THIS MATERIAL CONTAINED HEREIN IS FOR INFORMATIONAL AND EDUCATIONAL PURPOSES ONLY.  IT SHOULD NOT BE USED AS A SUBSTITUTE FOR LEGAL ADVICE.  IF LEGAL ADVICE IS REQUIRED OR DESIRED, THE SERVICES OF A COMPETENT ATTORNEY SHOULD BE SOUGHT.

  

WHAT IS A TITLE COMMITMENT?

A title commitment refers to the title company's pledge to issue an insurance policy for the home upon closing.  This commitment, also occasionally called a "title binder," typically includes the same terms and conditions that are found in the insurance policy.  The American Land Title Association (ALTA) generally dictates the process for issuing title insurance policies.

A lender's policy is usually required if you decide to take out a mortgage for your property.

Promise After Closing

A commitment is one of the most essential promises a title company should make to a homeowner after closing.  It is a pledge that is designed to be as specific as possible, which means that it contains not only what the title insurance policy includes, but also what it excludes.

Title Insurance Is Commonly Required

Nearly every standard purchase and sale agreement includes clear instructions obligating a title insurance seller to offer the homeowner this form of protection.  A title insurance owner's policy is important to have because it shields you in case there is ever an unknown problem related to your property that may subsequently create further issues.  For instance, if the previous owner of your home failed to pay taxes or other fees, you may potentially become responsible for these payments without title insurance.  Therefore, be sure to acquire this type of insurance in order to avoid any disputes, legal or otherwise.

Title insurance protects you from problems with an ownership title when you buy real estate.  These may be problems that existed before the purchase, such as:   (1) unpaid property taxes, (2) fraud or forgery of previous paperwork (Deed not properly recorded)  or (3) a spouse or unknown heir who claims they own the property, (4) Mechanic's Lien, (5) Judgements, (6) Defective Recordings.

Always Review The Commitment

It's imperative that you always review your title commitment for several reasons.  First, title companies are only prepared to insure against unexpected problems that arise later.  Prior to issuing this commitment, however, the title company typically peruses public records and notifies the buyer that any items that could potentially impact the property’s title are excluded from insurance coverage. These items are often called “exceptions.”

Common examples of such exceptions include public utility easements (e.g. your local power company sets up wires that run across your home). Be sure to speak to an attorney or other legal professional for clarification on any doubts you may have about exceptions to title insurance coverage.

UNDERSTAND A TITLE COMMITMENT

The title commitment is divided into several sections.  Depending on the state in which the property is located, the title commitment could vary slightly but they always contain the following parts.

SCHEDULE A

Schedule A contains the commitment date; the policies to be issued, the amounts, and proposed insured; the interest in the land and the owner' and the description of the property.

SCHEDULE B

Schedule B contains a list of standard exceptions that the title policy will not cover.  More importantly Schedule B also lists exclusions and exceptions to coverage including such matters as restrictive covenants, setback requirements, easements and right-of-way, and mineral reservations.  Schedule B items may not be shown when its a residential property.  If they're not shown the Schedule B items can usually be provided by the title company upon request. Schedule B is the most important part of the title commitment.  Buyers should pay close attention to it.  Always review Schedule B items very carefully as it can impact how you can use your property!

SCHEDULE C

Requirements: 

Schedule C can be thought of as the "Clear to Close" schedule, because the items listed here must be addressed prior to or at closing in order for a title company to fund and issue its policies.  We call them REQUIREMENTS. 

This schedule is important to both buyers and sellers as it itemizes what has to be satisfied before closing can occur.  A seller needs to pay special attention to this schedule, as it is the checklist of tasks for them to cure in order to close on time.  Many "simple" matters are easily resolved by tasks that the closing team handles through the closing process.  Most commonly these are matters like ordering a payoff statement on an existing lien, mechanics lien, tax liens, judgments, lawsuits, assessments, and other such encumbrances affecting the title.  On Schedule C you can also find records from probates or bankruptcies, clarification of homestead status, or a new updated survey.

This section lists the things that must be completed/adhered to in order for title insurance to be issued.  If one of the requirements cannot be met, this will affect escrow, so the buyer should inform the escrow officer immediately.

Requirements can include things like:

  • Tax payments
  • Recording the new deed
  • Recording loan documents
  • Release of Liens
  • Proof of identify

Exceptions: this section lists what is not covered under title insurance.  You’ll usually find generic wording contained in this section about mineral rights as well. In order for a buyer to fully understand the coverage of the title insurance on the property, the exceptions section should be read carefully.

If any of the exceptions are unacceptable to the buyer, it might be possible for the title company to remove them, insure over it (with the use of an endorsement), or discard it with a release or affidavit. Contact the escrow officer or an attorney if there’s anything that strikes you as unusual in this section. It’s better for you to understand the stipulations and gain clarification now than find out later you left yourself exposed by not fully reviewing the document.

Exclusions: this section discloses things that the title company will not cover. Common exclusions include:

  • Governmental regulations relating to the use of the property

  • Rights of eminent domain

  • Claims arising from bankruptcy

SCHEDULE D

Is a disclosure of ownership of the title insurance company and underwriter as required by regulatory law.  It also shows the total policy premium to be charged at closing and who's responsible for examing title and issuing the policy.  Please review your contract to determine what you will be charged.

 

What is the difference between a title commitment and a title policy? 

The title commitment comes before closing; the title policy is issued after closing.  The commitment says that a title company is willing to issue title insurance under certain conditions and if the seller fixes certain problems.

Your title commitment - which may also be referred to as your title work or title binder - is a long document that will guarantee you title rights to your new property when all is said and done.

A title commitment is one of the most important documents in closing because it details what is covered and not covered in the title insurance policy.

Without one, it's impossible to understand the stipulations and exclusions of the title insurance. You may be leaving yourself open to future legal challenges if you don't examine it carefully.

You have a choice when it comes to title agencies. Selecting a title company that helps you understand the process and works with you is wise. Contact the title company you will be using today to find out how a title company with a customer service focus will improve your closing experience.

Information About Minerals

Mineral rights are the rights to any natural resources that are present beneath a piece of property, such as oil, gas, coal or even gold.  In real estate, this information can be useful when buying or selling a home and the property it sits on - especially if it's located in an area rich in natural resources or close to mining operations.  But owning land does not necessarily mean you own what's underneath it.

What are Mineral Rights?

Mineral rights refer to the rights to extract minerals from a parcel of land.  This can include the right to mine for precious metals or gems, quarry materials such as gravel and sand, and even drill for oil and natural gas.  In many countries, the government holds claim to nearly all mineral rights on its land.  That is not the case in the U.S. 

Here, a landowner typically also has the mineral rights to that piece of land - but not always.  Sometimes, the rights to what's underground are separate from the above-ground or surface rights.

Mineral rights vs. surface rights

Surface rights literally refer to the land at the surface of a property:  in real estate terms, the actual ground a home is built on.  When you buy a home and the land its sits on, be it a small backyard or a tract of several acres, your surface rights mean you can plant a vegetable garden, install landscaping, grow flowers, and the like.  But you might not be able to, for example, drill for oil in your TEXAS backyard.  For that, you'd need to own the mineral rights, which grant ownership to the resources below the surface.  This can include the right to explore for, extract and - crucially - profit from any valuable resources found.

If you suspect there may be deposits beneath your land, a thorough title search can help uncover exactly what you own and do not, and it's smart to consult an attorney who is experienced in these matters as well.

 

 

THIS MATERIAL CONTAINED HEREIN IS FOR INFORMATIONAL AND EDUCATIONAL PURPOSES ONLY.  IT SHOULD NOT BE USED AS A SUBSTITUTE FOR LEGAL ADVICE.  IF LEGAL ADVICE IS REQUIRED OR DESIRED, THE SERVICES OF A COMPETENT ATTORNEY SHOULD BE SOUGHT.