NEW LOAN DEADLINES LEGAL UPDATE Scott Peterson General Counsel for the Colorado Association of REALTORS®
It is a triennial ritual for the very most diligent of Colorado REALTORS®. Like the fervent anticipation of a child on Christmas Eve, the drooling gaze of a dog awaiting a treat, the excited trepidation as the roller coaster attendant confirms that you are locked into the ride, and your anxious pause as you open the front door to your in-laws on Thanksgiving Day… on tenterhooks, Colorado REALTORS® await the triennial delivery of the Colorado Real Estate Commission approved contracts. Well, friends, your wait is over. The 2022 revisions to the Commission approved contacts are available now. (BUT NOT FOR USE UNTIL January 1, 2022!) For those of you who have not already downloaded the redlines, I would encourage you to do so using the link above. It is the best way to visually see each of the individual changes that have been incorporated into the new Contract to Buy/Sell (CBS) forms. Moreover, I would encourage each of you to take a comprehensive contract update course BEFORE THE NEW YEAR. Once the clock strikes midnight on January 1, you will be required to use the new forms immediately. Well, after your New Year’s hangover wears off, of course. As you may imagine, there are loads of changes to the new CBS forms. Some of the changes are what I would describe as “non-substantive” (clerical, clean-up, punctuation, etc.) but there are also a variety of important “substantive” changes. In the interest of calling out my FAVORITE contract modification for 2022, I wanted to discuss the important, exciting, and substantive modification to Paragraph 5 of the new CBS:
PARAGRAPH 5 – FINANCING In the current version of the CBS, Paragraph 5.2 is entitled “New Loan Review” and it provides the Buyer with the ability to terminate the contract if the New Loan is not acceptable to the Buyer (in their sole subjective discretion) based on the loan’s “availability, payments, interest rate, terms, conditions and cost…”. As such, the loan’s objective “availability” (the lender’s approval of the loan/buyer/property) is tied to the Buyer’s consideration and satisfaction with the loan’s “payments, interest rate, terms, conditions and cost” (the loan terms). Because of the loan “availability” (lender approval) component, the “New Loan Review” deadline is commonly the final contingency the Buyer has to terminate the contract and is typically very close to the Closing Date. Based on the “sole subjective” rights that a Buyer has to terminate for “New Loan Review,” it opens the door for the use of the contingency by the Buyer to get out of the contract very late in the transaction. In other words, as the contact is currently written, a Buyer could terminate at the New Loan Review deadline by saying they
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