The Title Commitment is one of the most important documents the buyer will receive during the escrow period. The Buyer must review it and within 5 days after receipt, notify the seller of any items disapproved – afterwards is too late! It is imperative that the buyer reviews all pages of the commitment as well as the Schedule B items to understand their impact on the ownership of the property, such as:

• Easements
• CC&R’s and other deed restrictions
• Access problems
• Prior leases

The Title Commitment may also reveal problems that could delay the close of escrow, Schedule B Requirements section, such as:

• Court orders / divorce decrees
• Probate issue
• Foreclosures
• Bankruptcies
• Judgment liens
• State and federal tax liens
• Environmental liens

Check the policy to be issued in Schedule A, front page, of the Title commitment to insure that the best policy type available will be issued. Generally the ALTA Homeowners’ Title Insurance Policy is considered the best available for residential transactions if Buyers intend to occupy as principal residence.

CHANGES DURING ESCROW MUST BE REPORTED

Advise your escrow officer of any of the following changes as they could affect closing:

• Changes in seller’s vesting, such as divorce, death, name change
• Changes in Buyers lender, name, address, contact person, telephone number

What is Title Insurance?

The process of buying a home has gotten pretty complicated, with mounds of paperwork and documents to sign.  Fees show up at closing that can sometimes be a big surprise to the buyer, who often has no idea what they’re for.  Title insurance is one of those charges little understood by homebuyers, who often see it as just another fee they have to pay to buy a home. Title insurance protects against problems affecting the title to a home, which is probably your client’s most valuable asset.

There are two types of title insurance policies. A Loan Policy is almost always required by the lender and insures the title for the amount of the mortgage loan.  An Owner’s Policy, on the other hand, insures the homeowner’s investment, such as their down payment and equity. Both are needed.  Having a problem with a title can seem rather remote because, historically, the title insurance industry has not had to pay a large amount in claims. This is due to the exhaustive due diligence work that is performed by the title company prior to closing.

The American Land Title Association estimates that one out of every four title searches reveals a problem with the title.  Because of the corrective work that title professionals perform, most buyers are unaware of these problems and the closing goes smoothly. Few problems with title ever end up resulting in a claim. However, when it happens, not having the proper protection can be devastating to a homeowner.

Some title problems are easy to detect, such as prior tax liens or a lien from an unpaid subcontractor. But other problems can be more difficult to detect, such as forged signatures in the chain of title, recording errors, undisclosed easements or title claims by missing heirs or ex-spouses. For this reason, having both a Loan Policy and Owner’s Policy ensures that you are fully protected.

For more information on the title insurance industry, please visit the American Land Title Association Web site at www.alta.org