Title Insurance Insurance Required

WHY?
Every real estate buyer expects to get a title that is free and clear. Lenders don't want to risk their first position to claim the title they're lending on in case of default. To make sure there is nothing to taint the title, all loans using the property as collateral and judgements against previous owners must be removed before the buyer can have a clean title. It could be an expensive, legal mess if someone showed up claiming a legal right to your new home!
WHAT?
Title insurance is one of those common closing costs you expect when buying and selling real estate or refinancing a loan. Lenders and informed buyers require a legal review of a property's chain of title to determine if there are any outstanding claims on the property or against the current owner (or previous claims against previous owners when they owned the property). So the title company researches public records for mortgages, secured lines of credit, possible judgements against the owners, similarly named people with judgements, unpaid taxes, mechanic's liens, easements, HOA rules and records, rights of way, and other items that could place a claim on the property being sold. Lenders require a policy to cover the value of the loan and buyers require a policy to cover the purchase price of the property. So, there are usually 2 policies written for each transaction. DORA (the Colorado Dept of Regulatory Agencies) has a more indepth explanation of title insurance at http://www.dora.state.co.us/pls/real/Ins_Survey_Reports.Report_Selection_Criteria?p_report_id=TITLE&p_label. The title commitments for each policy are delivered to the buyer and lender after the title transfer is recorded in the county where the property is located.
WHO PAYS & WHEN?
Title insurance is paid once, at closing. The fee covers costs of the title search, examination, policy writing and risk. By law, in Colorado, the buyer and seller can choose their own title insurer. Practically, however, since discounts are given when the same company provides the title insurance for the lender and for the buyer, usually only one company handles each transaction. Since most people deal with title insurance infrequently, it is customary for the realtor or lender to suggest a company. Further, in Colorado, it is usually the seller who chooses the company in a transaction, since they usually pay for the property title commitment-the more costly of the 2 policies written at closing. More importantly, a lender's policy has different provisions than a buyer's policy and is written more to assure the lender they have a valid first position claim against the property. Buyers want assurance that there is not and will not be any hinderance to transferring the title to them and that the transferred title will be marketable later.
HOW MUCH?
Each title insurer is required to post their rates. However, rates tell nothing about the closing services nor the depth of the coverage of the insurance policy. Rates are posted at http://www.dora.state.co.us/pls/real/Ins_Survey_Reports.Report_Selection_Criteria?p_report_id=TITLE&p_label .

There's much more to title insurance, so feel free to ask or comment.