Lots of folks avoid commitment. The title commitment. This is the long document sent to a potential buyer and seller by their title company. Despite the extensive legal terms and complexities, there’s no voodoo involved. The commitment simply outlines the terms and conditions for issuing title insurance. Rather than ignoring it, let me help explain it.
The Title Commitment is important to a buyer because it discloses what type of coverage they will receive and the limitations to that coverage (called Exceptions). It’s a government-regulated form that must follow strict state guidelines – which may help explain why it appears complex. The buyer typically has a limited amount of time to review and object to any items of concern on the commitment. So prompt examination is important.
Despite the complicated language about restrictive covenants, exclusions, encumbrances, etc, there is a way for the average buyer or seller to understand this document. There are main four parts to the Title Commitment – Schedules A, B, C and D. Here is a simple guide to deciphering them.
SCHEDULE A
Think of these as Actual Facts. This shows the legal description, ownership and insurance amounts. Check that the names, sales price, lender, and loan amount shown in this section are accurate. All spelling, legal names, etc. should be correct.
SCHEDULE B
Consider this the Buyer Notification. This section is aimed at the buyer and lender. It reveals both standard and specific exceptions to the title policy. An exception is a detail that will not be covered by the title policy. Generally, exceptions limit the buyer’s use of the property in some form or fashion.
A “standard exception” is found in every Texas title policy and may not be changed. They may include restrictions, tax assessments, etc. A “specific exception” affects that specific property. A specific exception may include things like easements, mineral reservations, and setback requirements. This lets the buyer know about possible limitations or encumbrances pertaining to the property.
Easements can affect the location and size of improvements or additions the buyer may want to make in the future. Exceptions can also include restrictions on animals, prohibiting some businesses, and more. A buyer would want to understand what limitations they will have on their use of the property. They may object to an easement that doesn’t allow them to make the improvements they want or a fence that doesn’t follow the property line. This is why a buyer should review this section and contact the title company with any questions.
SCHEDULE C
View this section as the Clear to Close. The items listed here must be resolved prior to (or at) closing. They include mortgages, liens, judgments, marital status issues, assessments, lawsuits, ownership or probate issues. Commonly these are simple matters like obtaining the payoff amount for an existing lien. Or there may be more complicated concerns like tracking down heirs or original documents.
The seller should review this section and provide the title company with all the information needed to resolve the matters before closing.
SCHEDULE D
This is a Disclosure. This discloses title company ownership, who is insuring the title, and the cost of the title insurance. Nothing in this section should change.
A buyer and seller should review the commitment and contact the title company if they have concerns. It is not their Realtor’s responsibility to do it for them. If you want to close on a house and Let The Good Times Roll … first, read the Title Commitment.
The opinions expressed are of the individual author for informational purposes only and not for legal advice. Contact an attorney for any particular issue or problem.
