Understand Your Title Commitment
Title commitment is often overlooked and always misunderstood
Home buyers spend so much time searching for the perfect Orlando home, and learning the details of their financing, that they often forget to review their title insurance policy.
Buyers fail to understand the importance of making sure they review title searches, title commitment, the survey, and what their rights to the property really are…or maybe what their rights are not.
Unless you have an attorney representing you to handle and review your title work, these details may not be apparant. Title commitments and property surveys often get overlooked by buyers, so understanding how your title commitment works will make you a smarter home buyer.
Title Commitment vs. Title Insurance
A title commitment is a document that the buyer receives from the title insurance company underwriter. It is a promise to issue you a title insurance policy with the terms and conditions outlined in the title commitment. The title insurance policy is insuring you as the policy holder for loss payable under the title insurance. This is issued to you shortly after closing.
The title company should provide this title commitment to the buyer for review during the purchase transaction. The buyer then has the option to reject items in the title commitment, but most home buyers are not knowledgeable enough to do that.
Only savvy home buyers will request to review their title commitment.
Components of a Title Commitment
The title commitment is composed of three sections:
Schedule A: This has the effective date, owners of policy (buyers name and lenders name) the insured amounts, legal description, and type of interest being insured in subject property. This should be reviewed for accuracy, so there are no mistakes or typos.
Schedule B-Section I Requirements: This section deals with paying off items such as mortgages, liens, taxes, judgements, HOA fees. It also records the deed, mortgage, and survey. The title agent must complete these requirements in order for the title policy to be issues correctly.
Schedule B-Section II Exceptions: This what the policy will NOT insure. This is a very important part of the title commitment.
These are called “exceptions” to the policy and are in fact exclusions to the title commitment. They are excluded from coverage under the policy. That means that the title policy will not cover the items listed as “exclusions”. Some exclusions could be an easement, current lease, unpaid taxes or recorded restrictions.
The key is to have an attorney or title agent remove as many exceptions as possible and thoroughly review the ones that cannot be eliminated. This will give you broader insurance coverage and more ownership rights on the property. Clearing exceptions is not typically something that title agents want to do as it creates more work for them.
We are seeing more title companies place exclusions on the title commitment and then charge an extra endorsement to cover insuring what they just tried to exclude.
Surveys and Exceptions
A property survey is a sketch or map of a piece of land showing the physical features, house location and property boundaries. Many title companies do not provide a copy of the survey until the buyer signs documents at the closing table. Most title companies do not review the survey for the buyer, either.
Reviewing the survey ahead of closing is very important because 1) it can tie “exceptions” on your title insurance such as easements or encroachments 2) it documents the physical location of your home in the specific lot.
In addition, the survey addresses property use, flood zones, boundaries, and set backs. The survey also reports in very small letters items the survey DOES NOT cover.
A real estate purchase is a huge financial investment and hiring an attorney will help minimize your risk. Be sure to request your title commitment and survey for review ahead of closing. Buyers Broker of Florida will make sure that you are aware of your options so that you have a successful transaction. Call 407-539-1053