Buyer beware: the close relationship of real estate agents and title insurers

Homes in the Cheesman Park neighborhood. Cheesman Park. (Kevin J. Beaty/Denverite)residential real estate; house; home; cheesman park; denver; denverite; kevinjbeaty; colorado;
Homes in the Cheesman Park neighborhood. Cheesman Park. (Kevin J. Beaty/Denverite) residential real estate; house; home; cheesman park; denver; denverite; kevinjbeaty; colorado;
Homes in the Cheesman Park neighborhood. Cheesman Park. (Kevin J. Beaty/Denverite)

Arvada real estate agent Amanda DiVito Parle had a really good question for the Denver Post:

“Have you ever seen a TV commercial for title insurance?” she said. “They don’t target consumers because it’s not where they’re getting their business. They target the real estate brokers.”

A title company ensures that the deed to your new home is legitimate and then issues title insurance for that property. Once a real estate deal is closed, brokers are generally expected to give clients a choice of three different title companies.

But in Colorado, the choice isn’t always presented. More troubling, the title company that’s recommended might come with some unexpected ties.

There are at least 37 real estate agents with financial interests in a title company that haven’t registered that affiliation with the state, a Denver Post analysis found.

Even the registered affiliated business arrangements aren’t always properly maintained. From failing to register with real estate regulators to not registering it at all, the affiliated business arrangement system as it currently exists doesn’t appear to put consumers first.

A share in the profits of the title company typically are in the hundreds or thousands of dollars for a broker, the Denver Post found. But for consumers, there are financial risks. Let’s end with another good question in the Post’s piece:

“Who looks at a title company? You sort of figure that when businesses are recommended, you trust your Realtors,” said Alicia Smith, who lost $3,000 in earnest money when the title company in her deal folded.