In Colorado residential real estate transactions, sellers have a legal duty to disclose known problems with a property. Under the Colorado Real Estate Commission’s Contract to Buy and Sell Real Estate (Residential), sellers must disclose all adverse material facts actually known about the property.
If a seller discovers a new defect or property problem after submitting the Seller’s Property Disclosure form, Colorado law may give the buyer the right to terminate the real estate contract, even if inspection deadlines have already passed.
This article explains Colorado seller disclosure requirements, what qualifies as an adverse material fact, and when a buyer may terminate a Colorado real estate contract after receiving new information about a property defect.
Because most residential home purchases in Colorado are governed by the Colorado Real Estate Commission’s Contract to Buy and Sell Real Estate (Residential), understanding these disclosure obligations is essential for buyers, sellers, and real estate professionals alike.
Seller Disclosure Requirements in Colorado Real Estate
Under Section 10 of the Colorado Real Estate Commission contract:
- The seller must complete the Seller’s Property Disclosure form.
- The disclosure must reflect the seller’s current actual knowledge.
- The seller must disclose all adverse material facts actually known, even if not specifically asked on the form.
What Is an Adverse Material Fact?
An adverse material fact is generally:
- A defect or condition that would concern a reasonable buyer
- A fact that could affect the property’s value
- A structural, safety, or legal issue impacting the home
This includes structural problems, water issues, foundation concerns, or other significant defects.
What Happens If the Seller Learns of a New Problem?
If a seller discovers a new adverse material fact after submitting the disclosure:
- Before the Disclosure Deadline:
The seller must update and resubmit the Seller’s Property Disclosure form. - After the Disclosure Deadline:
The seller must still disclose the new information in writing to the buyer.
Typically, the listing real estate agent communicates this written disclosure after being informed by the seller.
Buyer’s Right to Terminate Under Section 10.2
Section 10.2 of the Colorado real estate contract states:
- The seller must disclose newly discovered adverse material facts.
- The buyer has the right to terminate based on the new disclosure.
- Termination must occur no later than the earlier of:
- Five days after the buyer receives the new disclosure, or
- Closing.
Even if inspection deadlines have passed, the buyer may still have the right to terminate if the disclosure qualifies under Section 10.2.
Example Scenario: Structural Engineering Report
Fact Pattern
- Seller completes the disclosure form to the best of their knowledge.
- Seller mentions a prior structural engineering report but cannot locate it.
- Seller believes recommended repairs were completed.
- Buyer completes inspections and deadlines pass.
- Seller later provides the engineering report.
- The report reveals an unresolved structural issue.
- Seller cannot prove recommended repairs were performed.
Legal Outcome
Even though inspection deadlines have passed, the buyer may terminate the contract under Section 10.2. The buyer must act within:
- Five days of receiving the new structural report, or
- Before closing — whichever comes first.
Why Timing Matters
In these situations:
- The five-day termination window is critical.
- Buyers should immediately consult:
- A real estate attorney
- A structural engineer
- Other qualified professionals
Missing the five-day deadline could result in losing the termination right.
“As Is” Does Not Eliminate Disclosure Obligations
Although Colorado contracts typically state that property is sold:
“As Is,” “Where Is,” and “With All Faults”
The seller must still disclose adverse material facts actually known. An “as is” clause does not excuse failure to disclose material defects.
Key Takeaways for Buyers and Real Estate Professionals
- Sellers must disclose newly discovered adverse material facts.
- Buyers may terminate based on new disclosures.
- The termination deadline is strict.
- Written documentation is essential.
- Professional legal guidance is strongly recommended.
If you are facing a disclosure issue or a newly discovered property defect in a Colorado real estate transaction, consulting with a real estate attorney can help you understand your rights and options. Contact Cindy Manzano for more information.
