This post is designed to assist licensed real estate brokers in Colorado avoid common mistakes while navigating through a transaction.
Assume the judge will be the next person to read your contract
Colorado License Law requires you to exercise reasonable skill and care when providing brokerage services (Uniform Duty 5.1.). As such, competent completion of contracts requires thought as to boxes and blanks. CBS Provision 3.1. states, in part; Any box checked means the corresponding provision applies. Any box, blank or line left blank, or completed with the abbreviation “N/A”, or the word “Deleted” means such provision is not applicable. If no box is checked in a provision that contains selection of “None”, such provision means “None” applies.
While the contract language allows the choice of not checking a box or adding text, if left blank, the judge might wonder if the provision was intentionally deleted or whether the blank was inadvertently overlooked. Don’t leave it up to the judge to interpret the intentions of the parties.
As to Additional Provisions, be very careful when crafting language. Make sure your language is clear, complete, transaction-specific and resulting from negotiations or the instruction(s) of the party(ies) to the transaction (Commission Rule 7).
If uncertain as to proper crafting of specific language, seek guidance from your employing broker, legal counsel, and/or consider and taking a strong contracts class!
Know and explain your forms
Brokers are required to explain the effects of the forms and are required to understand what forms and addendums are appropriate to the transaction. Before signing, people need to fully understand their rights and obligations. Furthermore, people can only make decisions [informed decisions] when they understand what their choices are, and how their choice might affect future events. Do not tell your client what choice to make. Doing so constitutes the unauthorized practice of law. Take the time to explain the forms to your parties so they can make informed decisions.
Make sure the consumer understands your role
The public wrongly believes a Real Estate Agent is one who helps others buy, sell, or lease real estate. We know better, an Agent is a licensee who has been engaged as an advocate for their party and a Transaction-Broker is a licensee who has been engaged to assist one or more parties without being an agent or advocate for any party.
The Colorado General Assembly has found that “the public would be better served if they have a clear understanding of the legal and working relationships with real estate brokers”. As a result, it is our statutory duty to make proper disclosure of brokerage relationships, and make sure the message is understood.
The Commission has equipped us to provide disclosure of brokerage relationships through various forms. All you need to understand is what to disclose, when to disclose, and how to disclose!
Keep track of all your phone calls, emails and all communications. Your ability to document what was done, not done, said or not said, may become very important in the event of a lawsuit or complaint. Keep everything, even though it may not be required by commission rule. Your transaction file might include drafts of contracts or leases, redlines, all offers received even if they were not accepted, due diligence documents you may have received, text and email strings, etc.
If a party you are working with asks you a question and you don’t know the answer, don’t guess! Tell them you don’t know. Making statements outside of the scope of your license or beyond your expertise as a licensee never works out well. These statements can quickly backfire and get you into trouble. Be very careful when you take it upon yourself to verify information. If you pass on inaccurate information, the liability may be yours if the information is incorrect. Maybe a better solution would be to have your party investigate the answer and come to their own conclusion.
Encourage use of legal counsel
Commission approved forms include the warning, “This form has important legal consequences and the parties should consult legal and tax or other counsel before signing”. Take that warning to heart, articulate the warning and never discourage legal counsel!
Recommend use of experts
Uniform Duty 5.1.4. requires licensees to “Advise the party to obtain expert advice as to material matters about which the broker knows but the specifics of which are beyond the expertise of the broker”. If you insist on being the expert, you will assume the liability if you are wrong.
Never predict the future
Always anxious to help, brokers should be very careful when making assertions as to future events. Statements of fact must be accurate, and problems arise when people make important decisions based on inaccurate comments or statements made by their broker. If you are uncertain, or the questions falls outside of the scope of your license activities, direct your party to more reliable sources for answers. Common examples might include issues related to zoning, ADA compliance, rent projections, environmental hazards, surveys, etc.
Your Uniform Duty 5.1.4. will either condemn you or get you out of jail free; “Advising the party to obtain expert advice as to material matters about which the broker knows but the specifics of which are beyond the expertise of the broker”. As mentioned above, do not advise parties outside the scope of your license, regardless of your own perceived expertise.