I have a lot of discussions with real estate buyers, agents, and sellers about the Title Commitment. Usually I’m asking for a Title Commitment from them. This document is required to be given to the surveyor by the standard ALTA Title Survey standards.
The Title Insurance Commitment document has a lot of parts. I found this 25 minute video from REITipster that gives a great overview of the basic elements of the Title Commitment. I’m not recommending him in any way, other than that this video is very well done and thorough in explaining this Real Estate document. Please watch it and call me at (800) 798-9540 if you have further specific questions about your Title Commitment document.
Table of Contents:
- 0:36 – What is a title insurance commitment?
- 2:40 – Overview Schedule A
- 3:14 – The difference between an Owner’s Policy and a Lender’s Policy
- 4:27 – Who pays for title insurance, the buyer or the seller?
- 6:58 – Overview of Schedule B – Section I Requirements
- 19:05 – Overview of Schedule B – Section II Exceptions
If you’re approaching this with no prior experience closing real estate transactions (a category I suspect most people fall into), it’s not a bad idea to get some help from an experienced title professional or closing attorney on your first couple of deals just to make sure you’re doing it right.
What Part Does An ALTA Survey Play In This?
As the video mentions, Schedule B, Part II are where the list of Exceptions are listed, and hopefully linked. As we know an Exception is something that is NOT covered by the Title Insurance Policy. So, to remove as many of these as possible, the surveyor will locate and show them on the survey OR let you know if they don’t apply to the property.
Common Types of Exceptions
- Public utility easements and right of ways
- Private easements that are recorded
- Exceptions found or shown on a previous survey or plat
- Mineral and/or water rights
- Any encroachments, easements, variations in area or content, measurements, party walls or other facts which a correct survey of the property would show
- Assessments by the municipality or association or real estate taxes that are not yet due or payable
- Roads, travel ways, road beds, streams, or other easements, if any, not shown of record, and the title to any filled-in lands.
Two kinds of title insurance benefit you in two ways
There are two basic kinds of title insurance:
- Lender or mortgagee protection
- Owner’s coverage
Most lenders require title insurance as security for their investment in real estate, just as they may call for fire insurance and other types of coverage as investor protection. When title insurance is provided, lenders are willing to make mortgage money available in distant locales where they know little about the market.
Owner’s title insurance lasts as long as you, the policyholder – or your heirs – have an interest in the insured property. This may even be after you have sold the property.
Depending on local practices and state law where the property is located, you may pay an additional premium for an owner’s policy or you may pay a simultaneous issue charge – usually a smaller amount – for the separate lender coverage. You may even split settlement costs with the seller for the lender or owner’s policy.