The subject of "Title Insurance" may not be the most exciting topic, but this is an important aspect of a real estate transaction, nonetheless!! When purchasing a property, your Title Commitment will report the status of the title (including liens on the property), and the conditions and requirements under which the title company will issue an insurance policy once the transaction has closed. The Commitment also lists specific exceptions from coverage (matters that the policy does not cover). Essentially, this policy insures your title and ownership of the property against loss in a property dispute!
Take a close look at the Title Commitment when you receive it, as you have the opportunity to terminate your contract before the Title Objection deadline without losing your earnest money, or ask for a resolution to any issues before the Title Resolution deadline.
The Title Commitment includes 3 main sections, with a "jacket" section at the front, providing conditions and disclosures to the proposed insured:
Schedule A - Provides the "effective date" (which includes the gap period until closing), the Owner's Policy amount (purchase price), and Loan Policy amount (loan amount), the legal description of the property, names of the buyers and sellers, and the premium amounts for the policies ... all of this information should be checked for accuracy!
Schedule B - Section 1 - Provides requirements (mostly of the seller) that need to be met prior to closing, such as paying off a mortgage, or getting a lien removed. If the contract states that the commitment should "delete over standard exceptions" (recommended), this should be noted in this section of commitment.
Schedule B - Section 2 - Provides exceptions to the policy (items not covered, other than 1-4 if the commitment deletes over standard exceptions). This section will include water rights, taxes or assessments, rights of way or easements, oil and gas rights, covenants, etc. Title insurance only covers the surface of the property, though many times additional endorsements can be purchased to cover some of the items in the exceptions section, so ask the title company ... and if you see anything unusual, ask for clarification!
Title Insurance premiums should be the same for a property no matter which title company is used, as the policies are all issued by ALTA (American Land Title Association) ... the only difference in title companies is the amount charged for document preparation (which is not significant, and generally split between buyer and seller), and customer service! Note that Title Insurance is generally paid for by the seller in Colorado, but this can be negotiable. The policy covers both the lender (for the life of the loan), and the buyer (for the entire period of ownership).
So READ your Title Commitment, and ask questions!!
