You’ve signed your sales contract on your new home and gave your earnest money check to your agent, now what’s next you may be thinking. The next thing to do is to review your Title Commitment once you receive it. What’s a Title Commitment? Basically, a Title Commitment is the title company’s promise to issue title insurance for the property you’re purchasing after the closing. The same terms, conditions and exclusions that are in the title commitment will be contained in the actual title policy.
You will want to review the commitment because it can reveal important information on the property you are about to buy. The title company is willing to insure only against issues that come as a later surprise.
Before the Title Commitment is issued the title examiner will research the public records to determine the legal owner of the property, the legal description of the property; this can be a Lot and Block description if the property is urban or by a metes and bounds description if the property is rural. The title company will exclude from the insurance coverage any items that may affect the title to the property, these items are called exceptions.
The Title Commitment is broken down and divided into several sections, these sections are called Schedules. Every Title Commitment will contain a commitment jacket from the underwriter your transaction is being written on. This jacket will contain promulgated language by the Texas Department of Insurance.
The first section is on Schedule A. This section will show who the parties are that are buying the property, the sales price, the loan amount, what lender is being used for the financing and what type of policy is going to be issued. It will also reflect who the legal current owner of record is as well as the legal description. The commitment date is shown at the top of this schedule.
The next section is on Schedule B. This schedule is the exception part of the Title Commitment. The first section of it will show any Covenants, Conditions and Restrictions (CCR’s) The CCR’s may empower a Homeowner’s Association (HOA), if there is a HOA it may control different aspects of the property. If there is not a HOA or the HOA is in an inactive status, then the CCR’s would be enforced by the other homeowner’s in the area. This schedule will reflect any types of easements that affect the property, any types of Right of Way’s, mineral reservations, royalty reservations, mineral deeds and oil and gas leases just to name a few items. Any matters that are shown on a current survey would be stated on this schedule and taken exception to.
The third part of the Title Commitment is on Schedule C and it shows any liens that are currently against the property. These liens could be the purchase money Deed of Trust, a Home Equity Lien, mowing liens, child support liens, Federal Tax Liens and Abstract’s of Judgments to name a few. The title company will require that all liens be paid in full so that a release of lien can be obtained and filed of record. It will also be required that the property taxes for the year be paid in full. Any additional requirements to issue a clear title policy.
The last section of the Title Commitment is Schedule D. This will show the officers of the Underwriter, the ownership of the title company and the estimated cost of the title policies.
Title Insurance doesn’t insure that a title defect will not occur, it insures the defect if it occurred prior to the policy date. If the defect cannot be cured the buyer will be indemnified. If you have any questions about your Title Commitment, please do not hesitate to let us here at Red River Title Company know. We would love to go over any questions or concerns you may have.