How to Avoid Common Title Insurance Mistakes in Denver

When purchasing or selling a property in Denver, title insurance is a crucial part of the process. It protects both buyers and lenders from financial loss due to defects or disputes related to the property’s title. However, many homebuyers and real estate investors make mistakes when it comes to title insurance that can result in future issues or unnecessary costs. Understanding how to avoid these common title insurance mistakes can help protect your investment and give you peace of mind during the real estate transaction process.

In this post, we’ll walk you through some of the most common title insurance mistakes and how you can avoid them when dealing with title insurance in Denver.

1. Not Understanding What Title Insurance Covers

One of the most common mistakes buyers and sellers make is not fully understanding what title insurance covers. Title insurance policies can vary, but in general, they protect against financial loss from problems with the title that weren’t discovered during the title search process. This may include undiscovered liens, fraudulent claims, hidden ownership disputes, or even unpaid property taxes.

How to Avoid It: Make sure you understand exactly what your title insurance policy covers. Don’t assume all potential issues are covered under a standard policy. Talk to your title insurance company or agent about the details of your policy and any exclusions that might apply.

2. Overlooking the Need for Owner’s Title Insurance

Many buyers mistakenly assume that title insurance provided by their lender (lender’s title insurance) is sufficient to protect them. While lender’s title insurance covers the lender’s financial interest in the property, it does not protect the buyer's investment. If an issue arises with the title after the sale, the buyer could be left vulnerable to financial loss.

How to Avoid It: Ensure that you are purchasing both lender’s title insurance (if applicable) and owner’s title insurance. Owner’s title insurance protects the buyer's financial investment in the property, providing peace of mind in case any issues arise with the title.

3. Choosing the Wrong Title Insurance Company

Not all title insurance companies are the same, and some may offer more comprehensive coverage or better customer service than others. Choosing the wrong title company can result in higher premiums, less reliable service, and potential problems down the road.

How to Avoid It: Do your research before selecting a title insurance company. Look for a reputable provider with experience in the Denver real estate market. Ask for recommendations from your real estate agent or lender, and compare quotes from several companies to ensure you're getting the best coverage and service at a competitive price.

4. Not Reading the Title Insurance Commitment Thoroughly

A title insurance commitment is a preliminary document that outlines the terms, conditions, and exclusions of your title insurance policy. Failing to carefully review this document can lead to misunderstandings about what is covered, and you may be unaware of potential risks that could affect your property.

How to Avoid It: Take the time to thoroughly review your title insurance commitment. If you don't understand something, ask your title insurance provider to explain it in detail. Pay close attention to any exceptions, exclusions, or requirements that could affect your coverage, and address any concerns before closing.

5. Not Resolving Title Issues Before Closing

Some buyers and sellers may choose to ignore minor title issues in the hopes that they will go away on their own. Unfortunately, unresolved title issues, such as liens or boundary disputes, can lead to major complications during or after the sale, including a delayed closing or even the cancellation of the sale.

How to Avoid It: Before closing, ensure that all title issues are resolved. Work with your title insurance company, real estate agent, and attorney (if necessary) to address any title defects that arise. It’s far better to resolve these issues upfront than deal with them later.

6. Assuming Title Insurance Is a One-Time Cost

Another common mistake is assuming that the cost of title insurance is a one-time fee that covers you for the duration of your ownership of the property. While you do pay for title insurance upfront, some title insurance policies also provide additional protection, such as a policy upgrade for enhanced coverage. However, if issues arise in the future, buyers may need additional coverage.

How to Avoid It: Ask your title insurance provider whether additional coverage is available, such as enhanced title insurance, which offers more protection than standard coverage. It may be worth the extra cost to ensure you’re fully protected from unforeseen issues. Additionally, consider future needs, such as title insurance for refinances or sales.

7. Ignoring State-Specific Title Insurance Laws and Requirements

In every state, including Colorado, title insurance laws and requirements can vary. Many buyers are unaware of specific regulations or requirements regarding title insurance in Denver, leading to mistakes that could delay their closing or impact the terms of their policy.

How to Avoid It: Make sure you’re aware of Colorado's title insurance laws and how they may affect your purchase or sale. Work with a title insurance provider who is familiar with the state’s specific regulations and who can guide you through the process.

8. Delaying the Purchase of Title Insurance

Some buyers make the mistake of waiting until the last minute to purchase title insurance. This can cause unnecessary delays in closing, especially if the title search reveals issues that require additional time to resolve.

How to Avoid It: Purchase title insurance early in the closing process, as soon as you have an accepted offer and are in escrow. This gives your title insurance company plenty of time to conduct a thorough title search and address any issues that arise.

Conclusion

Title insurance is a crucial part of any real estate transaction, and avoiding these common mistakes can help ensure that your investment in Denver real estate is protected. By understanding the coverage, selecting the right title company, addressing any title issues early on, and purchasing the appropriate insurance, you can safeguard yourself against future risks and enjoy peace of mind.

If you're navigating the Denver real estate market, take the time to work with a knowledgeable title insurance provider who can help guide you through the process and provide comprehensive coverage.

Questions? Contact: Jerad Larkin at 303.630.9430 or Info@MileHighTitleGuy.com