When you are under contract to buy a home in Texas, the title company will issue a document called a Title Commitment. This document is essentially a promise from the title company to issue an insurance policy provided certain conditions are met. While there are four main parts (Schedules A, B, C, and D), Schedule C is arguably the most critical section for a buyer to understand.
What is Schedule C?
Think of Schedule C as the "To-Do List" or the "Clear to Close" section. It contains all the items, defects, and requirements that must be resolved before the title company will agree to issue a clean title insurance policy.
Common items found on Schedule C include:
- Mortgage Liens: The seller’s current mortgage that needs to be paid off.
- Tax Liens: Unpaid property taxes or federal tax liens.
- Mechanic's Liens: Claims by contractors who weren't paid for work done on the home.
- Abstracts of Judgment: Legal claims against the seller that have attached to the property.
If these items aren't cured or paid off at closing, they don't just disappear; they could potentially move to Schedule B, which contains the "Exceptions to Coverage." If an item moves to Schedule B, the title company is telling you they will not cover you if that issue causes a problem later.
The Objection Process Under the TREC Contract
In a standard TREC One-to-Four Family Residential Contract, specifically in Paragraph 6D, there is a built-in mechanism for buyers to handle title issues. Once you receive the title commitment, you have a set number of days (negotiated in the contract) to object in writing to any defects or encumbrances.
Once a buyer sends a formal objection, a seller clock begins ticking. The seller typically has 15 days to cure the objection. However, there is a catch: the seller is generally not obligated to incur any expense to cure these objections. If the seller refuses to fix the issue or cannot fix it within the 15-day window, the ball is back in the buyer's court. You then have to decide whether to waive the objection and close anyway, or terminate the contract and receive your earnest money back.
Why You Can’t Waive Schedule C
One unique protection in the standard TREC forms is that a buyer generally cannot waive the requirements in Schedule C. The Texas Real Estate Commission (TREC) Broker-Lawyer Committee designed these contracts to protect relatively unsophisticated residential buyers.
The contract explicitly states that a buyer's failure to object to other title issues constitutes a waiver of the right to object, except for the requirements listed in Schedule C. This means that if a seller has a massive unpaid mortgage, the buyer isn't accidentally waiving the requirement for that to be paid off just because they didn't send a formal objection letter.
However, traps still exist. If a complex lien isn't properly handled and the title company attempts to move it to Schedule B (Exceptions), you lose that automatic protection. This is a primary reason why having an attorney review your title commitment is vital; while a realtor might focus on getting to the closing table for their commission, an attorney ensures you aren't walking into a "gotcha" that leaves your home’s title permanently clouded.
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