WHAT IS A TITLE COMMITMENT?

If you’re the buyer in a real estate transaction, you’ll receive a copy of the title commitment before closing and have several days to review it. Here’s why that document is so important and what it means to your property.

What is a Title Commitment?

A title commitment is a document that iterates the details surrounding the property. It lists the various requirements, exclusions, and exceptions behind issuing title insurance on the property. It’s also a promise to issue title insurance as long as all stipulations in Section B are met. Without a title commitment, the buyer knows little about the property’s possible peculiarities such as a third-party ruling body like a condo association or any right-of-way existing on the property.

Understand a Title Commitment

The title commitment is divided into several sections. Depending on the state in which the property is located, the title commitment could vary slightly but they always contain the following parts.

Schedule A

Schedule A contains the commitment date; the policies to be issued, the amounts, and proposed insured; the interest in the land and the owner; and the description of the property.

Schedule B

Schedule B contains the requirements, exceptions, and exclusions. Schedule B is the most important part of the title commitment. Buyers should pay close attention to it.

Requirements: this section lists the things that must be completed/adhered to in order for title insurance to be issued. If one of the requirements cannot be met, this will affect escrow, so the buyer should inform the escrow officer immediately. Requirements can include things like:

Tax payments
Recording the new deed
Recording loan documents
Release of liens
Proof of identity

Exceptions: this section lists what is not covered under title insurance. You’ll usually find generic wording contained in this section about mineral rights as well. In order for a buyer to fully understand the coverage of the title insurance on the property, the exceptions section should be read carefully.

If any of the exceptions are unacceptable to the buyer, it might be possible for the title company to remove them, insure over it (with the use of an endorsement), or discard it with a release or affidavit. Contact the escrow officer or an attorney if there’s anything that strikes you as unusual in this section. It’s better for you to understand the stipulations and gain clarification now than find out later you left yourself exposed by not fully reviewing the document.

Exclusions: this section discloses things that the title company will not cover. Common exclusions include:

Governmental regulations relating to the use of the property
Rights of eminent domain
Claims arising from bankruptcy

A title commitment is one of the most important documents in closing because it details what is covered and not covered in the title insurance policy. Without one it’s impossible to understand the stipulations and exclusions of the title insurance. You may be leaving yourself open to future legal challenges if you don’t examine it carefully.

You have a choice when it comes to title agencies. Selecting a title company that helps you understand the process and works with you is wise.

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