You are a week from closing and your lender emails you a document called a “Title Commitment” or a “Commitment for Title Insurance.” It is thirty pages long. It is full of legal descriptions, lists of exceptions, and requirements that must be satisfied before the title company will issue the actual insurance policy. You are not sure whether this document means your title is clean or whether it means there are problems that could kill the deal.
A title commitment is not a title insurance policy. It is a promise to issue a policy, subject to conditions. It tells you what the title company found when it searched the chain of title, what problems exist, and what must be done to clear those problems before closing. It is the most important document you will receive during the closing process that most buyers never read.
What a Title Commitment Actually Is
A title commitment is a preliminary report issued by a title insurance company that states the conditions under which the company will issue a title insurance policy. It is not the policy itself. It is the company’s offer to insure the title, subject to the requirements and exceptions listed in the commitment. The commitment is issued before closing. The policy is issued after closing, once all of the commitment’s requirements have been satisfied.
The commitment has three main sections. Schedule A identifies the property, the proposed insured parties, the policy amount, and the type of policy to be issued. Schedule B-I lists the requirements that must be satisfied before the policy will be issued. These include paying off existing mortgages, releasing old liens, correcting errors in the legal description, and recording documents that are missing from the chain of title. Schedule B-II lists the exceptions from coverage: the liens, easements, restrictions, and other matters that the title insurance policy will not cover. These are the things the title company found during its search that will remain on the title after closing.
The commitment is a conditional promise. The title company is saying: “We will insure the title to this property on the following conditions: you must clear the items in Schedule B-I, and we will not cover the items in Schedule B-II. If you clear the requirements and accept the exceptions, we will issue the policy.”
Title Commitment vs. Title Policy: The Difference
A title commitment is issued before closing and tells you what the title company found and what must be done to get the policy issued. A title policy is issued after closing and is the actual insurance contract that protects you against covered title defects. The commitment is a report of the title search results. The policy is the insurance protection that results from clearing the issues identified in the commitment.
The commitment is a working document. It changes as you clear the requirements in Schedule B-I. When you pay off the seller’s mortgage, that requirement is marked as satisfied. When you obtain a release of an old judgment lien, that requirement drops off. The final version of the commitment, with all requirements satisfied, becomes the basis for the policy. The policy is the finished product. The commitment is the draft.
The commitment expires if the transaction does not close. A title commitment is typically valid for 90 to 180 days. If the closing is delayed beyond the commitment’s expiration date, the title company must update the title search and issue a new commitment or an endorsement extending the commitment. The title search must be current at closing. A commitment issued six months ago is not a reliable statement of the current state of the title.
How to Read a Title Commitment
Start with Schedule A. Confirm that your name is spelled correctly as the proposed insured, that the property’s legal description matches the property you are buying, and that the policy amount equals the purchase price for an owner’s policy or the loan amount for a lender’s policy. Errors in Schedule A are common and easy to fix if caught before closing. A misspelled name or an incorrect legal description that makes it into the final policy creates a problem that is harder to fix after the fact.
Then read Schedule B-I, the requirements. These are the things that must happen before the title company will issue the policy. Common requirements include satisfaction of the seller’s existing mortgage, payment of outstanding property taxes, release of judgment liens against the seller, execution and recording of corrective documents if the chain of title contains errors, and proof that the seller has the legal authority to convey the property. Each requirement is a condition that must be satisfied. If a requirement cannot be satisfied, the title company will not issue the policy, and the transaction cannot close unless the parties renegotiate or the buyer accepts the risk.
Finally, read Schedule B-II, the exceptions. These are the things the title policy will not cover. Standard exceptions include matters that would be revealed by an accurate survey, such as boundary disputes and encroachments; unfiled mechanics liens for recent construction work; taxes and assessments not yet due and payable; and matters created by the insured after closing. Specific exceptions include recorded easements that affect the property, deed restrictions and CC&Rs that limit how the property can be used, and mineral rights that have been severed from the surface estate. Each exception is a risk the title company is unwilling to insure. You accept these risks when you accept the policy.
What to Do When You Receive Your Title Commitment
Read the exceptions in Schedule B-II carefully. These are the things that will not be covered by your title insurance. If you see an exception you do not understand, ask the title company or your attorney to explain it. If you see an exception that concerns you, ask whether it can be removed or insured over. Some exceptions are standard and cannot be removed. Others can be removed by satisfying a requirement in Schedule B-I or by purchasing an endorsement to the policy that provides coverage for the excepted matter.
If the commitment reveals a title defect that you consider unacceptable, you have the right to object and to demand that the seller cure the defect before closing. The purchase contract typically gives the buyer a period, often five to ten days after receiving the title commitment, to review the commitment and raise objections. If the seller cannot or will not cure a valid objection, the buyer may have the right to cancel the contract and recover their earnest money. The title commitment is your opportunity to discover title problems before you own them. Use it.
Do not assume that the title commitment means the title is clean. The commitment reports what the title company found in the public record. It does not report what the title company did not find, such as forged deeds, undisclosed heirs, survey errors, and other defects that are not apparent from the record. Those are the risks the title policy insures against. The commitment tells you what is known. The policy protects you against what is unknown. Both are essential.
Frequently Asked Questions
What is the difference between a title commitment and a title policy?
A title commitment is issued before closing and is a conditional promise to insure the title, subject to requirements and exceptions. A title policy is issued after closing and is the actual insurance contract. The commitment tells you what the title company found and what must be done. The policy is the protection that results. The commitment is a draft. The policy is the final product.
How much does a title commitment cost?
The title commitment is typically included in the cost of the title insurance policy. You do not pay separately for the commitment. The title search and the preparation of the commitment are part of the service the title company provides in exchange for the title insurance premium. The premium itself is a one-time charge at closing, typically 0.5 to 1 percent of the purchase price or loan amount depending on the state and the policy type.
What is the point of a title commitment?
The commitment serves three purposes. First, it tells the buyer and the lender what the title company found in the public record, including liens, easements, restrictions, and other matters affecting the property. Second, it lists the requirements that must be satisfied before the policy can be issued, giving the parties a checklist of what needs to happen before closing. Third, it identifies the exceptions from coverage so the buyer knows what risks they are accepting. The commitment is a disclosure document, a checklist, and a risk assessment combined into one.
How long is a title commitment valid?
Typically 90 to 180 days from the effective date stated in the commitment. The exact period varies by title company and by state. If the closing does not occur within the commitment period, the title company must update the title search and issue a new commitment or an endorsement. The title must be current at closing. A commitment issued several months ago may not reflect liens, judgments, or other matters recorded after the commitment date.
What happens if the title commitment reveals problems with the title?
You have the right to object to title defects discovered in the commitment and to demand that the seller cure them before closing. The purchase contract typically allows a specific period for title review and objection. If the seller cannot cure a valid objection, you may have the right to cancel the contract. If the defect is minor and the seller cannot cure it in time, the title company may agree to insure over the defect, meaning the defect remains but the policy covers any loss it causes. Discuss unacceptable title issues with your attorney before the objection deadline expires.
The Short Version
A title commitment is a preview of your title insurance policy. It tells you what the title company found when it searched the public record, what must be done before the policy can be issued, and what risks the policy will not cover. It is not the policy. It is the offer to issue the policy.
Read Schedule A for accuracy. Read Schedule B-I for the checklist of things that must happen before closing. Read Schedule B-II for the list of things the policy will not protect you against. If you find a problem in the commitment, you can demand that the seller fix it before you take title. If you do not read the commitment, you accept the exceptions without knowing what they are, and you discover them only when a title defect surfaces years later and the policy you thought covered everything tells you it was excluded on page 24 of a document you never opened.
