3.4 Colorado Closing Procedures

Colorado closings center on title insurance, a standardized Closing Instructions process, and a documentary fee instead of a transfer tax. Brokers coordinate the transaction, but a neutral closing entity - most often a title company - usually conducts the actual settlement. Knowing who does what, the good-funds rule, and the proration and fee mechanics covers most of what the state portion asks here.

Who Conducts the Closing

The Commission's Closing Instructions (CI) form is signed by buyer and seller to authorize and instruct the closing entity on how to handle the documents and money. C.R.S. 38-35-125 is Colorado's "good funds" statute: the closing agent may not disburse until funds are actually available (collected/good funds), which prevents the scenario of a deed recording and money going out the door before a buyer's check has cleared. On the exam, "good funds" almost always points to C.R.S. 38-35-125 and the rule that disbursement waits for collected funds.

Pre-Closing Requirements

Title insurance commitment

The title commitment has schedules: Schedule A states the insured, the estate, and the amount; Schedule B lists the exceptions and requirements - the items the policy will not cover and the items that must be cleared before closing. A careful buyer's broker walks the buyer through Schedule B so easements or covenants are caught before the title-objection deadline passes. The standard CBS contract has the seller pay for the owner's title policy unless the parties check otherwise, and the buyer's lender requires a separate lender's (mortgagee) policy the buyer customarily pays for.

Federal TRID timing

TRID (the TILA-RESPA Integrated Disclosure rule) is federal, but it controls the Colorado closing calendar, so the contract's closing date must allow for the three-business-day Closing Disclosure window. If a last-minute change triggers a re-disclosure (for example, the APR jumps more than 0.125%), the three-day clock can restart and push closing back.

Deeds Used in Colorado

The general warranty deed gives the buyer the most protection and is standard for ordinary residential resales. A special warranty deed - common from banks, builders, and commercial sellers - only covers problems that arose while that grantor owned the property, leaving earlier defects to the title policy. A quitclaim deed conveys whatever interest (if any) the grantor has and is the tool for clearing a cloud or transferring between divorcing spouses or family members.

Prorations at Closing

Property taxes (paid in arrears)

Colorado property taxes are billed for the prior calendar year, so at closing the seller credits the buyer for taxes that accrued during the seller's ownership (typically January 1 through the day before closing), because the buyer will later receive and pay the full prior-year bill. Because the next year's mill levy may not be set at closing, the parties often prorate using the most recent mill levy and reconcile later if the contract provides for it.

A worked example: on a property with a $3,650 annual tax bill, the daily proration is $10/day; if the seller owned the home for 120 days of the year before closing, the seller credits the buyer roughly $1,200 for the taxes the buyer will later pay.

Recording and Costs

Deeds are recorded with the County Clerk and Recorder in the county where the property sits, which creates constructive notice and establishes lien/conveyance priority. Colorado has no general state transfer tax; instead it charges a documentary fee of $0.01 per $100 of consideration (i.e., $1 per $10,000), assessed only when the consideration exceeds $500. So a $500,000 sale carries a $50 documentary fee. By custom the seller pays it, though it is technically negotiable.

A handful of resort municipalities (such as Aspen, Vail, Telluride, and Breckenridge) also levy a separate local real estate transfer tax (RETT) that pre-dates the 1992 TABOR-era constitutional freeze on new transfer taxes.

Exam anchors: taxes are paid in arrears (seller credits buyer); the documentary fee is $0.01/$100 on consideration over $500; the Closing Disclosure must reach the buyer at least 3 business days before closing; and good funds (C.R.S. 38-35-125) must be collected before disbursement.