Have The Best Closing Experience – Read The Title Commitment When You Receive It!
When a title commitment is received by the parties, it should be reviewed for content and accuracy. A title commitment has three schedules: Schedule A, Schedule BI – Requirements, and Schedule BII – Exceptions.
Here is what you will find in each Schedule and what you should look for:
The first part of the title commitment provides the names of the proposed insured. This should be the buyers in the transaction. If these names do not match the names as your buyer has told you they would like to take title, you should contact your escrow officer to have this information corrected. The escrow officer may not have the latest Amendment to the contract. The escrow officer and the loan officer (if there is a loan) will rely on this information to prepare the necessary documents to close the transaction, if it is wrong then all documents may need to be redone which could potentially cause a delay in the closing.
The Policy Amount should match the purchase price, if wrong maybe the escrow officer does not have the latest Amendment. Again, contact your escrow officer to have the correction made.
The name of the seller should be listed as the party that has “Title to the fee estate or interest in the land as of the Effective Date”. If the name is different, there may be a title issue such as a deceased individual or a spouse that still owns the property, a trust or LLC that has an interest in the property, or some other issue that may require immediate attention. The name listed should be the same party that entered into the contract. If the name is not as the seller had indicated to you, check the requirement page (Schedule BI) and see what requirements have been made. There may be a requirement, for instance the spouse may need to quit claim their interest.
The land referred to in the title commitment should match the land being sold. This will be the legal description of the property not the property address, as title companies insure legal descriptions not property addresses. Review the legal description to see if it looks right, especially when dealing with a Condominium or multiple lots or parcels.
Schedule BI Requirements
This part of the title commitment provides a list of the requirements that must be satisfied in order to close on the transaction. If the seller is a corporation there may by be a requirement that states: Furnish currently certified copy of a Resolution of the Board of Directors of the Corporation authorizing the execution and delivery by the proper officers of all instruments required to consummate this transaction. The requirements will call out any unusual issues that must be dealt with at closing. For instance, if the seller is deceased a call for the Personal Representative to be appointed may be made or probate to be finalized.
The requirements section will call out any loans that show on the property so that the loans are paid and the release of the loan is obtained upon payment through the escrow. Sometimes the title commitment will show two deeds of trust on a property, yet the seller has only a single loan. Let your escrow officer know right away, they will need to obtain a Release of Deed of Trust from the previous lender, or a letter of indemnity from the previous title company that issued the title insurance. Additionally, any judgments, tax liens or taxes will show in the requirement section so that these items are also satisfied during the closing. Occasionally, these liens will show up as a result of a common name. In that case, the client may be asked to supply additional information showing that they are not the same person in the judgment. These are all items which will need to be cleared and it is important to be sure that they are being taken care of. Be sure the escrow agent has all loan payoff information e.g. account numbers etc.
An Owner’s Policy on vacant land may require an ALTA survey, this will be noted in the requirement section.
Schedule BII Exceptions
This section shows all of the title “issues” that are excepted from coverage – in other words, the title company will not insure for these issues. These include items such as covenants, conditions, and restrictions (CC&Rs); easements (utility or access) and/or mineral rights and reservations.
Reviewing is not Advising
When reviewing the title commitment with your buyer or seller, you should not advise them about the legal meaning or effect of any document contained in the title commitment. That would constitute legal advice and is prohibited under Arizona law. When the parties involved in the transaction spot a problem on the title commitment, that should be brought to the attention of the parties involved.
The title commitment is a crucial part of the closing process and provides all parties and their agents with notice of the current state of title. A thorough review of the title commitment immediately after issuance can save everyone time in the end and lends to the successful closing of transactions.
Contact Title Security Agency for all your title and escrow needs. We are committed to making each transaction a smooth one.