Property Titles 101: Everything You Need To Know When Buying or Selling A Home

Property Titles 101: Everything You Need To Know When Buying or Selling A Home

Most people only go through the home-buying and selling process a few times in their lives. So even if you’ve done it before, it’s easy to get a little rusty on all the details and terminology. As a realtor, I work with title companies practically every day, and I know one of the things that can leave buyers and sellers confused is the property title process. What exactly is a title? Why do you need a title search? What’s the role of a title company in the big picture? This is a post to give you the basics on this crucial step that protects you as a buyer or as a seller.



What is a property title, anyway?

Basically, a property title represents someone’s legal ownership of a home. It’s not an actual single document (that’s the property deed). It’s a legal concept that means someone has the right to sell a property.

My real estate agent said I need a property title company to do a search. What does that mean exactly?

Once you’re under contract, the title company does an exhaustive search of the property’s ownership history. They pore over every public record they can find for the address, making sure there are no issues that could get in the way of a nice, straightforward sale. For instance, are there any liens, or legal claims against the property, for unpaid debts, like unpaid taxes or work by contractors who weren’t paid in full? Is there an easement, meaning someone else has the legal right to use a specific part of the property without owning it? 

The title company delivers its findings in a title commitment by a deadline set in the contract. As a buyer, you'll get to review it, and you have a deadline to object if anything looks off. The goal is to catch issues early so they can be resolved before you sit down to close.

What is title insurance?

Usually part of a package including the title search, title insurance comes with a one-time payment (not ongoing premiums) that protects the buyer in case there was something missed during the search (things like recording errors, a forged signature, or an heir claiming ownership). It’s paid for at closing and it lasts as long as you own the home. For example, suppose a previously recorded lien or ownership claim wasn't discovered until after you bought the house. Depending on the circumstances and the coverage in your policy, title insurance could help cover your losses or even the legal costs of defending your ownership rights.

There are two types:

• Owner's policy: This protects the buyer. In Colorado, the seller typically pays for this one.
• Lender's policy: This protects your mortgage lender, if you have one. The buyer typically pays for this one.

You may also hear about extended coverage, which removes some standard exceptions from the policy (like unrecorded mechanic's liens or certain boundary issues). Your contract spells out whether it's included and who pays.

Who chooses the title company?

In Colorado, typically, the seller suggests a title company, although legally, nobody can be forced to buy title insurance from a certain company. This is where your Realtor will be a key resource—they should be able to suggest a title company they’ve worked with before who they know and trust. 

How much does all this cost?

The cost varies depending on the property and the title company, and it can include charges for the title search, closing services, and title insurance. Depending on the price of the home, type of coverage and the closing fees, we typically see costs in the range of $1,000 to $3,000. 

Title premiums in Colorado are filed with the state, so your title company can give you an exact quote early in the process, and it'll show up on your settlement statement.

What else does the title company do?

They’re basically the air traffic controller of the whole closing process: They have a wide range of responsibilities that ensure your closing goes smoothly. Beyond doing that title search, they’re also the ones who actually run the closing—getting all the paperwork and logistics prepared, organized, and executed. 

That includes the major things like tracking and disbursing all the money involved in the sale. Title prepares the statement showing every dollar in and out of the transaction, from commissions to recording fees to prorations, and works with the buyer's lender so the numbers line up with the Closing Disclosure.

Once everything's signed and funded, title sends the money wherever it needs to go: the seller's proceeds, the payoff of any mortgage, commissions, HOA fees, and so on. They also report the sale to the IRS and handle required withholding if the seller isn't a Colorado resident.

They handle other, crucial parts of the process too. In many Colorado transactions, the buyer's earnest money is deposited with the title company and held in escrow until closing. If the home is in an HOA, the title company confirms dues are current and shows any transfer fees, working capital contributions, or other amounts owed at closing. They collect and pay those on everyone's behalf. They also figure out and prorate property taxes, water, and sewer fees.

After closing, title records the deed and the buyer's loan documents with the county, which makes the new ownership official. They also file Colorado's required transfer declaration form.

All in all, the work done by the title company gives everyone involved in the transaction peace of mind and an assurance that the sale will go smoothly! If you have any questions about the buying or selling process, I’m always available to talk things through—feel free to contact me to set up a time to chat!