and in writing)

Once the buyers and sellers have signed the agreement it becomes legally binding on all parties with both parties having specific performances and deadlines which need to be met.

What is it that makes Colorado contracts legally binding?

I have had times where people have thought that just making an offer makes it legally binding. An offer by itself is not legally binding there are other components or actions which need to be taken for it to be binding.

What is an offer? The best way for a Denver CO first time home buyer to extend an offer is in writing utilizing the services of a Realtor® to prepare it. Verbal offers in the state of Colorado are typically not taken seriously and legal agreements such as this should always be in writing to avoid misunderstandings. Your Realtor® can prepare all the documents required to make an offer and present them on your behalf.

What is acceptance? For an offer which has been extended to be binding it has to be accepted by the counterpart to the offer and notification of acceptance must be given. Accepting an offer means accepting it in its entirety. Should a single term not be agreeable to the counterpart the offer is rejected and a counter offer can be extended amending the point in the offer which was not agreed to. If the offer or counteroffer is agreeable to all parties and executed it becomes valid and binding.

What is consideration? In order for a contract to be considered legally binding, consideration must be given. Without consideration it is only a gift. In nearly all Colorado real estate transactions consideration is monetary in the form of earnest money which represents part of the purchase price. Earnest money in a real estate transaction is also considered good faith upon the part of a buyer to show they are serious about the purchase.

The main points covered in the contract to buy or sell real estate are to identify the parties to the transaction, identify the property, spell out the terms of the agreement and repercussions should a party to the agreement fail to perform.

When purchasing a home, time is of the essence.

Built into an agreement to buy or sell real estate is steps and deadlines for their completion. Complying with the timing built into the agreement is vital to a successful transaction. When agreeing to purchase or sell a property you are agreeing to adhere to the timelines and failure to do so can put any buyers earnest money at risk or put a party in breach of contract. Time is of the essence.

Just a few (not all) of the important dates spelled out in a contract to buy or sell real estate are:

• Loan commitment deadlines
• Title commitment deadlines
• Deadline for hoa documentation
• Inspection objection deadline
• Insurance objection deadline
• Acceptance deadline
• And there are several more

Respect the contract as it is a legally binding document. Anything agreed to should always be in writing and not adhering to the contract has consequences, headaches and heartaches.

Next up in the Denver CO First Time Home Buyer Series – What to Expect with Home Inspections (Part 8)