Question: What is a title commitment?
Answer: A title commitment is a commitment by a title company to issue title insurance. We discussed title insurance and why it is necessary in 2019. Today let’s take a closer look at the four parts – called schedules – of the title commitment. They are Schedules A, B, C and D.
- Schedule A (think of it as A for Actual Facts) represents the who-what-when-how details of the transaction. It includes the legal description of the subject property, the buyer’s name (called the Proposed Insured) and the seller’s name as well as effective date of the commitment, proposed amount of insurance, type of policy (or policies) to be issued, the estate or interest in land to be covered and the party with whom title is currently vested. Both buyer and seller should review Schedule A to be sure that their names are spelled correctly, that the sales price is shown accurately and the legal description of the property (not the same as the street address) is listed properly.
- Schedule B (Buyer Notification) addresses which other parties have any interest or control of the use of the property. These often include utility easements, HOA deed restrictions and building setbacks. Buyers and their agent should examine Schedule B carefully to make sure that they are able to use the new property in the way they intend. For example, you may want to buy property to open a flower shop. You will need to make sure that commercial use is not prohibited in Schedule B. This section also includes the taxing jurisdictions and is where exceptions are noted. An exception in this case is anything that will not be covered by title insurance.
- Schedule C (Clear to Close) lists items that must be addressed prior to or at closing in order for a title company to fund and issue its policies. These “requirements,” as they are known, include items such as mortgage liens, tax liens, abstracts of judgment and assessment liens. This schedule is of special importance to the sellers and their agent, as it provides a checklist of tasks that must be “cured” in order to close on time. For example, a payoff statement on an existing lien must be ordered so that the seller can satisfy his/her existing mortgage.
- Schedule D (Disclosure) lists all parties who will collect any part of the insurance premium. These parties typically include the underwriters, title agents and attorneys. It will also show the amounts being paid for the owner’s title insurance policy, the mortgage policy’s amount and any endorsements. These same amounts will appear on the final documents at closing (unless there is a subsequent amendment changing the closing price or loan amount).
