Episode 8: What is Title Insurance?

This episode will cover the details of title insurance for a property. This is an interview with Courtney Rogers, Escrow Officer with First American Title company. This interview covers the process used for Colorado.

What does the title insurance company do for you?

  • There are two parts to title insurance company process in Colorado.
    • Insures the property (the land that the structure sits on).
    • Manages the escrow transfer process for the buyers and sellers from the title of contract to purchase to the closing and transfer of the title and money (including earnest money) from the buyer to the seller
  • What is escrow? Escrow holds the money that needs to payed during the title and property transfer process.
  • The title company handles all questions during the process of preparing the deed that will transfer the title between the seller and buyer.
  • The title company acts as the “scriber” which is the process of preparing the documents needed to be signed.
  • Additional items the escrow officer and title company complete are:
    • Any HOA documents that are needed if the property is part of an HOA.
    • Works with the lender to insure all fees and funds are collected.
    • Handles all documents that need to be signed for the lender.
    • Works with all parties to ensure there is a successful closing on the property.
    • Organizes and schedules the signing of all of the closing documents.
  • After closing the title insurance company disperses all funds to the proper parties.
  • They also file and record all of the documents regarding the sale and title transfer of the property to the county as it is considered a “public record”.
  • Transfer deeds include:
    • Warranty Deed – covers all historical records of the deeds of transfer for the property.
    • Special Warranty Deed – mostly for “fix and flips” or when an owner only is going to own the property for a short amount of time.
    • Deed of Trust – secures the note/mortgage that the buyer is taking out on the property.This gives the lender first position to collect on the property in the event of a foreclosure.
  • Colorado is a “table funding state” which means once all documents have been signed, all funds are released to the proper parties involved.

What is a title insurance policy and what does it cover?

  • When a property goes under contract, the title company requests a title search for the property.
  • This is to commit that a title insurance policy will be purchased.
  • There are two types of policies that are purchased:
    • A lender’s policy: Insures the lenders interest in the property.
    • An owner’s policy: Insures the title transfer will go smoothly and that all interested parties have previously been satisfied.
  • Each policy has a different cost associated with it.
  • Searches for any outstanding liens or judgements on the property and pays them to make sure the title transfers clean and clear to the buyer.
  • Includes and “exceptions page” which explains what is NOT covered by the policy, including any easements on the property.
  • Also covers any possible future liens that are a previous owners responsibility once they have been verified.

What is the difference between a title insurance policy and a homeowners (hazard) insurance policy?

  • A title policy covers the actual land that the structure sits on. It does not cover the building, other structures, or any personal items on the property.  You will need a separate homeowners/hazard insurance policy for those items.

What are good questions to ask to make sure of a reliable title company?

  • Know who the title company is and who is underwriting their policies?
  • Make sure the company is able to cover any large claims that may come their way.Make sure they have enough financial reserves to cover any claims.

To contact Courtney Rogers, you can email or call her at 303.209.6350.