Title Insurance is purchased with a one-time payment to protect against prior claims or defects that already exist in the title. In Colorado, it is customary for the seller to pay for the buyer’s title insurance. Title insurance protects against losses prior to the issue of the policy and expires on the date of issue. Title insurance does not protect any future claims or losses, only the past. There are two basic types of title insurance.
Owner's Coverage – protects the current homeowner from prior claims of ownership or other hazards and defects that already exist in the title. Several examples include: Forged documents, undisclosed heirs, and undisclosed liens.
Lenders Coverage - is paid by the buyer and is for the benefit of the lender. Lenders coverage is the security for their investment and only protects any loss to the lender.
Commissions - are the compensation that the seller agrees to pay the listing agency for the successful sale of the property described in the listing contract. The commission is normally expressed as a percentage of the gross purchase price. There is no fixed or set commission rate or structure. The commission structure will vary depending on the difficulty of selling a home, whether the agreement is for limited or full service, the amount of advertising required and other items as agreed to by the seller and listing agent. There is no compensation paid to the listing agency if the sale of the property does not close unless “other compensation” has been agreed to in the listing contract.
Taxes - are paid in arrears. If the annual taxes have not already been paid then the sellers will credit to the buyers the total number of days the seller has lived in the home that year.
Final Water - prorations are not uncommon to approach $350 - $400 dollars for summer time usage. In Colorado a lien will be placed against the property if the water bill is not paid. To prevent a lien on the property the title company will prorate water very high and then issue a check back to the seller for the difference of the final water bill. If water is paid by another entity such as a HOA management company then a final water proration will not be included on the settlement statement.
HOA Status Letter - will be required if the home is in a home owners association. The HOA status letter is customarily a sellers cost indicating the account status and whether the seller is in good standing or has past dues that must be settled before closing can occur.
Settlement Closing fees - are normally split between the buyer and seller and are approximately $200 each. This fee is charged by the title company to manage the physical closing, process all monies, explain the documents you will be signing and have you sign all documents in an orderly manner.