The Process, Step-by-Step
The Contract and Earnest Money

A contract is a legal arrangement between a Buyer and a Seller and the Earnest Money is the deposit you put down as good faith. Earnest Money goes towards the closing money you will need to close on the property and is refundable depending on the time frame and conditions in the contract. Earnest Money could be forfeited to the Seller if the Buyer fails to hold up their responsibilities during the contract. Your agent is there to guide you thru this process to help make sure this doesn’t happen. Some important tips to keep in mind to streamline the process:

  • Your Agent will assist you in drafting all the paperwork for your purchase and make sure that you have copies of everything. More than likely you will have electronic copies of everything and all paperwork will be signed electronically.
  • Stick to the schedule. Now that you are in contract (the most critical step), you and the seller will be given a timeline to mark every stage in the process of closing the real estate contract. Meeting the requirements on time ensures a smoother flow of negotiations so that each party involved is not in breach of their agreements. During the process, we will keep you constantly updated, so you will always be prepared for the next step.

The Closing Agent

In the State of Colorado, a Title Company will be selected as a closing agent. The closing agent will hold the deposit in escrow and will research the complete recorded history of the property to ensure that the title is free and clear of encumbrances by the date of closing and that all new encumbrances are properly added to the title. Some properties are subject to restrictions that limit various activities such as building or parking restrictions. There may be recorded easements and encroachments, which limit the rights to use your property.

How to Hold Title

You may wish to consult an attorney or tax advisor on the best way to hold the title. Different methods of holding a title have different legal, estate, and tax implications, especially when selling or upon death of the title holder. There are various ways to hold title for residential properties, but the most common types are: Sole Ownership (sometimes referred to as ‘In Sovereignty’ usually used for single ownership); Tenancy in Common (usually no co-tenant survivorship rights and in Colorado this is the type of title presumed unless joint tenancy is expressly stated in the deed); Joint Tenancy (usually provides survivorship rights to the co-tenant – most common for married couples) – again we are not advising which is best for you and you should always consult your attorney or tax advisor for the best way to hold the title for your personal circumstances.


Once your offer is accepted by the seller and you are under contract (congrats!!), you will need to have a professional property inspector inspect the property within the time frame that was agreed upon in the contract to purchase. You may elect to have additional inspectors inspect the property if you wish to obtain professional opinions from inspectors who specialize in a specific area (eg. roof, HVAC, sewer, Radon, structure). We can recommend several different inspectors.
Depending on the outcome of these inspections, one of three things may happen:

  1. Either each milestone is successfully closed and the contingencies (a condition that must be met to continue the contract) will be removed, bringing you one step closer to the close, or
  2. The buyer, after reviewing the property and the papers, requests a renegotiation of the terms of the contract (usual correction of the defect or sometimes the price).
  3. The buyer can back out of the deal and get their earnest money back as long as they are within the time frames and conditions of the contract.

Appraisal and Lending

It is imperative that you keep in close communication with your lender, who will let you know when additional documents are needed to approve your loan application and fund your loan. If the agreement is conditional upon financing, then the property will be appraised by a licensed appraiser to determine the value for the lending institution, via a third party. This is done so that the lending institution can confirm their investment in your property is accurate. Appraisers are specialists in determining the value of properties, based on a combination of square footage measurements, building costs, recent sales of comparable properties, etc. When you are within two weeks of closing, double-check with your lender to be sure the loan will go through smoothly and on time. This relationship with a good lender is key to a smooth transaction.


If the property that you are purchasing is part of an association, your agent will request the rules, regulations, and other important documents from the seller. You will have a certain number of days outlined in the contract to review the HOA (Home Owner Association) documents to verify you have no objections to the restrictions on the property or the financial records of the HOA.

Property Insurance.

If you are obtaining a loan, you will be required by your lender to purchase a certain amount of insurance on the property. The value will depend on the lending institution and the purchase price of the property. You may be able to save hundreds of dollars a year on homeowners insurance by shopping around for insurance. You can also save money with these tips.

  • Consider a higher deductible. Increasing your deductible by just a few hundred dollars can make a big difference in your premium.
  • Ask your insurance agent about discounts. You may be able get a lower premium if your home has safety features such as dead-bolt locks, smoke detectors, an alarm system, storm shutters or fire-retardant roofing materials. Persons over 55 years of age or long-term customers may also be offered discounts. Also bundling your homeowner insurance with your car insurance is another way that might save you money.

Insure your house NOT the land under it. After a disaster, the land is still there. If you do not subtract the value of the land when deciding how much homeowner’s insurance to buy, you will pay more than you should.