Before You Make an Offer on a Colorado Home: What to Know

Before you make an offer on a Colorado home, know four things: every offer is written on the Colorado Real Estate Commission's Contract to Buy and Sell Real Estate, earnest money on the Front Range runs 1 to 2 percent of the price and sits with the title company, the buyer proposes every deadline in the contract, and the inspection, appraisal and loan deadlines are the exits that return that earnest money. Get those four right and the rest of the purchase is execution.

This guide covers the form, the money, the dates, the clauses that win a bidding contest, and the inspection plan that fits Colorado houses. Start with the Colorado home buyer's guide if you are new to the process.

What contract form does a Colorado offer use?

Colorado is a form state. Licensed brokers write offers on the Contract to Buy and Sell Real Estate (Residential), a form approved by the Colorado Real Estate Commission and updated on a set schedule. Your broker fills in the price, the earnest money, the financing type, the inclusions and exclusions, and a dated list of deadlines. Anything the form does not cover goes in Additional Provisions or in an addendum.

Because every buyer uses the same form, the seller compares offers on the terms inside it: price, earnest money, financing, deadlines, concessions and possession. Our page on making an offer on a Colorado home shows each section of the form.

How much earnest money do you need, and who holds it?

Earnest money on Front Range purchases runs 1 to 2 percent of the purchase price. On a $600,000 home in Centennial that is $6,000 to $12,000. The contract names an Earnest Money Holder, and on nearly every Colorado sale that is the title company, not the listing brokerage and never the seller. The money is due within the number of days the contract states after Mutual Execution of Contract (MEC), and it is wired or delivered by check to the title company.

• Higher earnest money signals strength. In a multiple-offer contest on a Wash Park or Highlands Ranch home, 2 to 3 percent tells the seller you intend to close.
• The money is credited at closing toward your down payment and closing costs; it is not an extra fee.
• It comes back if you terminate on time under any deadline that carries a termination right.

The buyer sets every deadline

The Dates and Deadlines table is the part of the Colorado contract that new buyers skip and experienced buyers negotiate hardest. The buyer proposes each date; the seller accepts or counters. Short deadlines win competitive offers. Long deadlines protect a buyer who needs time for a sewer scope or a loan underwriter. The table below lists the deadlines that matter most and what each one protects.

Put every deadline in your phone the day the contract is signed, and ask your broker which box is checked on whether a deadline that lands on a weekend or holiday moves to the next business day. Our page on what happens after your offer is accepted follows the timeline day by day.

Get the pre-approval before the offer, not after

A Denver metro listing agent reads the pre-approval letter before the price. A fully underwritten pre-approval, with income, assets and credit verified, lets you shorten the loan deadlines and compete with cash. See the Colorado mortgage pre-approval guide for the documents to gather.

For financing questions, the Kenna Real Estate Group works with Mike Oswald, VP of Mortgage Lending at Rate, NMLS 261003, Equal Housing Lender. You are free to use any lender. Compare loan types and down payment programs on our Colorado home financing guide. Buyers relocating from other western states read home buying resources for Bend, Oregon and similar real estate buying resources to see how each state's contract differs; Colorado's form contract and its buyer-set deadlines are the biggest difference.

Does an escalation clause work in the Denver metro?

Yes, when it is written with a cap and a proof requirement. Colorado has no Commission-approved escalation form, so the clause goes in Additional Provisions or a broker-drafted addendum. Write it with three parts:

• The increment. $2,000 to $5,000 above the competing net offer is the working range on Front Range homes under $1 million.
• The cap. The highest price you will pay, tied to your appraisal-gap limit so you never escalate past the cash you have.
• The proof. The seller must deliver a copy of the competing offer's price page before the escalation takes effect.

Some listing agents refuse escalation clauses and ask for highest and best instead; your broker asks first.

What is an appraisal gap clause?

When a home sells above the price the appraiser assigns, the lender lends on the appraised value, not the contract price. The difference is the gap, and the buyer pays it in cash unless the seller drops the price. An appraisal gap clause states the maximum gap you will cover, for example: "Buyer agrees to pay up to $15,000 above appraised value, not to exceed the purchase price."

The Colorado contract already has an appraisal condition; keep it and you hold the right to terminate by the Appraisal Objection Deadline when value comes in low. A capped gap clause plus the appraisal condition is the strongest position: the seller sees you will cover a shortfall, and you keep the exit if the shortfall exceeds your cap.

Can you ask a Colorado seller to pay your closing costs?

Yes. The Contract to Buy and Sell has a Seller Concession line. The seller credits the amount at closing toward your closing costs, prepaid taxes and insurance, and any other cost your lender allows. Loan programs cap the credit.

In a multiple-offer contest a concession request weakens the offer by the same dollar amount; raise the price by the credit if you need the cash at closing and the home will appraise. Buyer closing costs in Colorado run 2 to 3 percent of price on a financed purchase; the breakdown is on our closing costs for Colorado home buyers page.

Inspection strategy for a Colorado house

Colorado does not license home inspectors, so hire one with ASHI or InterNACHI certification and a sample report you have read. A general inspection on a Denver metro detached home costs $400 to $700. Add these when the house calls for them:

• Sewer scope, $150 to $300. Clay and Orangeburg lines in pre-1980 Denver, Englewood, Arvada and Lakewood homes crack and root. A replacement runs $8,000 to $20,000, so scope every home built before 1985.
• Radon test, $150 to $250. The EPA rates most Front Range counties Zone 1, the highest radon potential. A mitigation system costs $1,200 to $2,500.
• Roof inspection. Hail season runs May to September along the Front Range. Ask for the roof age and the last claim.
• Structural review, $400 to $800. Expansive bentonite clay under Highlands Ranch, Parker, Castle Rock and parts of Aurora lifts slabs and cracks foundations. Sticking doors and stair-step cracks in brick call for an engineer.

Use the three inspection deadlines in order. Objection: send the written list of repairs or a dollar credit. Resolution: the seller agrees, counters or refuses. Termination: with no signed agreement by that date, you cancel in writing and the earnest money returns. A credit at closing beats seller-managed repairs above $1,500, because you choose the contractor. Read pre-offer home checks for Denver metro buyers for what to look at during the showing itself.

What the seller tells you before and after the offer

Colorado sellers deliver a Seller's Property Disclosure form covering the roof, structure, water, sewer, mechanical systems and known defects. Ask for it before you write the offer; most listing agents attach it to the MLS listing. You also receive a Source of Water addendum (municipal, district or well), the HOA covenants, budget and minutes with a termination right by the Association Documents Termination Deadline, and a lead-based paint disclosure on every home built before 1978. Newer Parker, Castle Rock, Erie and Commerce City subdivisions sit in metropolitan districts with their own mill levy; pull the district's levy and debt before you offer, because it moves the monthly payment by $100 to $400. Our Denver home buyer verification checklist lists every document to confirm before the inspection deadline.

Getting your earnest money back

You get the earnest money back when you terminate in writing before a deadline that carries a termination right: title objection, association documents, inspection, appraisal, or loan availability. You lose it when you miss a deadline and then walk. The contract states the seller's remedy on a buyer default: keep the earnest money as liquidated damages, or pursue specific performance. Ask which box is checked before you sign; liquidated damages caps your exposure at the earnest money. The post on cancelations and penalties in the Colorado real estate contract covers each case.

Colorado closing costs and timeline

Colorado has no state real estate transfer tax. The county charges a documentary fee of one cent per $100 of price, so $60 on a $600,000 home. Buyer-side costs are the lender's fees, the lender's title policy, recording, prepaid interest and insurance, and escrow reserves. Read what is needed to close on a house in Colorado for the final week.

How to win in the Denver metro without overpaying

• Offer the number the comparables support, then win on earnest money, short deadlines and a capped gap clause.
• Keep the appraisal and loan conditions unless you have the cash to close without them.
• Offer possession flexibility. A seller who needs 3 days after closing takes the offer that gives it.

Where to go next

• Search every home for sale in Colorado
• Making an offer on a Colorado home
• First-time home buyer guide for Colorado
• Radon and the Denver home purchase before inspection week
• When a cash offer makes sense in Denver
• Meet the Kenna Real Estate Group agents

Talk to the Kenna Real Estate Group

The Kenna Real Estate Group, Keller Williams DTC, writes every offer on the Colorado contract with deadlines set for your loan and your inspections, a capped escalation or appraisal-gap clause when the home draws multiple offers, and the concession request that fits your loan. See how we help buyers. Call or text 303-955-4220. A live person answers. Not a robot, not a phone tree. Start with a search of every home for sale in Colorado.