Things to Look For in a Title Commitment
The Basics of a Title Commitment
A title commitment is a legally binding document that provides assurance to both the buyers and sellers in a real estate transaction. A title commitment outlines details such as language regarding the transfer of ownership, disclosure of any liens or encumbrances on the property, any rights of access or use associated with neighboring properties, and special restrictions.
When you're buying or selling a property, you'll want to order a title commitment early in the process. It is essential to review the title commitment thoroughly since it lays out all of the elements that are required for transferring clear ownership on closing day. Understanding the basics of a title commitment is key to having a successful real estate transaction.
What to Look For in a Title Commitment
- The Legal Description: This should accurately describe the property being insured and should match the description in the purchase agreement or other relevant documents.
- The Owner of Record: The title commitment should indicate the current owner of the property and should match the name of the seller as listed in the purchase agreement.
- Easements: A title commitment contains all of the easements that will affect a property. Easements may include rights-of-way, utility lines, access to bodies of water, and access to public roads or sidewalks. These are just some examples; depending on the location, there could be other types of easements as well.
- Water, Timber, or Mineral Rights: The document also outlines the various rights associated with a particular property. These may include but are not limited to rights to water, minerals, and timber.
- Encumbrances: It is essential to recognize the character and degree of any liens, mortgages, or additional encumbrances that appear on the title commitment for the property. To complete a successful sale, these must either be resolved or discharged prior to closing.
- Exceptions: The title commitment will typically list exceptions to coverage, which are matters that are excluded from the title insurance policy. These may include matters that are disclosed in the public record or that are specifically excluded from coverage by the title company.
- Endorsements: The title commitment may include endorsements, which are additional provisions that modify or add to the coverage provided by the title insurance policy. It is important to carefully review any endorsements to understand their impact on the policy.
- Commitment Conditions: The title commitment will typically include a list of conditions that must be satisfied before the title insurance policy can be issued. These may include the payment of outstanding taxes or the resolution of any outstanding encumbrances. It is important to understand these conditions and to ensure that they are satisfied before the closing of the sale.
What To Do If There Are Problems in the Title Commitment
Should there be any discrepancies or issues with the commitment, it's important to address them promptly. The best option is usually to consult with a lawyer who is experienced in such matters in order to properly assess any risks. If needed, have them draft an amendment outlining any issues and agree upon appropriate corrective action. Taking the time to review and address problems early can help to avoid potential legal entanglements down the line. It may also save time and money on costly solutions that could result from the conflict going unresolved.
Title commitments are an essential component of the closing process, as they provide buyers and lenders with a guarantee that the title company will issue a policy ensuring a valid title to the property.
Understanding what title commitments entail can help ensure that all parties involved in the transaction have clear and accurate knowledge of any liens or claims against the property before it closes. Asking questions about this important component of the closing process is highly recommended to ensure that there are no hidden issues that could lead to future disagreements or costly delays.