Buying a home is complicated. As the CEO and founder of New Door Property Transfer, I am responsible for ensuring a smooth home buying experience. Let me help by breaking down what you need to know about title commitments that I’ve learned from working with lenders, real estate agents, and Homeway Real Estate brokerage.
Let’s get right into it and start with the basics. What is a title commitment? Aside from being one of the most crucial documents to have when closing, it lays out what will and will not be protected in your home insurance policy.
If you don’t have this, you might miss something expected of you and think it’s covered by your insurance when it is your responsibility. Title commitments also show valuable information about your new home’s history, such as missing information from public records about the problems with the home, lost from fraud, or forgery. The title commitment itself protects you from these types of surprises, as long as everything else is in good standing.
Title Commitment Structure
Aside from varying slightly from state to state, every single teeny-tiny detail about your new home is listed in detail in a title commitment, including requirements, exclusions, and exceptions covered or not covered by title insurance. This list should be identical to the list in the title insurance policy for the home.
Most especially, your title commitment will tell you if your new home is free and clear of flaws or faults. I advise you to take extra care and consideration when reading over these documents — as with any document awaiting your signature — to make sure you don’t miss anything important that could become a major headache later on down the line.
Categories of a Title Commitment
There are five sections to a title commitment:
- Who is getting insured — Schedule A (more on this later)
- What is getting insured — Schedule A
- Insurance amount — Schedule A
- Insurance requirements (what do you or the house need to get insurance) — Schedule B
- Insurance exceptions (what is not covered by insurance) — Schedule B
Schedule A and Schedule B
The five sections of a title commitment are divided further into Schedules A and B. This is universal for all title commitments in the United States of America.
Schedule A includes, as I stated above, who is getting insurance, which consists of the owner of the home and the lender. Further, it includes the insurance amount, the home’s current owner, and ‘the estate or interest of the land to be insured.’ Finally, Schedule A contains a legal account of the home.
Tip: Cross-reference all the particulars in Schedule A. Make sure it’s right. Compare the legal account of the home to past deeds, policies, and surveys of the home — make sure there are no disparities or discrepancies. This is your, or your lawyer’s, responsibility, not that of the title company or lender — although your lender might do the same.
Tip: Read your document with the utmost care and ask questions, especially if you don’t understand. Schedule B is where you will find your requirements to your title commitment, as well as the exceptions and exclusions to your homeowners’ insurance. As with Schedule A, it is imperative that you thoroughly read and understand this section.
Have you ever dropped your cell phone in water and taken it to get replaced? In the conversation, they asked if you had ever gotten your phone wet, and you said yes? They responded that they could not replace your phone because you dropped it in water, and their policy did not cover that water damage? Homeowners’ Insurance is the same principle! There will be certain things that your home insurance just won’t cover, and it’s up to you to do your due diligence.
Never sign something that you don’t understand. Ask lots of questions, and don’t be afraid to get second opinions or sleep on it. I advise that for any document, not just title commitments.
In Section B, you’ll see requirements that you must do or always follow — such as updating the insurance provider to any financial impacts or ownership changes in the home — to keep your insurance.
Here are some examples: paying your taxes, recording the new deed, documenting new loan papers, releasing any liens, and/or proving your identity. Failing to meet just one of these requirements could seriously jeopardize your chances of getting a loan or insurance.
So, I say again, read everything with the utmost care.
If you have not been told yet, let me be the first to say to you. You are entitled to a duplicate copy of the title commitment from the title company (one of the essential requirements of the title company to its clients) so that you may review exactly what is all involved with the property you see to purchase. You will want to make sure you review the information within a few days of receiving the title commitment, and at this point, it is up to you to discuss any issues with your loan officer, realtor, and/or lawyer. Unfortunately, this process can uncover things that might delay or even terminate your closing — whether you decide to delay or terminate your loan or the lender does.
Tip: Never sign something that you don’t understand. Ask lots of questions, and don’t be afraid to get second opinions or sleep on it. I advise that for any document, not just title commitments.
Unclean Titles
An unclean title, or a title that shows some pretty hefty cracks in the proverbial foundation of your sparkly new-to-you home, is your red flag to talk to a professional. Whether you choose a lawyer or a seasoned homebuyer is up to you, but I recommend a lawyer. If you suspect; or uncover an issue on your own, a lawyer may help you discover more.
Now What?
Let’s say you flag an issue that you want to be changed — now what do you do? It depends on the situation, but the bottom line is to look out for you and your family. Buyer’s remorse is felt more deeply with its financial impact for large purchases, such as a home, that we only make a couple of times in our lives. So this is when you need to put your foot down, even if you may feel the detail is tiny; do your due diligence and ask questions. Just as a pebble is tossed into the water, the ripples start small and grow bigger over time.
Ask as many questions as you need to before signing your title commitment. Look out for ‘numero uno’ and make sure you understand the Requirements and Exceptions of your Title Commitment crystal clear.
To act upon a change you’d like reviewed or resolved, the task can be arduous but cannot be done with verbal confirmation. You must present it in writing, quickstep, to your realtor, lawyer, or Title Agency. They will relay it to the home seller within a timeframe in which they must then respond. The title commitment cannot be finalized before this is dealt with, which delays the process entirely.
With the requested changes, you can anticipate some back and forth. Which in itself can be frustrating to handle, along with trying to buy a new home. A lawyer, seasoned realtor, or Title Agency can be ever-so-helpful for this step in the process. Patience is a virtue here. Remember, anything you let slide could become your problem, and yours alone, later down the line. It is highly unusual to accept a title commitment in the first round in today’s Real Estate market. So if you keep that in mind and know that it is normal to request changes, you’re on the right track. This all being said, you now have more knowledge to make an informed decision based on the Title Commitment and your future investment.
Let’s be frank; you, the buyer, have the money, or loan, to buy, and a Seller would love nothing more than for you to give that to them. As the home buyer, you are now, more than before, empowered to make a more informed decision. Did you know that you, as the buyer, are the party in the Real Estate Transaction that chooses with whom you select as your Title Company? You can choose the title company you work with, so do your research before choosing and choosing the right fit that best works for your needs.
At New Door Property Transfer, we make it our mission to make the title commitment process as easy and headache-free as possible while ensuring you get the best end of the deal.
About New Door Property Transfer
New Door Property Transfer provides smooth home property title transfers and closing services for consumers, lenders, and investors. The company was founded in 2019 by CEO Alex Lopez, Founder of homewayre.com. For more information, visit newdoorpt.com.
