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Sun and clouds mixed. A stray shower or thunderstorm is possible. High 66F. Winds WSW at 10 to 15 mph..
Clear skies. Low 38F. Winds W at 10 to 15 mph.
Updated: May 4, 2023 @ 2:44 pm
While not a legal requirement, title insurance is one of the most important pieces of a real estate transaction. High on the list of deadlines in a real estate contract is the Record Title Deadline. So what is title insurance, and why is it so important?
Basically, title insurance protects the property owner against any defects in the title that may become apparent, either during the purchase process or any time after the transaction has closed.
One of the first steps once going under contract is the title search, conducted by the title company. The company searches the public record of the subject property, ensuring that the seller is the actual owner of the property and is legally able to convey it.
At the same time, the title search uncovers any potential defects to the title that may affect ownership. Defects can include survey and boundary errors, third-party claims to ownership of the property, easements, liens or errors in the legal description or deed.
There are two types of title insurance policies: lenders and owners. Anytime a lender is involved in a transaction, they will take out a title insurance policy that will protect their interest in the property for the amount of the loan they provide. An owner’s policy similarly protects the buyer and is issued for the total amount the buyer pays for the property. Generally the buyer pays for the lender’s policy as part of their loan cost.
While there are no hard and fast rules on who pays for the owner’s policy, in our area the cost is generally borne by the seller. In both cases, the cost of the policy is a one-time, not ongoing, event.
It is important to note that there are some issues and eventualities that are not covered by title insurance. These generally revolve around any issues caused by a third-party interest in the property, for example a homeowner’s association, where mineral or water rights are owned by a third party, utility easements, or any actions by the property owner after purchase that affect title, such as failure to pay property taxes, or a contractor who has completed work on the property.
Much of the title commitment language comes in the form of legalese, and buyers are always recommended to have an attorney review their title commitment to ensure there are no red flags before proceeding with the purchase.
Hayden Mellsop is a board member of the Realtors of Central Colorado.
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