Transfer of title: deeds, title insurance, recording; foreclosures, short sales, probate

Bottom line: A deed moves ownership. Recording it protects you. Title insurance pays if a hidden problem appears. Foreclosure in Colorado is run by a government officer called the public trustee, on strict dates.

Types of deed

• General warranty deed: the seller promises good title against all claims, including ones from before he owned it. Strongest protection for the buyer.
• Special warranty deed: the seller promises only that he himself did nothing to harm the title while he owned it. Common for banks and businesses.
• Bargain and sale deed: says the seller owns and is transferring it, but gives little or no promise about problems. Common in Colorado.
• Quitclaim deed: passes whatever interest the signer has, if any, with no promise at all. Often used to clean up a name or add a spouse.
• Personal representative's deed: used when someone handling a dead person's estate (the personal representative) sells or transfers estate property.
• Trustee's deed: given by a trustee. In foreclosure the public trustee delivers a confirmation deed to the winning bidder (C.R.S. 38-38-501).

What makes a deed valid

1. A grantor (the person giving) who is legally able to sign.
2. A grantee (the person receiving) who is identified.
3. Words of conveyance (language that transfers).
4. A legal description of the land.
5. The grantor's signature.
6. An acknowledgment (a notary's confirmation of the signature), which is needed to record it.
7. Delivery and acceptance: the grantor must intend to hand over title now, and the grantee must accept. A deed left in a drawer and never delivered does not pass title.

Recording and Colorado's recording rule

Recording means filing the deed with the county clerk and recorder so the world can see it. The statute says an unrecorded instrument is not valid against anyone with rights in the property who records first, except between the parties and against anyone who had notice of it earlier. The statute literally states: "This is a race-notice recording statute" (C.R.S. 38-35-109(1)). In plain words: you win if you take without knowing of an earlier deal (no notice) and you record first. Record fast.

Title work

• Title search: a review of public records to see who owns the land and what claims exist.
• Abstract of title: a summary of the history of every recorded document on the property.
• Marketable title: title free of reasonable doubt, which a reasonable buyer would accept.
• Title insurance: pays for covered title defects, such as a forged old deed or a missed lien. The owner's policy protects the buyer for as long as he or his heirs own it, paid once. The lender's policy protects only the lender's loan amount and falls as the loan is paid down.

Foreclosure through the public trustee

A deed of trust is the lender's claim on the house. In Colorado a foreclosure usually runs through the county public trustee. Timeline from the statute:

• The lender records a notice of election and demand.
• Within 20 calendar days the public trustee mails a combined notice to listed parties (C.R.S. 38-38-103(1)(a)).
• Between 60 and 45 calendar days before the first sale date, a second combined notice goes out (38-38-103(1)(b)).
• The owner can cure (catch up the default) by filing a notice of intent to cure at least 15 calendar days before the sale (38-38-104(1)).
• After the sale, lienors (those who hold a lien) who want to redeem must file a notice of intent to redeem no later than eight business days after the sale (38-38-103(4)(a)(III); 38-38-302).
• When the redemption periods end, title vests and the public trustee gives the confirmation deed (38-38-501).

Redemption is getting a property back by paying what is owed. Deficiency is the unpaid balance of a loan after the sale proceeds are applied. A lender may sometimes seek it from a borrower, depending on the loan and the law.

Short sales and probate sales

A short sale is a sale for less than the loan balance, which the lender must approve. A probate sale is a sale by a personal representative of a dead owner's estate, using the court-supervised or informal process; the buyer gets a personal representative's deed.

Why the order of events matters

Think of foreclosure as a clock that gives each person a chance to protect themselves. The owner can cure early, which means paying the missed amounts plus costs so the loan goes on. Other lienholders get notices so they can protect their own claims. A person whose address is not in the recorded paperwork may not get notice, and the statute says that party's interest can be wiped out when the confirmation deed is delivered (C.R.S. 38-38-103(1)(c)). That is why recording your own documents with a correct address matters. For a broker the lesson is simple: never promise a homeowner or buyer that a sale date is final, because dates can be continued, and a continued date moves the cure deadline too (38-38-103(4)(a)(II.5)).

Probate sales in a little more detail

When an owner dies, the estate is opened in court and a personal representative is named. That person signs the sale contract and later the deed. Buyers should ask for proof of the representative's authority (letters from the court) and have the title company confirm it. Timing can run long, so build extra days into the contract. An heir who simply lives in the house does not have the power to sell it.

Example with real numbers

A Boulder County homeowner owes $430,000. The house is worth about $400,000. A buyer offers $400,000.

1. Sale price $400,000 - loan $430,000 = -$30,000 short, so the lender must approve a short sale.
2. Selling costs of 6% = 0.06 x $400,000 = $24,000. The lender nets $400,000 - $24,000 = $376,000 and accepts a loss of $430,000 - $376,000 = $54,000.
3. If the lender does not waive the rest, a deficiency could be claimed. Get any waiver in writing.
4. The buyer buys with a $400,000 owner's policy so a hidden claim is covered, and the deed is recorded the same day.