Question: I would like to buy a property I have listed for a seller/client for my own use, or for future resale. I do not want to buy the property to facilitate the seller’s purchase of another property. I want to own the property and do not wish to continue to market it after I have a contract to buy it. Does rule F-11 apply and must I use the Commission’s Licensee Buy-Out Addendum?
Answer: No. Rule F-11 only applies in one or more of the following instances:
When a licensee enters into a contract to purchase a property: (1) concurrent with the listing of such property; (2) as an inducement or to facilitate the property owner’s purchase of another property; or (3) continues to market that property on behalf of the owner under an existing listing contract . . .
As the Real Estate Commission states in its Position on the Use of Licensee Buyout Addendum: “Unless one of the above [three] situations exists, licensees are not required to use the Buyout Addendum.
But the Commission’s position goes on to state that:
If the listing licensee or broker desires to acquire a listed property solely for personal use or future resale and not as an inducement to the owner, the licensee or broker is advised to (1) clearly sever their agency or listing relationship in writing; (2) renounce the right to any commission, fee or compensation in conjunction with acquisition of the listed property; and, (3) advise the owner to seek other assistance, representation or legal advice.
Brokers should follow these three steps when purchasing company listings for their own use:
Question: Do real estate brokers have any involuntary lien rights, like a mechanic’s lien claim, against a Seller who breaches a listing agreement?
Answer: No. The listing agreement is a personal services contract which does not create any real property interest in the listed property. If the Seller breaches the listing agreement, the listing broker may sue the owner for money damages. Absent a separate agreement providing for a lien in the listing agreement, brokers have no such involuntary lien claim against sellers.
Question: I am working with Buyer #1 as a buyer’s agent. Buyer #1 has a property under contract. Buyer #2, also a client of mine, would also like to engage me to make a backup offer on the property. Can I help both buyers pursue the same property?
Answer: C.R.S. ’12-61-905(4) provides as follows:
A buyer’s or tenant’s agent may show properties in which the buyer or tenant is interested to other prospective buyers or tenants without breaching any duty or obligation to such buyer or tenant. Nothing in this section shall be construed to prohibit a buyer’s or tenant’s agent from showing competing buyers or tenants the same property and from assisting competing buyer or tenants in attempting to purchase or lease a particular property.
While the statute permits the Buyer’s agent to help two competing buyers pursue the same property, the statute does not give guidance about how a buyer’s agent can do so. There are also no Real Estate Commission Rules or official positions to guide brokers. Because the situation clearly involves a conflict of interest, brokers should proceed carefully and perhaps with the advice of legal counsel.
Question: What is the difference between the Real Estate Commission’s “UCCC–No Default Rate” promissory note form and the other note form?
Answer: The UCCC–No Default Rate note does not provide for a default rate of interest and provides a 20-day cure period for a defaulting borrower. The other note form does provide for a default rate of interest and does not give a defaulting borrower a cure period. Licensees may get a more precise understanding of these differences by comparing paragraph 4 from both versions of the note to one another.
Another subtle difference between the two forms is that the preprinted language in paragraph 5 of the UCCC–No Default Rate note does not provide for any exception to the borrower’s right to prepay, while paragraph 5 of the other note contains blank space and language contemplating that the parties might make exceptions to the borrower’s ability to prepay.
Question: What are the differences between the three Real Estate Commission deed of trust forms?
Answer: A transfer from the borrower to a new owner under the “Due On Transfer–Strict” deed of trust creates a default, unless the lender consents to the transfer. The lender has no obligation to consent to the transfer, regardless of the creditworthiness of the borrower. The deed of trust labeled “Assumable-Not Due on Sale” would allow the borrower to sell the property to a new owner and keep the existing financing alive without the consent of the lender. The “Due on Transfer–Creditworthy Restriction” deed of trust requires the lender to accept a “creditworthy” buyer. The Due On Transfer–Strict deed of trust and the Assumable-Not Due on Sale deed of trust create a clear relationship between lender and borrower regarding transfer issues. But because reasonable people can disagree about whether a proposed buyer is creditworthy, use of the creditworthy deed of trust enhances the chances of a dispute and perhaps litigation between lender and borrower.
A version of this article appeared in the Colorado REALTOR® News, the monthly publication of the Colorado Association of REALTORS®.