Understanding Your Title Commitment

What is a title commitment?

A title commitment details the terms of the title insurance policy that will be provided to you after you purchase a home, and the requirements that must be met before the policy can be issued. Before you buy property, your title company will search the public land records, where deeds and other documents that affect property interests must be filed. A title examiner reviews the property’s history to confirm your seller owns the property and find out if there are any problems, like deed errors, missing owners, or liens. A lien is an interest in property for a debt that is owed. If the debt is not repaid, the creditor can force the sale of the property and apply the money from the sale to the debt. Mortgages, unpaid real estate taxes, and court judgments are examples of liens. After this review, your title company will provide you with the title commitment, In most states, a standard commitment form is issued, known as the 2021 ALTA Commitment for Title Insurance, which is the form explained in this article. However, some states use their own special form, which may be formatted differently. which includes a Schedule A, a two-part Schedule B, and a Conditions section that outlines definitions, the insurer’s liability and obligations, and other provisions that apply.

Schedule A of the Title Commitment

The Schedule A section lists the following information:

• Effective date for the commitment
• Type of title insurance policies that will be issued, which may include your owner’s policy and a lender’s policy if you’ll have a mortgage
• Who will be insured
• Amount of insurance
• Estate This is your interest in the property that will be insured by the policy. The most common type is fee simple, which is a complete ownership interest. Another type of estate is a “leasehold,” which is a temporary right to hold property through a lease. that will be covered
• Current owner of the property according to the public records
• Legal description A legal description is the exact location of property and its boundaries. It’s different from the property address, which is the street name and number assigned by the local government. of the property

Schedule B of the Title Commitment - Requirements

The first part of Schedule B lists all the requirements that must be met before your policy will be issued. These include:

• Notifying your insurer of anyone else who will have an interest in the property. For example, if you’ll have a mortgage or if you’ll co-own the property, you must tell your insurer the name of the lender or other buyer
• Paying the purchase price for the property
• Paying the premium and other fees for the policy
• Signing the documents necessary to transfer the property to you and create the mortgage, if you’ll have one. These documents must also be recorded “Recording" is the process of placing a document, like a deed, in the public records. Each county has its own system and requirements for recording documents. in the public records

There may be other requirements depending on the location of your property. In addition, any issues found in the title search that need to be resolved will be listed here. For example, if your seller has a mortgage lien A lien is an interest in property for a debt that is owed. If the debt is not repaid, the creditor can force the sale of the property and apply the money from the sale to the debt. Mortgages, unpaid real estate taxes, and court judgments are examples of liens. on the property, the commitment will require the mortgage be paid and the lien removed from the property. It is common for a portion of the purchase funds to be paid to the seller’s lender to satisfy this requirement. Other common requirements include paying taxes and HOA fees that are due.

Schedule B of the Title Commitment - Exceptions

The second part of Schedule B lists the matters that will be exceptions in your policy, which are things not covered. Some exceptions can be removed from your policy if certain requirements are met. Other exceptions are unique to your property and typically cannot be removed. These are matters that were found when the title company searched the public records. Examples are easements An easement is the right to use part of someone’s property for a particular purpose. For example, neighbors may have easements over each other’s property to use a shared driveway. Utility companies often have easements to run utility lines across private property. and HOA declarations HOA declarations are rules for the neighborhood. For example, the HOA may require payment of dues, prohibit rental property, or limit parking. that affect your property. These matters are disclosed to you in the title commitment so you can decide whether to buy the property with these issues. The lien A lien is an interest in property for a debt that is owed. If the debt is not repaid, the creditor can force the sale of the property and apply the money from the sale to the debt. Mortgages, unpaid real estate taxes, and court judgments are examples of liens. for your mortgage loan will also be listed as an exception because you agree to the lien when you sign your mortgage documents. You can learn more about exceptions by reading What is not covered by title insurance?

What happens after I receive my title commitment?

You should review your title commitment carefully and talk to your title company, real estate agent, or attorney if you have any questions. You may receive an amended title commitment if any additional issues are discovered. For example, your title company may find a new matter affecting your property when it updates the title search. After you close on your home purchase and all requirements in the commitment have been met, you will receive your final title insurance policy. To learn more about title insurance, read What is title insurance and why do I need it?