How do I read a title commitment and explain title insurance?

The title commitment shows up a few days after contract, and most agents forward it without reading it. Don't. It's the title company's report of everything recorded against the property, and it lists the things the buyer's policy won't cover. In Colorado, title companies (not attorneys) search, insure and close, so this document is the buyer's main look at ownership problems. Here's how I read one in ten minutes.

The short answer

A title commitment is the title company's promise to issue a policy once certain conditions are met. It has three parts: Schedule A (who owns it, who's insured, for how much, and the legal description), Schedule B-1 (requirements to clear before closing), and Schedule B-2 (exceptions the policy won't cover, like easements and covenants). The buyer can object to title problems by the deadline in the contract. Owner's title insurance protects the buyer. Lender's insurance protects the lender.

Step by step

1. Check Schedule A. Does the owner match the seller on the contract? Does the legal description match the listing and the ILC or survey? Is the policy amount the purchase price?
2. Read Schedule B-1. These are the to-dos: pay off the seller's loan, release old liens, record a corrected deed, provide trust or estate papers. Ask who's handling each one.
3. Read every Schedule B-2 exception. Request copies of each recorded document listed. Utility easements are normal. A shared driveway, a mineral reservation, or a recorded agreement giving a neighbor rights may matter to your buyer.
4. Know the deadlines. The Colorado contract has dated title deadlines (record title delivery and title objection, plus off-record matters). Put them on your calendar. See Colorado contract basics.
5. Object in writing if needed. If a B-2 item is a problem, the buyer objects by the deadline. The seller can fix it, or the buyer may terminate under the contract.
6. Explain the policies. Owner's policy: protects the buyer for as long as they own the home. Lender's policy: protects the lender only. In much of Colorado, sellers pay for the owner's policy by custom, but the contract decides.
7. Ask about extended coverage. Standard policies have general exceptions (like matters a survey would show). Extended coverage may remove some of those, often with an ILC or survey and an extra fee.
8. Watch for the deed type. Most Colorado sellers sign a general warranty deed. HUD and many bank-owned sellers sign a special warranty deed, which promises less. Owner's title insurance matters even more there.

How to explain it to your client

Watch-outs

• Name mismatches. A seller in a trust or an estate needs paperwork. Catch it early.
• Old unreleased loans. Common, usually fixable, and they can delay closing.
• Mineral and oil-and-gas reservations. Common on Front Range lots. Explain them plainly.
• Survey questions. The title commitment won't tell you where the fence sits. See ILC vs land survey.
• Wire fraud. Title companies handle the money. Warn clients early. See wire fraud warning.
• Not legal advice. If an exception is complicated, suggest a real estate attorney.

Further reading

• Colorado title search: commitment, exceptions and deadlines on kennarealestate.com
• Title problems on HUD homes and the special warranty deed on denver-hudhomes.com

This is training for real estate agents. It isn't legal advice. Check with your managing broker.

Frog tip: For a move-up client, pick the order before the first showing: sell first, buy first or same-day closings. That one choice sets the budget and the offer. Learn more →

Questions

What's the difference between a title commitment and a title policy?

The commitment is the promise to insure if conditions are met. The policy is issued after closing.

Who pays for owner's title insurance in Colorado?

Often the seller by custom, but the contract decides.

Does a cash buyer need title insurance?

No lender requires it, but the buyer should get an owner's policy.

Can my buyer object to an easement?

Yes, by the title objection deadline in the contract.

What's in Schedule B-2?

Exceptions the policy won't cover, such as easements, covenants and plat notes.

Brian Lee Burke is the founder of PadLeaders, a Colorado real estate broker licensed since 2003, team leader of The Kenna Group at Keller Williams DTC (formerly Kenna Real Estate Group) and the author of Mastering Real Estate and The Real Estate Playbook. More about Brian.