When buying or selling a piece of real estate, one of the essential documents you’ll encounter is the title commitment. But, if you are unaware of how to read title commitment, it can put you in trouble and dilemma which can either be solved by learning how to read it or by taking the help of expert title closing services. In this article, we’ll look at a title commitment and how to read it.
What is a Title Commitment?
A title commitment is a critical document that provides a summary of the history of a property’s ownership. It’s prepared by a title closing services company or attorney and is typically offered to the buyer and lender as part of the real estate closing process.
The title commitment serves as an insurance policy that ensures the buyer receives a clear and marketable title to the property. It typically includes a Schedule A, which provides basic information about the property, such as the legal description and the names of the current owner and lender. Schedule B lists any exceptions to the title policy, such as certain liens, encumbrances, or easements. Schedule C lists any requirements that must be met before the title company issues a title policy, such as releasing a lien or a legal description that matches the property.
When purchasing real estate, it’s essential to review the title commitment carefully to ensure no issues could prevent the transfer of ownership. Any outstanding issues should be resolved before closing on the property. If any exceptions are listed in the commitment, it’s essential to understand what they are and how they could affect your property ownership.
Components of a Title Commitment
Schedule A provides basic information about the property, including the legal description, the names of the current owner and lender, and the policy amount. The legal description is a detailed description of the property’s location and boundaries, and it’s essential to ensure that it matches the physical boundaries of the property. The policy amount is the maximum amount that the title company will pay out if there are any issues with the title.
Schedule B lists any exceptions to the title policy. These are issues that the title company will not cover, such as certain liens, encumbrances, or easements. Examples of exceptions include unpaid property taxes, mechanic’s liens, or restrictive covenants. It’s important to review this section carefully to understand what issues need to be covered by the title policy.
Schedule C lists any requirements that must be met before the title company will issue a title policy. For example, the seller may need to provide a release of a lien or a legal description that matches the property. The title company will typically require these requirements to be met before issuing the policy, as they are necessary to ensure that the title is clear and marketable.
In addition to these three components, a title commitment may include a legal description exhibit, which provides a detailed description of the property’s location and boundaries, and a plat exhibit, which shows the property’s location and boundaries on a map.
How to Read a Title Commitment
Reading a title commitment can be overwhelming, but it is essential to understand its information to ensure a smooth closing process. Here are a few key things to examine:
- Ownership History: Look at the ownership history section to see if there are any gaps or inconsistencies in the chain of title. If there are, the title company may require additional documentation to resolve these issues.
- Understand the Purpose of a Title Commitment: The title commitment provides a comprehensive report on the property’s ownership history, including any liens or encumbrances that may impact the property’s title. The report is generated by a title company and serves as a basis for the title insurance policy issued to the buyer.
- Review the Property Description: The property description is the first section of the title commitment and contains essential information about the property’s legal description. Ensure that the description matches the property being purchased.
- Examine Schedule A: Schedule A summarizes the title company’s findings, including the current owner’s name, purchase price, and the amount of the title policy. Review this section to ensure that all information is correct.
- Pay Close Attention to Schedule B: Schedule B is the most critical section of the title commitment. This section lists any exceptions to the title policy, including liens, judgments, and easements. It is crucial to review this section carefully to ensure that all exceptions are acceptable and do not impact the property’s value.
- Understand the Importance of Clear Title: If any exceptions are listed in the title commitment, it is crucial to understand how they impact the property’s title and whether they can be resolved before closing.
- Seek Professional Advice: If you need clarification on any aspect of the title commitment, seek professional title closing services advice from an attorney or a title company representative. They can help you understand the report and provide guidance on how to resolve any issues that may arise.
Conclusion
A title commitment is a critical document in any real estate transaction. By understanding how to read a title commitment, you can ensure that you’re making an informed decision and protecting your investment in the property. Be sure to review the commitment carefully and ask your attorney for Title Insurance in Virginia to clarify any issues you need help understanding.