St. Petersburg, FL - When you are in the process of buying a house, you and your Realtor are going to receive a copy of the title commitment before closing.
According to the standard Florida sales contract, there is a deadline by which you must be given this document with all it's exceptions. What exactly is a title commitment, and what do you need to look for on one when purchasing property?
A title commitment is a document that shows the current ownership and encumbrances of the specific property. It also details the requirements that are necessary to complete the transaction contemplated within the Contract, and shows exceptions (if any) from coverage that may ‘carry over’ to the final title policy for your specific property. It's also a promise (a ‘commitment’) to issue title insurance to the Buyer and the Buyer’s Lender (if a Lender is used) as long as all requirements are met.
Before we discuss the title commitment any further, let's make sure you understand what title insurance is. Title insurance protects buyers and their lenders against any problems with the title in a transfer of ownership. It's basically an insurance policy protecting the owner from any claims of ownership by other parties from the past. It does not protect you from any future title issues, but if someone claims some ownership or some type of financial interest in the property from before your policy's effective date (the date/time of the Deed being catalogued in the County's Public Records), the title insurance issuer (underwriter) has a duty to resolve the matter. There will typically be two separate policies when a buyer is using a mortgage to help purchase a property. One policy (the Owner’s Policy of Title Insurance) guarantees the buyer’s ownership, and the other policy (the Lender’s Policy of Title Insurance) protects the lender’s financial interest created by Note.
Before you close on your new property, you should get a copy of the title commitment. If you do not receive the title commitment, demand that it be delivered to you!
What do you need to look for on it? A title commitment comes in 3 parts.
Schedule A contains the parties involved, the commitment date, the policies to be issued, the amounts of those policies, and the legal description of the property.
You want to be careful to check the seller name(s) against what is listed on the sales contract. Make sure everyone involved has signed the contract.
Check the legal description of the property for any errors. This is where many title issues arise.
Make certain the effective date is recent. If there is a big gap between issue date and effective date, you may be open to problems down the road. Ideally you would want the dates to be no more than 30 days apart. The effective date is the date through which the courthouse records are up to date and the issue date is the day the document is prepared. If the gap between the effective date of the commitment and the date you’re reviewing the commitment is significant, you should demand that the title company perform a ‘date-down’ aka an update of the title search.
Schedule B-1 is the requirements section. This section will list all the things that must be resolved prior to closing for the title insurance to be issued. Items that will be listed here include:
Paying off any taxes that are due
Paying off seller's existing mortgage
Releasing any liens on the title
Recording new deed and new loan documents
Correcting any errors in the title
Always pay special attention to anything in bold.
If you see anything that relates to a former owner (before the seller purchased the property), you should question it.
If you see anything about provisions for future advances on any line of credit for the seller in this section, you should question it.
If you're purchasing a foreclosure property, especially if you're paying cash, look out for any item referring to a loss from an attack on a foreclosure. If you see this, you will likely want to dispute it.
Schedule B-2 is for exceptions to the title insurance coverage. This is what won't be covered. Examples include:
Mineral and water rights
HOA covenants and restrictions
In general, pay close attention to any items that include any of the following:
Any name not on the contract
When in doubt, speak to the title company and have them explain whatever you don't understand. If you need a title company you can trust, I suggest Insured Title Agency. They aren't like other title companies, and they really know their stuff.