Title Company

TITLE COMMITMENT … WHAT IS A TITLE COMMITMENT?

The Title Commitment

The title commitment is produced after the title company has received a copy of a signed sales contract and a check for earnest money. The commitment reviews the status of title, lists title issues and defects that need to be addressed or “cured” before closing, and states any other preconditions to issuance of a title policy.

This is not the same thing as title insurance. Click here to learn about Title Insurance.

The title commitment consists of Schedules A through D plus various notices and disclaimers.

    • Schedule A Sets out the date of the commitment, who the title company is proposing to insure (both purchaser & lender –if financed), the amount of title liability, the property title is insuring and how title to the property is currently held.
    • Schedule B lists exclusions and exceptions to coverage, including such matters as deed restrictions, setback requirements, and utility easements. These are items that affect the property and will probably always affect the property.
    • Schedule C Shows items that must be resolved prior to closing. These items might include include existing liens, bankruptcies, abstracts of judgement, marital status issues, probate issues, vesting problems or mechanic’s lien affidavits.The title company routinely requires release of these. If there are more serious issues like mechanic’s liens, judgments against the seller, tax liens, lawsuits affecting title, heirship issues due to a previous owner dying without a will, or gaps in the chain of title, the commitment will indicate what must be done if title is to be insured in the name of the new owner. Specific curative action may be required.
    • Schedule D is a disclosure of ownership of the title insurance company and underwriter as required by regulatory law. It also shows the estimated premiums to be charged at closing. Please review your contract to determine what you will be charged.
      • Please note this information does not constitute legal advise 

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Title Insurance – Do You Need It?

In short, title insurance protects against problems affecting the title to your home. You may think having a serious problem with your title is rather remote, but, in fact, title companies find problems in 25% of their title searches. Common problems are liens against the property from unpaid sub-contractors, unpaid property or income taxes or judgment holders. Other issues that can cloud title that are not so easy to detect include forged signatures in the chain of title, recording errors, undisclosed easements and title claims by missing heirs or ex-spouses.

There are two types of title insurance—an owner’s policy and a lender’s policy. When you obtain a new loan, the lender will require you to purchase a lender’s policy. A lender’s title policy protects the lender’s interest in the property should a problem arise. It does not cover the owner’s equity in the property, and will not pay the homeowner’s legal expenses if there is a problem. Only an owner’s title insurance policy will protect the homeowner. Owner’s title insurance is optional, but it protects the homeowner by paying claims and legal fees should a problem arise with the title of a property. Owner’s title insurance is purchased for a one-time fee at the original purchase and provides coverage for as long as you own an interest in the property or provide financing for a subsequent buyer. It also covers any liabilities you have under the title warranties you make when you sell the property.

A title insurance policy is your protection against loss of your rights to the property. When you consider that your home is probably your most valuable asset, title insurance makes fnancial sense.