When you buy a house, a lot of money is in the air. There are always risks when hundreds of thousands and possibly millions of dollars are loaned out, and those risks can lie in wait in the form of title issues. Luckily, home lenders, borrowers, and sellers can protect themselves with title insurance.
When buying a home or property in the sizzling real estate market of Colorado things can move fast but you definitely don’t want to be left in the dust when it comes to being protected with title insurance. Let’s learn more about title insurance including what it is, Colorado title insurance regulations, if you need it in Colorado and where to find help on title insurance questions.
What is a Title?
A title is proof of ownership of a home or property. If you need to prove the home is yours or need to sell a home, you will use the home’s title. When a title, also known as a property deed, changes hands the previous homeowner is saying, “This is my title, I own it without any back taxes or other issues, and I am transferring it to you.”
A successful transfer of title and ownership happens most of the time, but not all the time and often without anyone knowing they’re doing anything wrong. In the case of questionable transfer or other errors on a deed or title, title insurance keeps you protected.
Questions about Title Insurance
What is Title Insurance?
Title insurance is a policy that protects homebuyers (borrowers) and mortgage companies (lenders) from damage or loss of property due to liens or defects in the property’s title.
There are two main types of title insurance, lender’s title insurance, and owner’s title insurance. Lender’s title insurance protects the lender’s money invested in the property while owner’s title insurance helps verify your claim on the title. Owner’s title insurance is only purchased once but applies to the title as long as you own it.
Does Colorado Require Title Insurance?
Colorado does not require owner’s title insurance, but any mortgage company will require you to purchase a lender’s title insurance policy as part of the home sale.
What Does Title Insurance Cover?
Title insurance seems like another senseless real estate fee, but title insurance is good for the borrower too. Title insurance can help against unforeseen circumstances, major clerical errors, shady dealings, and more. Because many of these issues can be missed even with a thorough check it’s important that your policy covers:
Unpaid liens and judgments
Unpaid taxes and assessments
Forgeries and fraud
Improper execution of documents
Improper filing or recording legal documents related to the property
While rare, the above issues could cause major issues on your home’s title. Imagine waking up and having a bank representative at your door because the home you’ve been living in for a year doesn’t technically wasn’t the previous owners to sell. It can happen but it won’t with title insurance.
Title Insurance vs Other Insurance
When you purchase a home, you purchase a homeowners’ insurance policy. You pay plenty for your homeowners’ policy, so doesn’t that cover the home’s title?
The difference is what homeowners’ insurance and title insurance covers. Homeowners’ insurance cover possible future events like hail, fire, flood, and more, while title insurance protects against things that have already happened related to the home’s title.
Who Pays for Title Insurance?
In real estate transactions, it’s traditional for the seller to pay for the owner’s title insurance. Owner’s title insurance in an incentive for purchase and since it’s a one-time purchase of one to three thousand dollars, it isn’t a big deal on the ledger.
The lender’s title insurance is traditionally purchased by the new homeowner since their name is assigned to the title and mortgage.
What if there is a dispute related to your title? When a title transfers hands the title company will search public and private records to find any issues or future problems. If the company finds anything, they will remedy it before the transfer of title. Any remedies will not cost extra to the borrower.
If a title problem arises months to years down the road your title insurance will help prove your ownership of the property and can absorb any other legal disputes.
Colorado Title Insurance Regulations
Every state treats title insurance differently. If you’re buying a home in Colorado, you need to understand local rules and regulations. Colorado allows both insurers (loan underwriters) and insurance agencies to approve title insurance policies. Only insurance companies are allowed to set rates for title insurance.
The State of Colorado’s Division of Insurance encourages homebuyers to rigorously research different agencies and policies before deciding on your title insurance provider. Colorado residents can search for different licensed title insurance providers directly at the Colorado Division of Insurance website.
Title Insurance Companies Colorado
If you have further questions about your current title insurance policy, it’s best to reach out to your mortgage company. Your mortgage agent can detail what type of title insurance covers your loan and property, what it protects against, and any updates or filings you need to make.
If you’re purchasing a home and are curious about title insurance, it’s best to talk to your real estate agent. They can show where it will be nestled into paperwork or recommend title insurance agencies.
Title Insurance in Denver CO
If you’re purchasing a home and title insurance in Denver, CO its best to follow the Colorado Division of Insurance’s guidelines and properly shop and validate individual companies. You can verify a Denver title insurance agency is licensed with the state through the Colorado Division of Insurance website.
Getting Covered with Title Insurance
Title insurance protects your loan company, protects new homeowners, and ensures that when you purchase a home – that home is yours. If you’re home shopping right now contact The Storck Team to find out more about title insurance and what it means to you.
The world of titles and deeds can be a clerical nightmare, but you can protect your investment for as long as you own it with title insurance. If you ever find yourself asking “Do I need title insurance in Colorado?” The answer is definitely.