What is a Commitment of Title when buying property?
Buying property involves many steps and documents, but few are as significant as the Commitment of Title. This document serves as your roadmap through the property's history and potential issues. I'll walk you through everything you need to know about this critical piece of the real estate puzzle.
Commitment of Title: A Commitment of Title is a written promise from a title company to issue title insurance for a specific property, provided that certain requirements are met. It outlines the current status of property ownership and any existing liens or encumbrances that could affect the title.
Key Components of a Commitment of Title
The Commitment of Title contains two main sections: Schedule A and Schedule B. Schedule A lists basic property information including:
The name of the current property owner
A detailed legal description of the property
The type of title insurance policy proposed
The purchase price or loan amount
Schedule B outlines requirements and exceptions, split into items that must be resolved before closing and permanent exceptions that will remain with the property. Standard exclusions might include public utility easements or building restrictions.
The Role of Commitment of Title in Property Transactions
This document protects both buyers and lenders by revealing potential issues before the sale closes. You can use it to assess risks associated with the property and negotiate solutions to any problems discovered. Think of it as your property's background check - you want to know what you're getting into before making such a big investment.
Common Issues Revealed in Title Commitments
During my time reviewing title commitments, these issues pop up regularly:
Tax liens or judgment liens against the property
Utility easements that might restrict property use
Deed restrictions from homeowners associations
Boundary disputes with neighboring properties
Existing mortgages that haven't been paid off
The Process of Obtaining and Reviewing a Commitment of Title
The title commitment typically arrives after you've made an offer on a property. Your real estate agent, attorney, and lender will review it carefully. They'll look for anything unusual or concerning that might affect your ownership rights or property use.
Frequently Asked Questions
Q: Who pays for the commitment? A: This varies by location and can be negotiated between buyer and seller.
Q: How long is it valid? A: Most commitments remain valid for 90 days from the issue date.
Q: What happens if issues are found? A: The seller typically must resolve serious title issues before closing.
Q: Can you close without resolving all requirements? A: Some requirements must be met before closing, while others might be waived with proper documentation.
Working with Title Companies
Pick a title company with a solid reputation in your area. They'll handle the title search, prepare the commitment, and issue the final title insurance policy. Clear communication with your title company helps prevent delays and ensures all issues are addressed properly.
Common Misconceptions
Many people confuse the commitment with actual title insurance - they're not the same thing. The commitment is a promise to issue insurance if conditions are met. Also, exceptions and requirements serve different purposes. Requirements need resolution, while exceptions might stay with the property permanently.
Tips for Buyers and Sellers
Review your commitment as soon as you receive it. Pay special attention to:
Property boundaries and descriptions
Names and spelling accuracy
Outstanding liens or mortgages
Easements that might affect property use
Protecting Your Investment
A thorough review of your Commitment of Title helps protect what might be the biggest investment of your life. Don't rush through this step - take time to understand every detail.
Contact Bellhaven Real Estate for expert guidance through your property purchase, including a detailed review of your Commitment of Title. Our team will help you navigate this process with confidence and clarity.