In nearly every real estate contract the seller agrees to provide the buyer with title insurance. Before closing you will receive a “title commitment” for your review. The title commitment is essentially a promise (i.e., commitment) to issue the title insurance policy after closing, and contains the same terms, conditions and exclusions that will be in the actual title insurance policy. The title commitment also identifies any specific requirements that need to be addressed prior to closing so that the title policy can be issued.
The title company uses standard forms for title commitments and title insurance policies. These forms are distributed by the American Land Title Association (ALTA). Although your title commitment contains items unique to your particular transaction, the typical ALTA title commitment covers the following things.
This part of the title commitment covers the basics of the transaction, such as the name of the person who currently holds title, the property legal description, the name of the proposed insured (buyer), the sales price, and name of lender. You will want to make sure that these items are correct.
This part of the title commitment is broken into two parts, the “Requirements” and the “Exceptions.”
The Requirements section lists all the things that must be addressed prior to or at the closing, such as:
- Paying off taxes
- Paying off seller’s existing mortgages
- Releasing liens on the title
- Recording the new deed and any new loan documents
- Correcting any errors in the title
The Exceptions section lists the things that won’t be covered under the title insurance policy. Examples include:
- Mineral and water rights
- Utility and access easements
- Homeowner Association Covenants and Restrictions
- Existing Plat restrictions
You should review the Exceptions so that you have an understanding of how they may impact your use and ownership of the property. Your title commitment contains hyperlinks to certain documents that are recorded with the County Clerk and Recorder. This makes it easier for you to review particular documents.
If you have questions about a particular ‘Requirement’ or ‘Exception’ please let me know and I’ll get you talking with the right person at title for answers. We’re happy to help you understand your title commitment and want to make sure to clarify any questions you have prior to closing.