The Importance of TITLE Review and Title Insurance in Real Estate Transactions
Real estate transactions are inherently complex, and neglecting a legal review can lead to significant risks. In Colorado, unlike other stats, layers do not have to be engaged in residential real estate transactions. However, legal expertise is invaluable—especially for reviewing title commitments and identifying potential risks. Here's what you need to know about the importance of title review, common misconceptions, and the role of title insurance.
What Is Title Insurance?
Title insurance protects buyers and lenders from issues tied to a property’s ownership history. Unlike homeowners insurance, which covers future risks, title insurance looks backward—guarding against problems such as unresolved liens, boundary disputes, clerical errors in public records, and undisclosed easements or ownership claims. The most widely used coverage is the 2021 ALTA Owner’s Policy, which shields property owners from recorded defects, encumbrances, or liens that exist up to the date the deed is recorded.
What Is a Title Commitment?
Before issuing a title insurance policy, a title company provides a title commitment—a formal outline of what the insurance will and won’t cover. It includes:
Schedule A, which lists basic transaction details (buyer, seller, purchase price, etc.),
Schedule B-I, which outlines requirements that must be met before the policy is issued (such as paying off existing liens or recording necessary documents), and
Schedule B-II, which lists exceptions—items excluded from coverage, such as recorded easements, restrictions, or other encumbrances.
Buyers may also add endorsements to the policy to extend coverage for certain risks, such as zoning or encroachment issues. For example, an ALTA 9 endorsement may protect against violations of certain land-use regulations. Meanwhile, exceptions—especially those in Schedule B-II—can limit the policy’s protection. Understanding which exceptions are negotiable or insurable can have a major impact on your rights as a property owner.
Why Title Review and Title Insurance Are Critical
When you're buying real estate, title review and insurance aren't just formalities—they're essential safeguards. Without a clear title, you could inherit problems you didn’t create, from unpaid liens to restrictions that limit how you can use the property. That’s why having a real estate attorney involved early in the process is so important. They can help you make sure the title aligns with your plans, whether that’s building an addition, renting the space, or simply living there without hassle.
Title companies provide a title commitment before issuing insurance, which outlines what’s covered and what’s not. These commitments often include exceptions—some are routine, others can be deal-breakers. Many exceptions can be insured over for a small fee, but some might seriously impact your intended use of the property. By reviewing these with a legal expert before the title objection deadline, you protect yourself from unpleasant surprises and set the stage for a smoother, more secure closing.
Common Misconceptions About Title Review
Many buyers mistakenly believe that title issues are automatically resolved as part of the closing process. In reality, several common misconceptions can leave buyers exposed to risk.
One major myth is that the title company guarantees a perfect title. In truth, title insurance only covers specific risks and excludes many others. A property can still close with unresolved defects—issues that then become the buyer’s responsibility. Another common misunderstanding is that the lender will catch any problems. However, lenders focus solely on protecting their financial interest in the property. They won’t flag restrictions that affect how you can use the property, such as HOA rules or zoning limitations.
Some buyers also assume the seller is obligated to provide a clean title. But in Colorado, the standard contract only requires the seller to deliver title “as is.” It’s up to the buyer to review the title and raise objections before the deadline. Finally, many expect their real estate broker to handle title review. While brokers play a key role in guiding the transaction, they aren’t licensed to interpret legal title issues. Their goal is to close the deal—not to protect you from potential legal pitfalls.
Work With GLO
When it comes to buying real estate, having a lawyer review the title documents isn’t just a formality—it’s a critical step in protecting your investment. Whether you're reviewing title commitments, considering title insurance, or preparing to close on a property, having legal guidance is essential. A knowledgeable attorney doesn’t just spot problems—they help you avoid them entirely. In real estate, that peace of mind is worth every penny.
Contact GLO today for professional guidance on title reviews, title commitments and other real estate concerns. Secure your investment with confidence.
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