Understanding and Reviewing the Title Commitment

February 22, 2022by Brian Walsh

When you close on a home one of the documents you will be asked to review at the closing table is a document referred to as a “title commitment.” It is one of the most important documents in the real estate closing process.

Without a title commitment a bank will not lend you money to purchase the property. They want to know the risks upfront prior to agreeing to fund the purchase. Moreover, they will want to reduce that risk even further by insuring the transaction itself through what is known as “title insurance.” Insurance companies are just like banks; they don’t want to take on any unnecessary risks. And won’t issue a title insurance policy without knowing the risk factors involved.

A title commitment is a pledge by the title insurance company to issue a title insurance policy for the real estate transaction. It is called a commitment because title insurance policies are not issued until after a transaction is closed. And since banks will not fund the loan unless the transaction is insured, they need a guarantee that an insurer is willing to write a policy for the transaction.

The title commitment is that guarantee.

Understanding and

Reviewing the
Title Commitment

The primary reason to review a title commitment is to fully understand what you are buying and to what extent that purchase will be insured.

The title commitment contains a lot of information about the transaction and the property you are buying. It is organized into three sections, called “schedules.” Schedule A contains information about the property being purchased, the transaction and proposed insurance coverages.

Schedule B Section 1 outlines the requirements that must be satisfied in order for the title insurance policy to go into effect. Schedule B Section 2 provides a list of exceptions that will not be covered by the policy.

Normally, before you see the title commitment it has been reviewed for accuracy by several people. The title company’s processor or analyst that put the report together, possibly a paralegal or attorney, and if you are obtaining a loan to purchase the property, the bank’s mortgage processor – who reviews it before sending it on to the bank’s underwriter for final review. However, mistakes do still happen.

Schedule A

Schedule A essentially summarizes the basic facts of the transaction; the who, what, when, where, and how of the transaction; along with insurance policy information.

When reviewing this section, you will want to make sure there are no discrepancies between the information found in this section, the purchase agreement, the deed and the closing disclosure.

Line Items for Schedule A

  1. Commitment Date – This should be the closing date. But it could be a few days before as well. It should not reflect a date after the closing date.
  2. Type of policy or policies to be issues and the whom. It does not matter what order these items are in. Sometimes the Owner’s policy is listed first and sometimes the Lender’s Policy, or vice versa. What is important is that the Buyer’s and Lender’s names are correct, and the policy amount listed for the Owner’s Policy is the full purchase price including any down payment and the Lender’s Policy is for the loan amount.
  3. Provides information on type of ownership. Normally fee simple.
  4. Who the owner is on the day of closing is.
  5. The legal description of the property. This is sometimes included as an addendum at the end of the Title Commitment. This section may also include the “Common Address” of the property. But, typically this is included at the top of the page in the “Preamble.” The preamble is not show in the above example. But, it includes the name of the title company, title company file number, property address, and other information specific to the title company and not necessarily to the transaction of policy. Make sure the address listed is correct and everything is spelled properly

Schedule B - Section 1

This section contains a list of requirements that must be completed before the title insurance policy can be issued.

For instance, one requirement, #4, is for a warranty deed conveying the property from the current owner to the new owner to be properly executed and recorded: as-well-as, a mortgage from the borrower (new owner) to the lender.

There are a wide variety of requirements listed in this section that will need to be satisfied, including:

  • Correcting errors or defects in the title
  • Satisfying any judgements or liens
  • Property taxes and municipal fees or fines
  • HOA / COA assessments and fines
  • Proof of Identity and authority
  • Payoff mortgages

If any these requirements are not met there is a strong possibility that the closing could be delayed. Moreover, some requirements, if not satisfied, become exceptions or exclusions from coverage and won’t be covered by the title policy.

Schedule B - Section 2

Items listed in this section are considered exceptions or exclusions and are not normally covered by standard title insurance policies.

Items listed in this section are considered exceptions or exclusions and are not normally covered by the final insurance policy. There are both standard and unique exceptions

Standard exceptions – Are general exceptions that are applied to all Standard Owner’s Policies. If you can establish that the condition does not exist or has been resolved then the exclusion can be removed. Alternatively, purchasing an Extended Owner’s Policy would likely cover many of the standard exceptions.

Examples of Standard Exceptions:

  1. The Gap Exception – The Gap Exception covers any items that occur after the commitment date but before closing and properly recording the transaction.
  2. Taxes and assessments for the current year and subsequent years, which are not yet due and payable.
  3. Rights or claims of parties in possession.
  4. Survey Exception – Unless they are already in the public record, any items that would have been found if a correct survey would have been done.

You may see other standard exceptions as well. Most are dependent on what state county and city the property is located.

Unique exceptions – Are exceptions or exclusions that are unique to the property

  1. Homeowner and Condo Association covenants and restrictions
  2. Deed restriction or restrictive covenant. These are usually used to restrict what can built on a property and / or how the property can be used.
  3. Taxes or assessments that are not in the public records.
  4. Liens that are not in the public record.

In most cases exceptions, even some standard ones, can be removed or insured for. However, you do have to let the title company know well in advance so they have time research the exceptions and gather the necessary paperwork.

Often new homeowners fail to review the title commitment because they believe the associated insurance will cover any potential issues. However, it is, as we have hopefully shown, the one document that will provide you with a clear understanding of what you are buying along with the associated rights and obligations.

If you have any questions about your title commitment, please reach out to us. We are happy you help you in anyway.

Address: 228 Hillcrest St, Orlando, FL 32801 | Phone: (407) 217-9231
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