Required Broker Disclosures When Selling a Home in Colorado

Does the listing broker for a property need to divulge information to the buyers about the property itself or the seller?

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In Colorado, many real estate transactions involve real estate brokers. By the time a listing broker is ready to interact with the public, he or she probably knows the home or other property, as well as the seller, pretty well. The question then becomes, how much does the listing broker need to divulge to prospective buyers about either the physical condition of the property or the interests of the sellers?

This article discusses disclosure obligations that apply to brokers in a real estate transaction based on Colorado law. Real estate sellers in Colorado have a separate set of disclosure obligations to prospective buyers, which can be reviewed in the article: “Home Sellers in Colorado: Your Disclosure Obligations.”

Despite having parallel obligations to buyers, a broker’s obligations are separate from the seller’s disclosure obligations. In particular, the broker is not required to independently investigate and determine whether the seller’s disclosures are accurate. (See the Colorado Revised Statutes, at C.R.S. § 12-16-804 (3)(b)). In addition, brokers may have other professional obligations with respect to the transaction, such as accurate accounting. (C.R.S. § 12-16-804).

Broker’s Disclosure Requirements

The seller’s broker must disclose to the buyer any adverse material facts known by the broker. This requirement does not include facts that should have been known by the broker, as is the law in some other states. In other words, while a broker in some states should, arguably, check on why there’s a water stain on the hardwood floor (perhaps a sign of leakage?) a broker in Colorado might not need to investigate any further. “Adverse material facts” may include facts pertaining to the property’s title, physical condition, and material defects, and any environmental hazards affecting the property.

Psychological impacts to the property are not, however, considered material defects. (C.R.S. § 12-61-804.) Examples of psychological impacts might include crimes committed on the property or a rumor that the property is haunted.

In addition, a Colorado broker must inform the seller of any material benefits or risks of a transaction that are actually known by the broker. (C.R.S. § 12-61-804).

Limits on Broker’s Disclosure Requirements

A seller’s broker is not allowed to share certain information with the buyer. A broker is prohibited from making the following disclosures without the informed consent of the seller. In other words, the broker may share the following information with the buyer if the seller agrees:

  • That the seller is willing to accept less than the asking price for the property.
  • The motivation for the seller to sell the property.
  • That the seller will agree to financing terms other than what have been offered.
  • Any material information about the seller not otherwise required to be disclosed by law.
  • Any facts or suspicions regarding circumstances that may psychologically impact or stigmatize the property, further explained below. (C.R.S. § 12-61-804 (2)).

Unlike some other states, Colorado does not require the seller’s broker to tell buyers about deaths that occurred on the property. (Note also that there is no requirement for sellers to disclose deaths). For example, the broker would not need to disclose the highly publicized death of JonBenét Ramsey in her family home in Boulder, Colorado.

Remember, a broker can make any of the above types of disclosures when authorized by the seller. However, in cases where the seller refused such permission, the broker is not allowed to lie outright concerning psychological circumstances or any other matter. If asked a direct question by the buyer, a broker might state, “I’m not authorized to discuss that information.”

More Information on Colorado Real Estate Disclosure Laws

For additional information about Colorado real estate disclosure laws, see the state Division of Real Estate website at www.colorado.gov/DORA. Consult with an attorney if you have questions related to disclosure requirements and other legal aspects of a home sale.

by: Brittany Scantland-Lall

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