How to Buy Land in Colorado

Three Parts:Getting Everything in OrderSearching for Potential PropertyClosing the Deal

Buying a property of any kind can be a stressful and complex process, but can be very satisfying and exciting in the end. Buying property in Colorado is not that much different from other parts of the United States, yet it is still helpful to enlist the help of real estate experts — both agents and lawyers — to assist you with a property purchase.

Part 1
Getting Everything in Order

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    Figure out how much you can afford. Start by using an online mortgage calculator to determine how much you can afford to spend. These calculators normally ask you to input your income and associated expenses (e.g. utilities, other loan payments, etc.) and then will determine how much you can afford to spend on a monthly mortgage payment. These calculations also take into account interest rates, mortgage terms and amortization. In the end, the calculator will show you the total amount you can spend on real estate based on your current financial situation.[1]
    • The general rule of thumb for financing property is that the total monthly amount of your mortgage payments should not exceed 36% of your total monthly (gross) income. For example, if you make $3,000 a month, your maximum monthly mortgage payment should be $1,080.[2]
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    Arrange for pre-approved financing. Online mortgage calculators do not guarantee approval or the interest rates used in the calculations. You still need to make an appointment with a mortgage broker and ask to be pre-approved for a mortgage. A pre-approval application is almost identical to a normal mortgage application. The difference is that the end result is a guarantee by the financial institution to provide a certain amount and interest rate to you as long as your financial situation does not change. This guarantee is normally in effect for a limited time (e.g. 3 months, 6 months, etc.).[3]
    • A pre-approval is not a contract. You can still switch financial institutions before you close the real estate deal if you want.
    • Keep in mind that the financing rules for vacant land can be very different from the financing rules for a house or condo. This is because there is more risk with vacant land. Financial institutions may request that you provide a large down payment or may require a larger interest rate. If possible, you may want to consider buying vacant land with cash.[4]
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    Make sure you have the cash you need. In addition to making sure your mortgage is lined up, you also need to make sure you have enough cash to pay both the down payment and the closing costs. Down payments of 20% or more will not require mortgage insurance, but if you decide to buy a home with less than 20% down you’ll need to pay an extra fee to purchase mortgage insurance.[5]
    • In addition to cash for the down payment, you also need to have enough cash set aside to pay for closing costs. Closing costs can include appraisal costs, loan fees, lawyer fees, inspection fees, transfer taxes and other items. It is not unreasonable for closing costs to end up being 5% of the property purchase price, therefore if you buy a $200,000 property you might have closing costs of $10,000. Unfortunately the exact amount cannot be determined until you’re near the end of the process.
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    Decide what and where you want to buy. Once you have all your financing in order, you can start to think about the actual property you want to buy. The first thing you may want to do is narrow down exactly where you want to purchase property. Since different geographical locations tend to have different real estate markets, knowing where you want to buy property may also narrow down what type of property you can consider. For example, if you want to buy in downtown Denver, you will get less land and less house for your money than if you buy in the middle of nowhere. There are many other things you’ll want to consider, including:[6]
    • Do you need to be near an elementary or high school, now or in the near future?
    • What sort of public transportation do you require in your neighbourhood?
    • Are you okay buying something that is not in good condition and fixing it yourself, or do you need something in good condition that requires very little upkeep?
    • How many bedrooms and bathrooms do you need? Do you need multiple floors and/or a basement?
    • Do you need a balcony, patio or backyard?
    • What type of heating and cooling system do you want?
    • Are you okay with properties that have wells or septic tanks, or do you need to be on a city water system?
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    Realize other items you need to consider for vacant land. If you’ve decided that you want to purchase vacant land, either to build on it yourself or as an investment, there are other things you need to consider. Even if you aren’t building on the land yourself realize that selling the land in the future may depend on whether someone else can build on it. Some items to consider are:[7]
    • How far ‘out of town’ is the property? Will you be charged extra by contractors to work at this property (because it’s so far away)?
    • Is the land anywhere near a major road or highway? Is the road it is on paved or gravel? Is that road cleared in the winter?
    • If the land isn’t bordered by a road, can you obtain right-of-way access to cross someone else’s property?
    • How is the land currently zoned? How easy or hard is it to request a zoning change, if required?
    • What restrictions are associated with the land due to its proximity to water?
    • If the land requires a septic system, can the soil support a septic system?
    • What is located underground? Can a foundation be easily constructed on the land? Can a well be dug for water if one doesn’t already exist?
    • What is the topography of the land? Does the topography restrict what can be constructed?
  6. Image titled Invest In Real Estate With No Money Step 10
    Select a real estate agent. Having a real estate agent who is working directly for you during this process is usually your best option. Purchasing real estate is a complex process and it helps to have an expert who can give you guidance and advice throughout the process. ‘Exclusive buyer agents’ are real estate agents who work exclusively for you — the buyer. In many situations you do not have to pay them directly, instead they receive a portion of the real estate fees from the seller.[8]
    • Keep in mind that the real estate agent who is selling a property works for the seller. They are being paid by the seller to sell the property, therefore their priority is to sell the property for the most amount of money possible. You, on the other hand, are trying to buy a property for the least amount of money possible. While it might seem convenient to use the same real estate agent as the seller, it is not in your best interest to do so.
    • It is not unusual for buyers to meet with multiple real estate agents before they select someone to work for them. It is also not unusual to ask friends, family or previous real estate agents to refer you to a new real estate agent.
  7. Image titled Buy a Stock Without a Stockbroker Step 7
    Sign the exclusive buyer agent agreement. Once you have found a real estate agent who you are comfortable working with they will likely ask you to sign an Exclusive Right-to-Buy Listing Contract. This contract solidifies the deal between you (the buyer) and the real estate agent. The contract lays out how the agent will be paid and how long they will work for you.
    • While most real estate agents who work exclusively for buyers are paid a portion of the real estate fees from the seller, you can also make an arrangement to pay the agent a specific fee. By doing this, the fee is not based on the final selling price of the property you purchase, but rather a pre-determined amount agreed upon by you and the agent.

Part 2
Searching for Potential Property

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    Search for potential properties yourself. You do not need to rely on your real estate agent to do all the searching for you, you can search listings on your own as well. The upside of searching on your own is that you can take all the time you want and you can try out several different types of searches. The downside is that you will only be able to see properties that have officially been listed for sale. Your agent, however, may be able to tell you about properties that have not yet been listed. There are several ways to find listings, including:[9][10]
    • Drive around the area you’re interested in. While this is the most time consuming method, it gives you a great understanding of the general area — what it looks like, road access, neighbouring properties, etc. This method, however, assumes the property is officially listed and has a sign on the property. If you do see anything you like, write down the information from the For Sale sign and use it to search the internet when you get home. The easiest way to find the listing is to look on the realtor’s website.
    • Look in local newspapers or real estate flyers. Real estate is one of the few industries that still publishes a lot of their sales listings in paper format. Some areas may even have local real estate flyers that only list properties for sale in that specific area.
    • Go to local real estate offices. Some realtors post the properties they have for sale on the windows of their offices. You can view the posters for these properties without going inside. Note that the listings posted will only be those for sale by agents from that specific office.
    • Search online. Using the internet to search for properties is probably the easiest and the fastest method you can use, but it can also be overwhelming. There are dozens of real estate websites listing properties in Colorado and each of them are a little different. You may want to start at sites like MLS at or at These sites will list properties, regardless of which agent or broker is selling the property.
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    Review potential properties from your real estate agent. Your real estate agent will also search potential properties on your behalf. You, however, need to provide your agent with specific search criteria to use. At the very least agents will need to know which geographical area to search and what price range to include. You can also ask them to include or exclude items like: number of bedrooms or bathrooms, types of heating, amenities on the property, lot size, etc.[11]
    • Your agent will have a better understanding of the real estate market where you’re searching, so they’ll be able to tell if a property is over or under priced. Knowing if a property is under or over priced will help you determined how much negotiating room you might potentially have. Because of this, agents may include listings for you to review that appear out of your price range but are actually overpriced.
    • Your agent might also be able to tell you about properties that are not yet listed on the open market. Agents sometimes share this information amongst themselves, however not all sellers will accept offers before their property is listed (especially in an area where they’re likely to get multiple offers).
  3. Image titled Write a Grant Proposal Step 8
    Decide which potential properties you want to see in person. Regardless of how you collect a list of potential properties, once you have that list you need to decide which properties (if any) you want to view in person. How you select properties to view is a personal decision based on your personal opinion of each listing. However, there are several things you can consider when making this decision:[12]
    • Does the property meet all of your requirements? If not, can you live without these requirements? Unless you have an endless amount of time to spend searching for the perfect property, you will probably have to make a couple of compromises about the property you end up purchasing.
    • Is the property located somewhere you like? Even if the location is within your geographical search area, the specific location (e.g. neighbourhood, street, block, etc.) might not be somewhere you want to consider.
    • Does the property need any upgrades in the short-term? Can you avoid those upgrades? You may need to limit your possibilities based on what you can afford to do after you’ve purchased the property. For example, if you cannot afford to install a new roof within the next 5 years, don’t consider houses that need a new roof in the next 5 years.
    • If you’re considering vacant land, does the topography and layout of the land make sense for what you’re planning to do with it?
    • If the property has a house on it, do you like the look and layout of the house? It’s okay to choose a property based on the look of the house, but be sure to recognize the difference between items you can change and items you cannot change (or would be very expensive to change).
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    Visit selected properties in person. Once you’re ready to take a look at properties in person, you’ll need to arrange the date and time with your real estate agent. For properties that already have buildings on them, you’ll need the agent to accompany you so you can gain access to the buildings. For vacant land you might be able to look around on your own time, without your real estate agent, if you want.[13]
    • Don’t rush through any of the properties — unless you’re absolutely certain upon first glance that it is not an option. Take you time and look around at everything.
    • Feel free to open cupboards, run water, flush toilets, etc., while viewing the property.
    • If you’re viewing a property with a house, keep in mind that many of the aesthetics of the house can be easily changed (e.g. paint, light fixtures, outlet covers, door knobs, etc.). While it can be difficult, try to ignore these factors when looking around and making a decision. Along the same lines, try to avoid choosing a property because you like minor elements like paint colour or window coverings.
    • If the sellers are home while you’re visiting, feel free to ask them questions about the property, but avoid revealing your overall feelings or thoughts about the property. You may need to negotiate with them in the future, so keep your emotions neutral.
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    Rank or compare properties you like. Some buyers need to find a property within a specified period of time and therefore need to select a property to make an offer on within that timeframe. Other buyers may be able to spend more time searching for a property, in which case they may decide not to make an offer until they’re absolutely certain they’ve found a property they love. Regardless of which situation you’re in, you may need to rank and compare properties in order to make a final decision.[14]
    • You cannot make an offer on more than one property at one time, unless you can purchase both properties. Therefore, you have to narrow down potential properties until you have one ranked highest enough to make an offer.
    • Rank properties based on your original criteria and on your feelings. If you’re buying a property to live on, you really need to like it as you’ll probably be there for awhile. Don’t be afraid to use some emotions and gut feelings as part (but not all) of your decision.

Part 3
Closing the Deal

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    Complete and sign the offer forms. Once you’ve decided which property you prefer and want to make an offer on, you’ll need to complete the official offer documentation. In Colorado this contract is referred to as the Contract to Buy and Sell Real Estate.[15]
    • This contract includes many standard items such as: names of both buyer and seller; exact legal address of the property; inclusions; offer amount; conditions.
    • Use your judgement and the advice of your real estate agent to determine an offer price. Also consider in advance how much you’re willing to change that price before walking away.
    • Inclusions are any items on the property that can physically be removed that you wish to have included as part of the sale. You should list appliances in this section to ensure the seller is legally obligated to leave them. If you do not specify appliances, the seller is permitted to remove them.
    • There are separate contracts for residential, land, commercial, foreclosures, and residential income units. You will most likely use the residential or land contract.
    • Your real estate agent will fill out the form on your behalf, or with you present. You should review the contract in detail before signing it. If you have any questions, ask your agent.
    • Once this contract is signed and presented to the seller you are legally obligated to follow through on the terms of the contract.
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    Determine what conditions you want to place on the offer. Conditions are specific provisions you add to the offer contract that must be met before the contract can be completed. Most buyers include several conditions on any offer contract to ensure they’re protected in certain circumstances. Standard conditions are as follows:[16]
    • Financing Condition — is used to ensure you can back out of the agreement if your financing falls through. Even if you have been pre-approved, you have to complete a full mortgage application once you have a specific property in mind and it is possible the amount you want will not be approved.
    • Home Inspection Condition — is used to ensure you can have a home inspection completed before closing the deal. If any negative items are found in the home inspection, you can back out of the contract.
    • Sale of Existing Home Condition — is used if you need to sell your existing house before you can follow through on purchasing the new house. In many cases a specific deadline of 30-90 days may be used during which you must sell your home. If you are not able to sell your home within this time, the sellers can sell the property to someone else.
    • Condo Documents Condition — is used to give the buyer time to review any and all condominium or homeowner’s association documentation that may exist. If you do not like what is outlined in the documents, you are able to back out of the offer. For example, you may find that the condo association is in debt and will be asking owners for a large one-time payment the following year which you cannot afford.
    • Insurance Condition — is used to ensure you are able to insure the home before you close the deal. If an insurance company refuses to insure the home, you are able to back out of the offer.
    • Other Conditions — can be used to include any other specific conditions you need to include that must take place before you can close the deal.
      • Most homes may also need to be appraised as part of the financing, you may wish to include this as a separate condition.
      • Other types of inspections may be required, you may want to mentioned them specifically (e.g. radon, fireplace, etc.). If you need a property survey, you may also want to include it as a separate condition.
      • Most contracts will also include a title search as a condition. This allows your lawyer the time to ensure the property is legally owned by the sellers before you close the deal.
    • Note that a seller may not agree to some or all of the conditions, or the due dates of some or all of the conditions. They may use the conditions as part of the negotiation process.
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    Negotiate the price and conditions. Once the paperwork is completed your real estate agent will present the offer to the sellers and their real estate agent. Most contracts have a deadline by which a response is required from the sellers, usually the timeframe is within 48 hours.[17]
    • Sellers may negotiate the contract by sending back changes they want to see. Each time the contract is ‘signed back’ to the opposite party, another deadline is put into place.
    • Anytime the sellers reject an offer or sign back, you are able to walk away. Once the sellers accept an offer, the contract is legally binding and you are obligated to purchase the property for the specified price if all conditions are met.
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    Confirm all conditions on the contract. Once your offer has been accepted by the sellers, you, as the buyer, must follow through on all the conditions you put in the contract. Once each condition has been confirmed, you will be required to sign an additional form to indicate the condition has been fulfilled. Some items you may now need to do include:[18]
    • Book and attend a home inspection, and then decide if the results of the home inspection are acceptable to you.
    • Obtain home insurance for the property.
    • Receive final approval on any financing with your financial institution. This may include your bank requesting an appraisal of the property.
    • Sell your existing property, if required.
    • Obtain a real estate lawyer who will perform a title search and other duties as required to close the deal.
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    Understand what closing costs will include. Closing costs are expenses that are required in order to close the real estate deal. They are not part of the offer price on the contract. Closing prices may include the following items:[19]
    • Legal fees — can include notary costs, photocopying costs, courier costs, etc.
    • Utilities and Property Taxes — can include any pro-rated utility bills or property tax amounts as per the date you take ownership.
    • Real Estate fees — can include the sales commission paid to the agent, or a commission to your agent if you agreed to one.
    • Financing fees — can include the cost of the appraisal and other fees. These are sometimes rolled into the mortgage amount.
    • Inspection fees — any inspection you want done on the property will cost you money to have performed.
    • Transfer taxes — can include any state, county or city fees to transfer title from one person to another. In Colorado the transfer tax is 0.01% (of the purchase price). For example, if you purchase a property for $400,000, you’ll pay transfer taxes of $4,000.[20]


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Categories: Purchasing | Real Estate