A title commitment gives the details of what is covered in title insurance. It discloses all liens, burdens, defects, and obligations associated with a property, which impacts the ability to transfer a sold property. Claims stemming from eminent domain, bankruptcy, and legislation are exclusions, while liens that the buyer can’t accept are called exceptions. These exclusions and exceptions in the title commitment must be satisfied before the title company can provide title insurance. Reviewing the title commitment avoids vulnerability to future challenges on the property. Addressing any concerns immediately can expedite the title commitment process.
How the Title Company Ensures a Clear Title
Before the title company writes the policy, a title search is conducted to determine if the title is clear. During this process:
- Property transfers on record are pulled for the sold property.
- In addition to tracing the ownership details, this requires identifying the details for any liens and other encumbrances on the property, including easements.
- The title company ensures that every lien or transfer of the property is disclosed.
After the search is completed, a report is compiled and sent to the buyer and seller for review, prior to the issuance of title insurance.
Uncovering Hidden Defects and Clearing Clouds on the Title
When the title search reveals another commitment on the property, it is referred to as a cloud on the title. A defect can also arise prior to the close, based on an action by the owner or new information that arises. This typically includes encroachments, incorrect survey details, unpaid betterments, tax liens, and foreclosure attempts. It can also include recent improvements that do not pass code inspection.
To expedite the closing and clear clouds on the title, the title company will do the following:
- Determine when the defect originated and who’s responsible for clearing it.
- Work with the buyer and seller to remove any clouds.
- This can include addressing unpaid judgments as well as fixing or reversing improvements to make sure the property is up to code.
The title company tries to resolve any clouds on the title behind the scenes. Alternately, the buyer might be asked to remove or release liens in order to obtain the property. Once all liens are satisfied, the buyer receives the deed along with a title insurance policy. This usually takes two weeks, but can vary greatly based on the unique circumstances of each transaction.
At the end of the title commitment process, either the title is cleared and title insurance is issued, or the defect remains and the buyer and seller determine how to move forward.
Baer Reed is a woman-owned business support service that provides various real estate support services. Contact us for a consultation about how we can support your title commitment process or other requirements.
- On September 25, 2019
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