Real Estate Deals Gone Bad


While most people today use a mortgage to purchase commercial and residential real estate, there is an anachronism still used today to buy real estate without a mortgage. It’s commonly referred to as a “contract for deed”, “installment land contract” or sometimes a “land sale contract.” The purpose of these real estate agreements is to sell real estate to a buyer and allow the buyer to make payments directly to the seller. The seller holds the deed and signs it over to the buyer after they’ve made all the payments under the real estate agreement. It sounds simple enough. It’s not.

Most states, including Colorado, have laws that discourage a contract for deed or an installment land contract. In Colorado, these types of real estate agreements must include specific provisions that, among other things, designate the public trustee as an escrow agent for property taxes and require certain documents to be filed with the county within 90-days of signing the agreement. If the agremeent doesn’t comply with these provisions, the consequences are significant – the buyer is entitled to void the real estate agreement and receive their money back. If a lawsuit has to be filed, the buyer is also entitled to reimbursement of their attorney’s fees for filing the lawsuit. The Colorado statute outlining the requirements of these types of real estate agreements is C.R.S. 38-35-126.