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Title Insurance and Colorado Real Estate

August 23rd, 2012 | Written by | Buyers, Franktown Colorado, Homes for sale, Market Reports for Parker Colorado, Parker Neighboring Communities, Sellers

Title and Title Insurance in Colorado Real Estate. Very important information to know.

Below I will address many of the basic and common questions concerning Title and Title Insurance in the State of Colorado. I wrote a post about Title Insurance way back in 2008 but I wanted to revisit this topic and cover it in more detail and cover a few issues and questions I’ve been asked lately.

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As always in any real estate transaction it is best to hire an attorney to review and discuss title issues with you as well as the entire Colorado Contract to Buy and Sell Real Estate. If you are spending a few hundred thousand dollars or over a million to buy real estate why not spend a few hundred to have an advocate like an Attorney covering your butt. I’m always surprised at how few people hire and use good legal advice when buying and selling Colorado Real Estate.

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What is Title to Real Estate?

Title describes the Legal terms or matters affecting a piece of property. Real Estate Title affects how you can LEGALLY own, use, access, and yes even sell your property. Think of Title as your legal rights to the property.

More examples – A Title Commitment can show you if there are easements for power lines that could be built on your property or rights of way for neighbors to cross your land. Mineral rights may be listed and this is a hugely important topic right now in Douglas and Elbert County Colorado. It’s also very important to find out if there are any liens on the property that may not be discharged.

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Do I have your attention? Yes title and knowing about title is vitally important to your real estate transaction.

Here is an interesting Fact about Title Insurance.

Did you know that Title Insurance is the only insurance you purchase to cover an event that may have occurred in the past? Normal insurance covers you for issues or accidents that may occur in the future.

What is Title Insurance?

First there are two basic types of Title Insurance. 1. Owners Policy 2. Lender’s Policy.

Title Insurance is when the Title Company agrees to indemnify or protect, you the owner or the lender, from claims and challenges to your ownerships or rights to your real estate by a third party.

The Title Insurance Policy or agreement is subject to certain exceptions, exclusions and conditions. Make sure you read and understand the conditions and talk to the title company to see if you can have the conditions or exceptions removed. Sometimes title exceptions or exclusions can be removed by the title company. These are called Endorsements. Ask if there are endorsements to cover you for the exceptions that are of concern. This is where having your own Attorney review the Title Documents can come in handy. Be prepared to pay a fee should the Title Company give you an endorsement. Generally the fees associated with obtaining an endorsement is not very expensive when you consider the costs associated with a loss and it is normally just a one time fee paid at closing.

How much Title Insurance do I need?

You will receive a title insurance policy that will cover the cost of the purchase price of the real estate. TIP: Ask about inflation protection or extra title protection should you improve the property and increase the value beyond the original purchase price.

What happens if a third party makes a claim against my title?

As soon as you are notified that someone is challenging your title place a call to the Title Company that holds your Title Insurance Policy. Let them know what you know at that point. In every case I’ve seen so far the Colorado Title Insurance Company will take the facts and work the case from that point forward and keep you informed. They may request your original closing docs and contract to purchase. ALWAYS keep your docs from the closing. You can also call your Realtor to ask them for help gathering these documents.

Possible Remedies of a Third Party Title Claim.

There are many remedies but the most common I’ve seen are 1. The Title Company can be required to fix the problem. 2. The Title Company should defend you against the claim within the terms of the original Title Agreement. 3. The Title Company should Compensate you for your loss within the parameters of the original Title Commitment.

Who pays for Colorado Real Estate Title Insurance?

Title insurance in Colorado Real Estate is typically purchased by the seller for the buyer. Of course this is negotiable and sometimes the buyer will pay for it but in most cases [based on my 14 years of real estate sales] sellers are usually buying the title insurance policy for the buyer.

Who chooses the Title Insurance Company in a Colorado Real Estate Transaction?

The seller’s Realtor, the seller and the buyer’s Realtor do not have final say on which title company is used in the Colorado Real Estate transaction. The buyer actually can and should have final say on who provides the Title Insurance or Title Commitment.

TIP: Remember that just about every issue in a Colorado Real Estate Transaction can be negotiated.

Legally, per the Colorado Contract To Buy and Sell Real Estate, the buyer has the right to request which title company the insurance will come from.

What is the best Title Insurance Company in Colorado?

Personal experience and company history all play a role in what Colorado Title Company you should choose. A lot of times when a buyer makes an offer on a property they will receive Closing Instructions to sign along with the Colorado offer to purchase. In the Closing Instructions the seller and seller’s Realtor will have already filled in the name of the Title Company that they wish to use.

If the Title Company that the seller and seller’s Realtor have picked is unknown to me or may have a sketchy track record I will recommend to the buyer that they request a more reputable company for the Title Insurance and to handle the real estate closing. There are plenty of fly by night Title Companies out there so Buyer Beware. Even with all the recent regulations bad Title Companies still slip through the cracks. Know who you are dealing with.

Things to remember.

Remember the Title Insurance is usually being purchased by the seller to protect the buyer.

If you are obtaining a loan to buy real estate the lender will also require the buyer to purchase a “Lender’s Policy” in the amount of the loan. The term of the Lender’s Title Insurance Policy will run the length of the loan. This is in case the bank ends up owning the property through foreclosure or other means.

Title Insurance Companies in Colorado.

A final note on Title and Title Insurance in Colorado. Hopefully when you decided to make a Real Estate purchase you investigated and hired a Realtor that knows the area you are wanting to live. Just like hiring a Realtor that knows the area you should also hire a Colorado Title Company that is local and works the area and more importantly the types of property you are interested in purchasing.

Parker, Castle Rock, Douglas and Elbert County Specific Title Issues.

Properties with mineral rights where oil and gas drilling may be an issue would require a Colorado Title Company that has experience in these issues. I would never even begin to purchase a property with possible mineral rights without FIRST hiring a top Attorney to help research and educate me about the mineral rights and what is included. Many times people sell mineral rights separate or retain them for themselves. You need to know this.

Surveys are also a really good addition to any property purchase.Know what you are buying. I haven’t seen it much in the last few years but occasionally a Title Company and even the Lender will request and even require a current survey before they will give you a loan or sell you Title insurance.

Please make a comment or suggestion below on this blog post if you have an opinion or past experience with any of these issues. Comments are always welcome. I know I’ve only covered the basics here but it should help answer most entry level questions.

Good Luck,

Steven Beam – Parker Colorado Realtor. 303-941-4663

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Steven Beam, Realtor, CRS
18551 E. Mainstreet Suite 2-A
Parker, CO 80134
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