PREFACE

The Colorado Real Estate Commission and the Colorado Board of Real Estate Appraisers, with assistance from the Division of Real Estate, have prepared this manual. The Commission and Board gratefully acknowledge the help of the many who have contributed, without compensation, their knowledge and experience.

We hope this manual will be helpful to the new applicant for licensure and also a benefit to the practicing real estate broker, appraisal, and mortgage professional as a ready reference.

The information contained in this manual is fundamental to a sound introduction to the real estate industry. It is not intended as an all-inclusive real estate text; nor should it be relied upon as a source of legal advice. Many colleges and universities offer four-year programs leading to a degree in real estate and related fields. Many classes and courses of instruction are available throughout the State of Colorado for those who desire to increase their educational and professional competency. There are also many books and pamphlets written on the subject of real estate. In addition, to better protect the public interest, the employing broker or supervising appraiser should spend considerable time instructing employed licensees on the application of license law and proper business procedure.

Suggestions, corrections and criticisms for and of this publication are solicited and will receive careful consideration.

Disclaimer: The portions of the Colorado Revised Statutes, reprinted in this Manual with permission of the Committee on Legal Services in accordance with section 2-5-118, C.R.S., are unofficial publications of the Colorado Revised Statutes. They are included as: a reference for real estate practitioners, an aid to those preparing for licensure, and others with an interest in a digest of real estate related laws and information. The Real Estate Commission, Board of Real Estate Appraisers, and Division of Real Estate make every effort to maintain accurate information; however the State makes no warranties whatsoever in relation to the contents of this manual, and users rely upon the information contained herein at their own risk. Official statutes are maintained on the Colorado General Assembly website at: http://www.leg.state.co.us/

Official rules of the Real Estate Commission, Board of Real Estate Appraisers, and Mortgage Broker Program are compiled and published by the Secretary of State in the Code of Colorado Regulations at: http://www.sos.state.co.us/CCR/Welcome.do

The most current version of this Manual and other information is available on the Colorado Division of Real Estate website at: http://www.dora.state.co.us/real-estate

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REAL ESTATE BROKER EXAMINATIONS

Applicants for licensing under the Colorado real estate broker license law are required to take an examination for the purpose of maintaining the educational standards and professional competency of the real estate industry and in order to protect the public interest in real estate transactions. The law imposes upon the real estate commission the responsibility of regulating and controlling the issuance, revocation or suspension of licenses. This authority includes the investigation of complaints against licensees for fraud, misrepresentation, secret profits, commingling of deposit funds, false advertising, failure to maintain proper trust accounts and other causes.

The real estate broker examination has been prepared to determine whether the applicant is well grounded in the fundamentals of real estate principles and practices and is a measure of a candidate’s knowledge and qualification for minimum competency.

The examination is in two parts. The general portion covers real estate practice common to most states. The state portion of the examination is devoted to real estate practice in Colorado.

Although examinations are based primarily on material covered by the Colorado real estate manual, the applicant is expected to be informed as to the usual and current activities and practices in the real estate field. The statutory educational and experience requirements for broker applicants are listed in this manual. Examinations are given by a testing service designated by the real estate commission.

Passing the examination is only the first step in pursuing a successful career in real estate. The employing broker should continually instruct the licensees operating under his or her brokerage in proper and ethical business procedures.

REAL ESTATE APPRAISAL EXAMINATIONS

Applicants for all levels of real estate appraiser licensing must successfully complete an appropriate examination administered by the testing contractor designated by the board of real estate appraisers. Examinations test for understanding and ability to apply real estate fundamentals, appraisal principles, appraisal procedures and standards of appraisal practice.

At the registered and licensed appraiser levels, applicants must successfully complete the licensed appraiser (Level A) examination. Certified residential appraiser applicants must pass the certified residential appraiser (Level B) examination. The certified general appraiser (Level C) examination is required to apply for certified general appraiser. A passing score on an appropriate examination will be accepted for one year from the date of testing.

Colorado has open examinations. Anyone may take any level of examination at any time, without pre-qualification as to education or experience. Colorado examinations are open to residents of other states. Check to see if the other state will accept the Colorado examination.

Successful completion of the examination is only one step in the process of qualifying for licensing. Applicants must also demonstrate successful completion of the education required by Colorado statute and board rules. At the licensed and certified levels applicants must also document completion of real estate appraisal experience requirements.

MORTGAGE BROKER EXAMINATIONS

Applicants for mortgage broker licensing must successfully complete 40 hours of pre-licensing education, and pass a two part licensing examination. The course of study for mortagage broker candidates consists of State and Federal Law, which includes current and relevant state and federal statutes, regulations, and forms as they pertain to the mortgage broker industry, and Mortgage 101. Mortgage 101 provides a course of study for mortgage broker candidates that identifies the necessary components and overall anatomy of a mortgage loan transaction. The Business and Trade Practices component of the course provides candidates with the real world application of laws, rules, and standards of practice.

All mortgage brokers who currently maintain a Colorado mortgage broker’s license must complete 40 hours of licensing education and pass a two-part licensing examination by January 1, 2009.

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CP-21 Commission Position On Office Policy Manuals .......................................................	3-14
CP-22 Commission Position Statement on Handling of Confidential Information in
Real Estate Brokerage.................................................................................................	3-14
CP-23 Commission Position On Use Of “Licensee Buyout Addendum”..............................	3-15
CP-24 Commission Position On Preparation Of Market Analyses And Real Estate
Evaluations Used For Loan Purposes .........................................................................	3-16
CP-25 Commission Position On Recording Contracts...........................................................	3-16
CP-26 Commission Position On Auctioning .........................................................................	3-17
CP-27 Commission Position On The Performance Of Residential Property
Management Functions...............................................................................................	3-18
CP-28 Commission Position On Showing Properties ............................................................	3-19
CP-29 Commission Position On “Megan’s Law”..................................................................	3-19
CP-30 State of Colorado Real Estate Commission and Board of Real Estate
Appraisers Joint Position Statement on Seller Assisted Down Payments ..................	3-20
CP-31 Commission Position on Acting As A Transaction Broker Or Agent in
Particular Types of Transactions. ...............................................................................	3-21
CP-32 Commission Position on Brokerage Disclosures ........................................................	3-22
CP-33 Joint Position Statement from the Division of Real Estate and Division of
Insurance.....................................................................................................................	3-22
CP-34 Joint Position Statement from the Division of Real Estate and Division of
Insurance Concerning Closing Instructions ................................................................	3-24

CHAPTER 4: SUBDIVISION LAWS .......................................................................................4-1 I. Subdivision Statute ................................................................................................................4-1 II. Rules and Regulations for Subdivision Developers .............................................................4-7 III. Jurisdiction of Commission...............................................................................................4-17 A. General.....................................................................................................................4-17 B. Exempt from Registration under the Subdivision Developer’s Act.........................4-17 C. Additional Provisions of the Subdivision Act..........................................................4-17

IV. Licensee’s Responsibilities...............................................................................................4-18 V. Estates above the Surface...................................................................................................4-19 Title 38, Article 32, C.R.S. – Estates Above The Surface............................................4-19 VI. Condominium Ownership Act ..........................................................................................4-19 Title 38, Article 33, C.R.S. – Condominium Ownership Act.......................................4-19

VII. Municipal Planning and Zoning Laws.............................................................................4-22 VIII. County Planning Laws ...................................................................................................4-22 IX. Colorado Land Use Commission ......................................................................................4-23 X. Special Types of Subdivisions ...........................................................................................4-24 A. Shopping Center ......................................................................................................4-24 B. Condominiums as Subdivisions ...............................................................................4-24

XI. Colorado Common Interest Ownership Act......................................................................4-25 A. Creation, Alteration and Termination ......................................................................4-41 XII. Management of the Common Interest Community .........................................................4-61

XIII. Cooperative Housing Corporations................................................................................4-81

CHAPTER 5: LANDMARK CASE LAW AND OPINIONS..................................................5-1 I. Supreme Court Decision on Practice of Law by Brokers ......................................................5-1 A. Summary of Decision on Practice of Law by Brokers...............................................5-2 II. Companion Decision on Practice of Law .............................................................................5-4

III. Licensee Acting on Own Account-Commission Jurisdiction .............................................5-5 IV. Attorney General’s Opinion on Business Opportunities.....................................................5-7 V. Summary ..............................................................................................................................5-9

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CHAPTER 6: INTERESTS IN LAND HISTORY .................................................................. 6-1

I. Introduction ........................................................................................................................... 6-1

II. Kinds of Interests in Land.................................................................................................... 6-1

A. Freehold estates ......................................................................................................... 6-2

B. Non-Freehold Estates. ............................................................................................... 6-4

III. Concurrent Interests............................................................................................................ 6-4

A. Joint Tenancy ............................................................................................................ 6-4

B. Tenancy in Common ................................................................................................. 6-6

IV. Concurrent Conveyances.................................................................................................... 6-6

V. Homestead Exemption......................................................................................................... 6-6

VI. Easements........................................................................................................................... 6-8

VII. Adverse Possession ........................................................................................................... 6-8

VIII. Combined Types of Ownership ..................................................................................... 6-10

CHAPTER 7: LAND DESCRIPTIONS.................................................................................... 7-1

I. Introduction ........................................................................................................................... 7-1

II. The United States Governmental Survey System ................................................................ 7-1

II. Metes and Bounds Descriptions........................................................................................... 7-5

A. Bearing System.......................................................................................................... 7-5

B. Azimuth System ........................................................................................................ 7-7

III. Recorded Subdivision Plat.................................................................................................. 7-7

IV. Surveys and Certificates..................................................................................................... 7-8

V. Colorado Coordinate System............................................................................................. 7-11

VI. Metric System................................................................................................................... 7-13

CHAPTER 8: DEEDS AND TRANSFER OF TITLE............................................................. 8-1

I. Introduction ........................................................................................................................... 8-1

A. Types of Deeds.......................................................................................................... 8-3

B. Usual Elements of Deeds........................................................................................... 8-4

CHAPTER 9: EVIDENCE OF TITLE..................................................................................... 9-1

I. General .................................................................................................................................. 9-1

II. Abstract and Opinion ........................................................................................................... 9-1

A. Liability ..................................................................................................................... 9-1

B. Risks .......................................................................................................................... 9-2

III. Title Insurance .................................................................................................................... 9-2

A. Owner’s vs. Mortgagee’s Policies............................................................................. 9-2

B. Title Insurance Commitments.................................................................................... 9-3

C. Division of Insurance................................................................................................. 9-3

IV. Torrens Certificate of Title................................................................................................. 9-6

A. Methods of Registration ............................................................................................ 9-7

B. Transfer of Torrens Title ........................................................................................... 9-7

CHAPTER 10: APPRAISER REGULATION....................................................................... 10-1 I. The Colorado Board of Real Estate Appraisers .................................................................. 10-1 II. Appraiser Licensing and Certification ............................................................................... 10-1 III. Levels of Appraiser Licensure.......................................................................................... 10-2 IV. Requirements for Appraiser Licensure............................................................................. 10-3 V. Continuing Education Requirements ................................................................................. 10-5 Title 12, Article 61, Part 7, Colorado Revised Statutes – Real Estate Appraisers ....... 10-6 VI. Rule Making of the Board of Real Estate Appraisers..................................................... 10-16 RULES OF THE COLORADO BOARD OF REAL ESTATE APPRAISERS............................ 10-17

VII. Appendix – Affidavit for Conservation Easement Appraisals...................................... 10-47

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CHAPTER 11: CONSERVATION EASEMENTS................................................................11-1 I. Introduction..........................................................................................................................11-1 II. HB1353 – Legislative declaration. .....................................................................................11-1

CHAPTER 12: MORTGAGE BROKERS..............................................................................12-1 I. Introduction..........................................................................................................................12-1 II. Mortgage Broker Licensing Act.........................................................................................12-2 Colorado Revised Statutes Title 12, Article 61, Part 9.................................................12-2 III. Standards for Mortgage Lending and Servicing .............................................................12-16

IV. Loan Fraud......................................................................................................................12-20 V. Mortgage Broker Rules ....................................................................................................12-22 VI. Position Statements.........................................................................................................12-50

Position Statement – MB 1.1 Non-Traditional Mortgage Products and

Documentation Types ...........................................................................................12-50 Position Statement – MB 1.2 – Mortgage Broker Contracts ......................................12-50 Position Statement – MB 1.3 – License Required ......................................................12-51 Position Statement – MB 1.4 – Applicability of Colorado Mortgage Broker

Licensing Law to Employees and Exclusive Agents of Federal and State

Financial Institutions.............................................................................................12-51

CHAPTER 13: WATER RIGHTS...........................................................................................13-1 I. Water Allocation Laws and Procedures...............................................................................13-1 II. Well Permits .......................................................................................................................13-3 III. Conveying and Encumbering Water Rights......................................................................13-4 IV. Disclosure of Potable Water Source .................................................................................13-6 V. Special Considerations for Irrigated Land..........................................................................13-7 VI. Water Conservation and Drought Mitigation....................................................................13-8 VII. Conclusion.......................................................................................................................13-9 VIII. Water Right Terminology ............................................................................................13-10

CHAPTER 14: BROKERAGE RELATIONSHIPS...............................................................14-1

I. Introduction..........................................................................................................................14-1

A. We’re # 1 .................................................................................................................14-1

B. Two Good Choices...................................................................................................14-1

C. The Way We Were...................................................................................................14-1

D. You’re the One.........................................................................................................14-1

E. Good News/Bad News .............................................................................................14-2

F. Get a Job...................................................................................................................14-2

II. Designated Brokerage ........................................................................................................14-2

A. One-Person Firm......................................................................................................14-2

B. Multiple-Person Firm...............................................................................................14-3

C. Stop the Flow ...........................................................................................................14-3

D. Supervising ..............................................................................................................14-3

E. Not Dual ...................................................................................................................14-3

III. Agency ..............................................................................................................................14-4

A. Two Kinds of Agency Law......................................................................................14-4

B. The Basics................................................................................................................14-4

C. No Secret Agents .....................................................................................................14-4

D. Authority 3-Ways ....................................................................................................14-4

E. Don’t Go There ........................................................................................................14-4

F. Real Estate Agency...................................................................................................14-5

IV. Transaction-Brokerage......................................................................................................14-5

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V. Uniform Duties .................................................................................................................. 14-5 A. Getting Started......................................................................................................... 14-5 B. Seller or Landlord Uniform Duties.......................................................................... 14-5 C. Seller or Landlord Agency – Additional Duties...................................................... 14-7 D. Buyer or Tenant Uniform Duties............................................................................. 14-7 E. Buyer or Tenant Agency – Additional Duties ......................................................... 14-8

VI. Entering into a Brokerage Relationship............................................................................ 14-8 A. Get It in Writing ...................................................................................................... 14-8 B. Agency..................................................................................................................... 14-8 C. Transaction-Brokerage ............................................................................................ 14-9 D. Customer ................................................................................................................. 14-9 E. Lots of Combinations............................................................................................... 14-9

VII. Disclosures .................................................................................................................... 14-10 A. When to Do It........................................................................................................ 14-10 B. They’re in There.................................................................................................... 14-10 C. Designated Brokerage Disclosure.......................................................................... 14-10 D. In the Beginning .................................................................................................... 14-10 E. Other Upfront Disclosures..................................................................................... 14-11 F. Mid-Stream ............................................................................................................ 14-12

VIII. Two Examples ............................................................................................................. 14-12 A. Only One Broker ................................................................................................... 14-12 B. Other Broker Involved........................................................................................... 14-13 C. Prohibited Relationships........................................................................................ 14-13

IX. Duration of Relationships............................................................................................... 14-13 A. Term ...................................................................................................................... 14-13 B. Termination ........................................................................................................... 14-14 C. No Duties after Termination.................................................................................. 14-14 D. Responsibilities after Termination ........................................................................ 14-14

X. Office Policies.................................................................................................................. 14-14 XI. Compensation................................................................................................................. 14-14 A. Payment Not Agency............................................................................................. 14-14 B. Multiple Payments................................................................................................. 14-15 C. Payer...................................................................................................................... 14-15 D. Approval to Share.................................................................................................. 14-15 E. ID ........................................................................................................................... 14-15 F. Out-of-State Brokers.............................................................................................. 14-15

CHAPTER 15: LISTINGS....................................................................................................... 15-1

I. General ................................................................................................................................ 15-1

II. Right-to-Sell Agreements .................................................................................................. 15-1

III. Types of Seller Agreements.............................................................................................. 15-1

A. Net Listing............................................................................................................... 15-2

B. Open Listing ............................................................................................................ 15-2

C. Exclusive Agency Listing........................................................................................ 15-2

D. Exclusive Right-to-Sell Listing............................................................................... 15-3

E. Multiple Listing ....................................................................................................... 15-3

IV. Right-to-Buy Agreements ................................................................................................ 15-3

A. Exclusive Right-to-Buy Contract ............................................................................ 15-3

V. Change of Status ................................................................................................................ 15-4

VI. Approved Forms............................................................................................................... 15-4

VII. Broker Responsibility...................................................................................................... 15-4

A. Diligence in Pursuing the Objective of the Listing Agreement............................... 15-4

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B. Cancelled Listings....................................................................................................15-5 C. Conflicts of Interest..................................................................................................15-5 D. Scope of Activity – Principal Consent.....................................................................15-5 E. Commission-Approved Forms .................................................................................15-5 F. Closing Instructions..................................................................................................15-6 G. Broker Compensation ..............................................................................................15-6 H. Sales Arrangements between Brokers......................................................................15-7

CHAPTER 16: CONTRACTS .................................................................................................16-1 I. General.................................................................................................................................16-1 II. Essential Elements of a Contract ........................................................................................16-1 III. Matters to be Considered in Real Estate Contracts ...........................................................16-5 A. Names and Signatures of the Parties........................................................................16-6 B. Sale Price and Payment Provisions..........................................................................16-6 C. Description of the Property ......................................................................................16-6 D. Type of Deed ...........................................................................................................16-6 E. Condition of Title.....................................................................................................16-6 F. Default Provisions ....................................................................................................16-7 G. Contingency Provisions ...........................................................................................16-7 H. Possession ................................................................................................................16-7 I. Apportionment or Adjustment...................................................................................16-7 J. Risk of Loss...............................................................................................................16-7

IV. Colorado Buy-Sell Contract..............................................................................................16-8 A. Contract to Buy and Sell Real Estate.......................................................................16-8 V. Competency in Preparing Contracts...................................................................................16-9 A. Loan Contingency..................................................................................................16-10 B. Assumptions...........................................................................................................16-10 C. Buyer’s Creditworthiness.......................................................................................16-10 D. Balloon Payments ..................................................................................................16-11

VI. Surveys............................................................................................................................16-11 VII. Dual Contracting and Loan Fraud .................................................................................16-11 VIII. Installment Contracts....................................................................................................16-11 IX. Manufactured, Modular and Mobile Homes...................................................................16-15

CHAPTER 17: FINANCING ...................................................................................................17-1

I. Introduction..........................................................................................................................17-1

II. Categories of Real Estate Loans.........................................................................................17-2

A. Veterans Administration ..........................................................................................17-2

B. Federal Housing Administration..............................................................................17-2

C. Conventional Loans .................................................................................................17-3

III. Sources of Funds...............................................................................................................17-3

A. Commercial Banks...................................................................................................17-4

B. Savings and Loan Associations................................................................................17-4

C. Mutual Savings Banks .............................................................................................17-4

D. Life Insurance Companies .......................................................................................17-4

E. Mortgage Bankers and Mortgage Brokers ...............................................................17-4

F. Pension Funds...........................................................................................................17-5

G. Credit Unions...........................................................................................................17-5

H. Federal Land Bank...................................................................................................17-5

I. The Farm Service Agency (FSA)..............................................................................17-5

J. Real Estate Investments Trusts (REIT).....................................................................17-5

K. Owners.....................................................................................................................17-6

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IV. The Secondary Mortgage Market..................................................................................... 17-6 V. Discount Points.................................................................................................................. 17-7 VI. Types of Mortgages.......................................................................................................... 17-7 A. Fully Amortized Mortgage...................................................................................... 17-7 B. Adjustable Rate Mortgage (ARM) .......................................................................... 17-7 C. Graduated Payment Mortgage (GPM)..................................................................... 17-7 D. Package Mortgage ................................................................................................... 17-7 E. Demand Mortgage ................................................................................................... 17-8 F. Limited Reduction Mortgage................................................................................... 17-8 G. Term or Straight Mortgage...................................................................................... 17-8 H. Straight Amortization Mortgage.............................................................................. 17-8 I. “Wrap-Around” Mortgage........................................................................................ 17-8 J. Construction Loan Mortgage.................................................................................... 17-8 K. Blanket Mortgage.................................................................................................... 17-9 L. Open End Mortgage................................................................................................. 17-9 M. Divided Amortization Mortgage............................................................................. 17-9 N. Participation/Shared Appreciation Mortgage.......................................................... 17-9 O. Bridge Mortgage...................................................................................................... 17-9 P. Balloon Mortgage .................................................................................................... 17-9

VII. Supplemental Methods of Financing............................................................................. 17-10 A. Second Mortgage................................................................................................... 17-10 B. Installment Land Contracts.................................................................................... 17-10 C. Collateral Loans..................................................................................................... 17-10 D. Sale and Lease-Back ............................................................................................. 17-10 E. Syndication or Joint Venture ................................................................................. 17-11 F. Buy Down .............................................................................................................. 17-11 G. Lease-Option ......................................................................................................... 17-11

VIII. Truth-In-Lending ......................................................................................................... 17-11 A. Truth-In-Lending Creditors................................................................................... 17-12 B. TIL Disclosure....................................................................................................... 17-12 C. Truth In Lending (TIL) - Right of Rescission ....................................................... 17-14 D. Truth In Lending (TIL) - Advertising ................................................................... 17-14 E. Truth in Lending (TIL) - Enforcement and Penalties ............................................ 17-15

IX. Uniform Consumer Credit Code..................................................................................... 17-15 A. Title 5 Articles 1-9, C.R.S..................................................................................... 17-15 X. Syndications and Securities ............................................................................................. 17-17 A. Colorado Requirements......................................................................................... 17-17

XI. Sales of Secured Notes ................................................................................................... 17-17 A. Exemptions............................................................................................................ 17-18 B. Federal Requirements ............................................................................................ 17-18 C. Other States............................................................................................................ 17-18 D. Condominiums as Securities ................................................................................. 17-18

CHAPTER 18: TRUST DEEDS AND LIENS........................................................................ 18-1 I. Trust Deeds and Mortgages................................................................................................. 18-1 A. Introduction and Background of Mortgages ........................................................... 18-1 II. The Foreclosure Process 2008 ........................................................................................... 18-3 Foreclosure Revolution ................................................................................................ 18-3

III. Mortgages and Deeds of Trust.......................................................................................... 18-5 IV. Concerning Real Estate Foreclosures (Deeds of Trust).................................................... 18-5 V. Master Form Mortgage or Deed of Trust......................................................................... 18-18 A. Master form of mortgage or deed of trust ............................................................. 18-18

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B. Acknowledged and recorded for the protection .....................................................18-19 VI. Usual elements of a deed of trust or mortgage................................................................18-19 VII. Assumption of Indebtedness..........................................................................................18-21 VIII. 38-30-165 C.R.S. Limit on interest rate increase .........................................................18-21 IX. The Promissory Note ......................................................................................................18-21 X. Second Mortgage or Trust Deed ......................................................................................18-22 XI. Installment Land Contract...............................................................................................18-22 XII. Liens ..............................................................................................................................18-23 A. Introduction............................................................................................................18-23 B. Specific Liens.........................................................................................................18-23 C. General Liens .........................................................................................................18-27

CHAPTER 19: CLOSING STATEMENTS............................................................................19-1 I. Introduction..........................................................................................................................19-1 II. A Simple Real Estate Transaction ......................................................................................19-3 A. Facts.........................................................................................................................19-3 B. Sub-Totals ................................................................................................................19-6 C. Balance due to Seller................................................................................................19-6 D. Balance due from Buyer ..........................................................................................19-7 E. Totals........................................................................................................................19-7 F. Statements of Settlement ..........................................................................................19-7 G. Worksheet for Real Estate Settlement – Private Loan.............................................19-8

III. Final Settlement through a Lending Institution.................................................................19-9 A. Lender’s Loan Statement .........................................................................................19-9 B. New Loan Statement Form ......................................................................................19-9 C. Signing the Statement of Settlement ......................................................................19-12 D. Broker Closing Records.........................................................................................19-12 E. Escrow Tax Reserve Account Refunds ..................................................................19-12 F. Internal Revenue Service Reporting – Real Estate Sales .......................................19-12 G. Certain Cash Transactions .....................................................................................19-13 H. Worksheet for Real Estate Settlement – New Loan...............................................19-14

IV. Final Settlement when a Loan is Assumed .....................................................................19-15 A. Introduction............................................................................................................19-15 B. Assumption Statement ...........................................................................................19-15 C. Other Charges and Adjustments for a Loan Assumption.......................................19-15 D. Worksheet for Real Estate Settlement – Assumption of Loan...............................19-19

V. Real Estate Settlement Procedures Act (RESPA) ............................................................19-20

CHAPTER 20: ESCROW RECORDS....................................................................................20-1 I. Overview..............................................................................................................................20-1 A. Concepts and Responsibilities – A Chapter Summary ............................................20-1 II. Sales Escrow Accounts.......................................................................................................20-3 A. The Escrow Bank Account ......................................................................................20-3 B. The Cash Receipts and Disbursements Journal (The “Journal”) .............................20-7 C. The Beneficiary’s Ledger Record (The “Ledger”) ................................................20-10 D. Illustrated Escrow Accounting Transactions .........................................................20-12 E. Transaction Files and the Retention of Records.....................................................20-16 F. Administrative Matters...........................................................................................20-19

III. Property Management Records .......................................................................................20-22 A. Management Accounting Requirements................................................................20-22 B. Required Management Records .............................................................................20-26 C. Accounting for Security and Advance Rental Deposits.........................................20-32

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IV. Subdivisions and Associations ....................................................................................... 20-36 A. General .................................................................................................................. 20-36 B. Accounting Requirements for Registered Developers........................................... 20-38 C. Management of Common Interest Associations.................................................... 20-39

V. Appendix – Sample Forms .............................................................................................. 20-42 A. Notice of Escrow or Trust Account....................................................................... 20-43 B. Escrow Account Journal........................................................................................ 20-44 C. The Beneficiary and Broker Ledger Cards............................................................ 20-45 D. The Bank Reconciliation Worksheet..................................................................... 20-46 E. Tenant Ledger........................................................................................................ 20-47 F. Tenant Security Deposit Ledger ............................................................................ 20-48 G. Owner’s Ledger..................................................................................................... 20-49 H. Change of Employing Broker Affidavit................................................................ 20-50 I. Schedule of Commissions Earned (vs.) Amounts Taken........................................ 20-51

CHAPTER 21: PROPERTY MANAGEMENT AND LEASES........................................... 21-1 I. General ................................................................................................................................ 21-1 II. Management Functions...................................................................................................... 21-3 III. Merchandising Rental Space ............................................................................................ 21-5 IV. General Accounting Concepts.......................................................................................... 21-6 V. Security Deposits ............................................................................................................... 21-8 A. Introduction ............................................................................................................. 21-8 Title 38, Article 12, C.R.S. 1973 Security Deposits-Wrongful Withholding......... 21-8 B. City Ordinances Concerning Security Deposits .................................................... 21-10 C. Guidelines for the Property Manager Regarding Security Deposits...................... 21-10

VI. Leases ............................................................................................................................. 21-11 A. Introduction ........................................................................................................... 21-11 B. Leasehold Tenancies.............................................................................................. 21-12 C. Types of Leases ..................................................................................................... 21-12 D. Elements of a Lease............................................................................................... 21-15 E. Termination of Leases ........................................................................................... 21-16 F. Duties and Liabilities of the Parties ....................................................................... 21-17 G. Warranty of Habitability Act (Residential Propertries)......................................... 21-19

VII. Sources of Information and Training ............................................................................ 21-24 VIII. Mobile Home Park Tenancies...................................................................................... 21-25

CHAPTER 22: FARM AND RANCH BROKERAGE.......................................................... 22-1

I. General ................................................................................................................................ 22-1

II. Farm and Ranch Glossary .................................................................................................. 22-4

CHAPTER 23: BUSINESS OPPORTUNITIES .................................................................... 23-1 I. Introduction ......................................................................................................................... 23-1 II. Matters to be Considered ................................................................................................... 23-1 III. The Uniform Commercial Code ....................................................................................... 23-3 IV. The Colorado Use Tax...................................................................................................... 23-4 A. Forms and Settlement.............................................................................................. 23-4 Business Opportunity Worksheet......................................................................... 23-5 Income Statement ................................................................................................. 23-6 B. Colorado UCC Financing Statements...................................................................... 23-7

4-9-502. Contents of financing statement – record of mortgage as

financing statement – time of filing financing statement................................ 23-7 4-9-521. Uniform form of written financing statement and amendment.............. 23-7

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CHAPTER 24: AFFILIATED BUSINESS ARRANGEMENTS..........................................24-1 I. Introduction..........................................................................................................................24-1 II. Real Estate Settlement Procedures Act (RESPA)...............................................................24-2 12 U.S.C. § 2607. Prohibition against kickbacks and unearned fees............................24-2 III. Colorado Real Estate Statutes ...........................................................................................24-3

12-61-113.2. Affiliated business arrangements – definitions -disclosures – enforcement and penalties – reporting – rules – investigation information

shared with the division of insurance......................................................................24-3 10-11-124. Affiliated business arrangements--rules--investigative information

shared with the division of real estate .....................................................................24-5 IV. Colorado Real Estate Commission Rules .........................................................................24-6 E-22. Inducements from settlement producers prohibited............................................24-6 E-46. Affiliated Business Arrangements ....................................................................24-11

CHAPTER 25: TAX FACTORS PERTAINING TO REAL ESTATE PRACTICE..........25-1 I. Introduction..........................................................................................................................25-1 II. Ownership of a Personal Residence ...................................................................................25-1 A. Buying Expenses......................................................................................................25-2 B. IRA Withdrawal Used to Fund Purchase.................................................................25-2 C. Qualified Residential Mortgage Interest ..................................................................25-2 D. Mortgage Interest Credit..........................................................................................25-3 E. Property Taxes..........................................................................................................25-4 F. Personal Property Taxes...........................................................................................25-4 G. Non-business Casualty and Theft Losses ................................................................25-4 H. Moving Expenses.....................................................................................................25-5 I. Business Use of Home (Home Offices) ....................................................................25-5

III. Sale of a Personal Residence.............................................................................................25-5 A. Installment Sales ......................................................................................................25-7 B. Foreclosure...............................................................................................................25-7 C. Colorado Withholding Tax on Certain Transfers of Real Estate .............................25-7

IV. Property Used in a Trade or Business...............................................................................25-7 A. Rental Property Operations......................................................................................25-7 B. Depreciation.............................................................................................................25-8 C. Certain Business Gains and Losses..........................................................................25-9 D. Tax Credits applicable to business property ..........................................................25-11 E. General Business Credit (combines credits and some described below) ...............25-11 F. Disabled Access Credit...........................................................................................25-11 G. Rehabilitation Credit..............................................................................................25-12 H. Low Income Housing Credit..................................................................................25-12

V. Federal Estate and Gift Taxation......................................................................................25-12 A. Real Property .........................................................................................................25-12 B. Federal Gift Taxes..................................................................................................25-13

VI. Tax Treatment of Various Legal Entities........................................................................25-13 A. Corporations...........................................................................................................25-13 B. Partnerships............................................................................................................25-13 C. S Corporations........................................................................................................25-14 D. Limited Liability Companies (LLC)......................................................................25-14 E. Trusts......................................................................................................................25-14 F. Homeowner Associations.......................................................................................25-14 G. Real Estate Mortgage Investment Conduit (REMIC) ............................................25-14 H. Tax Shelters ...........................................................................................................25-14

VII. Employed Real Estate Licensees ...................................................................................25-15

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VIII. Withholding of State Income Tax on Proceeds from Transfers by Nonresidents

of Real Property Located in Colorado...................................................................... 25-15 39-22-604.5. Withholding tax – transfers of Colorado real property –

nonresident transferors.......................................................................................... 25-15

CHAPTER 26: FAIR HOUSING ............................................................................................ 26-1 I. Introduction ......................................................................................................................... 26-1 II. Federal Civil Rights Acts................................................................................................... 26-1 A. Civil Rights Acts of 1866 and 1870 (42 U.S.C. 1981 and 1982)............................ 26-1 42 U.S.C. 1981 – Equal rights under the law ....................................................... 26-1 42 U.S.C. 1982 – Property rights of citizens........................................................ 26-1

B. Fair Housing Act 1968, Amended 1988 (42 U.S.C. 3601 to 3619) ........................ 26-2 Bases of Discrimination ....................................................................................... 26-2 Exemptions to Property Covered.......................................................................... 26-2 III. Illegal Practices under Federal Law.................................................................................. 26-3

IV. Equal Credit Opportunity Act (ECOA) (15 USC 1961 et seq.) ....................................... 26-9 V. Americans with Disabilities Act ........................................................................................ 26-9 A. Licensee ADA Responsibilities in Conducting Real Estate Practices..................... 26-9

B. Licensee ADA Responsibilities in Listing, Selling, Leasing or Managing

Property ................................................................................................................ 26-10 C. ADA Responsibilities in Real Estate Instruction................................................... 26-11 D. ADA Responsibilities as Employers ..................................................................... 26-11

VI. Colorado Fair Housing Act ............................................................................................ 26-12 A. Title 24, Article 34, C.R.S..................................................................................... 26-12 B. Major Differences between Federal and Colorado Fair Housing Acts.................. 26-12

VII. Colorado Civil Rights Division—Commission—Procedures....................................... 26-13 VIII. Housing Practices ........................................................................................................ 26-14 IX. Discrimination in Places of Public Accommodation...................................................... 26-23 X. Discriminatory Advertising ............................................................................................. 26-25 XI. Persons with Disabilities – Civil Rights......................................................................... 26-26

CHAPTER 27: RELATED REAL ESTATE LAW ............................................................... 27-1 I. Preowned Home Warranty Service Contracts..................................................................... 27-1 II. Manufactured Home Installation and Sellers of Manufactured Homes............................. 27-2 III. Mobile Home Park Act................................................................................................... 27-16 IV. Title to Manufactured Homes Act.................................................................................. 27-27 V. Nondisclosure of Information Psychologically Impacting Real Property ....................... 27-46 VI. Soil and Hazard Analyses of Residential Construction.................................................. 27-47 Title 6, Article 6.5 ...................................................................................................... 27-47 VII. Uniform Statutory Form Power of Attorney Act .......................................................... 27-47

VIII. Relief of Residential Taxpayers from Lien of Special District Taxes for General Obligation Indebtedness........................................................................................... 27-56 Certification and Notice of Special District Taxes for General Obligation

Indebtedness ......................................................................................................... 27-56 IX. Colorado Consumer Protection Act................................................................................ 27-58 X. Disclosure – Methamphetamine Laboratory.................................................................... 27-63 Illegal Drug Laboratories .......................................................................................... 27-64 XI. Common Interest Community Disclosure ...................................................................... 27-65

XII. Equity Skimming .......................................................................................................... 27-66 XIII. Colorado Foreclosure Protection Act........................................................................... 27-67 XIV. Foreclosure Consultants .............................................................................................. 27-70 XV. Equity Purchasers.......................................................................................................... 27-74

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XVI. Notaries Public Act ......................................................................................................27-78

XVII. Uniform Recognition of Acknowledgments Act ........................................................27-86

CHAPTER 28: COMMISSION APPROVED AND MISCELLANEOUS FORMS ..........28-1 I. Commission Approved Forms .............................................................................................28-1 Rule F – Use of Commission Approved Forms............................................................28-1

GLOSSARY OF TERMS ................................................................................................Glossary-1

TOPICAL INDEX.......................................................................................................Topic Index-1

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