The topic of title insurance may not be real sexy. However, it’s a very important topic when you’re selling, buying or refinancing your home.
Your home is generally the largest single financial investment of your lifetime. For that reason, just as you wouldn’t deposit money in a bank that wasn’t FDIC insured; likewise, don’t use a title company that can’t protect your money and real estate transaction.
Just ask Doug Marion of Fort Collins, Marty Gentry of Berthoud, David Schmidt of Denver and Nancy Ferguson of Pueblo, as they lost a combined $265,000 in 2014 from the real estate closings of their homes. Since 2005, there have been seven title companies in Denver that have gone out of business due to the theft and embezzlement of a reported $12 million.
There is a significant value for title insurance, as it determines your ownership rights, protects your interests and provides you the necessary and costly legal representation if needed. However, in Colorado, the business of title insurance which is regulated by the Division of Insurance includes the real estate closing settlement services of the transaction; and it’s this aspect of title insurance business that can cause great financial harm to consumers. Especially since Colorado has a very antiquated statutory and regulatory environment, which provides little, if any, consumer protections.
In an effort to address the need for more consumer protections the Colorado General Assembly in their recent 2015 legislative session passed Senate Bill 210 that was sponsored by Sen. Laura Woods and Rep. Jeni Arndt. This bill creates a nine-person advisory commission to the Division of Insurance, which will include the voices of three consumer members. In addition, the bill creates a statutory focus and annual reporting to the General Assembly on what consumer protections are needed.
SB 210 is a step in the right direction. However, it will take a couple of years to develop a legislative and regulatory environment that can truly protect consumers. Meanwhile, you need to be more informed about title insurance services and mindful about the title company you use.
Consumers typically rely on the recommendation of their real estate broker, which is not a good idea. You must be cautious of such recommendations for the following reasons: a) the recommendations are usually not based on a comparison of services, protections and costs for your specific transaction, b) many brokers providing recommendations are affiliated with a particular Title Company for various self-serving motives, and c) brokers are under no legal duty in representing the consumer’s best interest as it relates to the recommendation of a title company.
Here are important facts regarding the business of title insurance:
• The Colorado Division of Real Estate says consumers are responsible for shopping and selecting the title company for their real estate transaction, not the real estate broker
• The Colorado Division of Insurance, which licenses and regulates title companies, encourages consumers to shop and compare title and closing services and costs.
• Title companies are not required by Colorado law to undergo a criminal background check, or have any form of business coverages necessary in protecting the consumer’s money and real estate transaction.
• The overall costs for title insurance and closing services can vary greatly among title companies, from $200 to over $1,500, depending on the transaction.
• Selecting and paying for title insurance and closing services are a negotiated real estate contract item between seller and buyer.
• A closing protection letter that provides additional assurances and protections are available, upon request, to sellers, buyers and borrowers, at no extra charge.
Even though it’s your responsibility to shop and ultimately select the title company, nothing prohibits you from requesting that your real estate broker provide a written comparison of their three recommended title companies based on services, protections and costs, specific to your real estate transaction.
In addition, ask your real estate broker when placing your title insurance business with the selected title company, to request a Closing Protection Letter on your behalf.
SB 210 allows for more consumerism, transparency of information and protections to the business of title insurance.
Garry Wolff, founder of TI services, is a member of the Colorado Division of Insurance Consumer Insurance Council.
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