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  • Ralph A. Cantafio, Esq.
  • Richard L. Eddington, Esq.
  • Mark J. Fischer, Esq.
  • Reed F. Morris, Esq.
  • Jay M. Cranmer, Esq.
  • Elizabeth Wittemyer
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With all the complications associated with selling or buying real estate, one would think that it would be easy to prove your ownership rights involving your own property.

The purpose of title insurance is to establish your legal rights to protect your real property against title "defects" – legal rights to your property claimed by somebody else.

Unfortunately, hidden defects clouding or encumbering title can sometimes come to light after you have bought your property. Many legal issues can stand between you and a marketable title preventing you from selling or refinancing. With title insurance, the title insurer not only pays your legal costs if you are ever forced to defend your real estate, but title insurance also covers any financial loss if any title defect is found to exist.

How does title insurance work? Prior to buying or selling your property, a buyer will have to first purchase a lender's title insurance policy. This policy protects the lender against any title problems associated with the real property that will act as collateral for the loan. After closing, title insurance is purchased by the buyer to protect their interests, and hence a buyer needs an owner's title insurance.

Many companies sell title insurance. But a lay title agency (one that is not affiliated with a law firm) only prepares documents for closing and issues your title insurance policy. Under our Colorado law, no lay title agency can:

• prepare contracts
• resolve title or inspection issues
• give you legal advice regarding the content of documents you sign during the closing

Since your ownership rights must be legally protected, a person trained in the complexities of real estate is best qualified to issue your owner's title insurance policy. A lay title company will identify problems with title at the time of making a title commitment, a statement as to what they will and will not insure for, but can do nothing to actually resolve these issues. Because real estate brokers cannot practice law, they are of little help. That is why the participation of a real estate attorney actively involved in the title process can assist in the timely closing or the sale of real estate. Since the fee for title insurance will be about the same with or without having a real estate attorney prepare your title insurance, it just makes sense to receive the added value of an attorney's legal advice and counsel at the outset when purchasing title insurance.