A title commitment is a document provided to a buyer and a lender before closing on a property. It identifies the terms and conditions for a title company to provide title insurance as well as any issues, exclusions, or exceptions to coverage. Ultimately, the title commitment offers protection to both buyer and lender if a dispute arises about ownership, liens, and other encumbrances against the property.
The title commitment includes four parts, Schedules A, B, C, and D, each of which must include specific information in order for the title company to offer title insurance.
Schedule A includes basic facts about the contract: the date of the title commitment; the amount of the policy; the type of policy, whether a lender’s policy or an owner’s policy; the name of both buyer and lender; the estate or interest in land to be covered, which should almost always be “fee simple”; and the legal description of the property. Although the information is straightforward, proofreading for spelling and other seemingly small errors is essential for title insurance to be approved.
Schedule B includes information about exceptions to coverage. Of particular importance to the buyer is information regarding encroachments, setbacks, or other issues requiring a survey; any worker’s comp or construction liens; and standby fees. Special exceptions such as easements, taxes, and deed restrictions on the property are also included in Schedule B. Buyers may choose to write an objection letter if any of the restrictions seem problematic to them. Otherwise, the buyer is agreeing to any and all restrictions, exclusions, and exceptions outlined in this section of the title commitment.
Schedule C includes information and issues which must be addressed, usually by the seller. Title companies frequently require that items in Schedule C, such as liens, probate issues, or abstracts of judgment be addressed before the company issues a title policy. Thus, failing to address issues in Schedule C prior to or at closing could delay or even prevent closing. While Schedule C is important to the seller, the buyer should note that unresolved issues from Schedule C may be moved to Schedule B for the buyer to address.
Schedule D includes information about anyone with a share in title premiums, such as title agents and underwriters of the title insurance policy. It also identifies title information, the amount of the title premium, and who receives that premium. If the policy includes an arbitration provision, the buyer should request in writing before closing that the arbitration provision be deleted. Otherwise, the buyer will be unable to sue the title company in the event of a disagreement over a claim.
Buying and selling real property is one of the biggest financial commitments most people make during their lifetimes. Since title insurance is an important safeguard for buyers and lenders, fully understanding the title commitment is crucial. A lawyer well-versed in Texas real estate will provide the greatest opportunity for a successful real estate transaction.
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