A title commitment is a document from a title company which says the property you are buying will be able to have a title insurance policy after you close the sale. The document contains the same information that will be included in the actual insurance policy, but it is not underwritten or ratified until after closing. This also means that a title commitment is not legally binding.
One of the reasons title commitments are not be legally binding is that title commitments will state if any conditions must be met like the homebuyer paying unpaid taxes, in order for the title company to issue an insurance policy. If these items are not completed, the person will not be able to get an insurance policy. Title commitments also list what the insurance policy will and will not cover once it is written.
Those are the main differences between a title commitment and a title insurance policy. The insurance policy is legally binding where the title commitment is not.
Now that you know what a title commitment is, you may be wondering if there are other differences between this document and your actual insurance policy. If it is required by law, or if it is just for a peace of mind. Look below to learn everything about title commitments and the home and land buying process.
Is a Title Commitment Required By Law?
No, title commitments are not required by law, but if you are buying a home, your agreement with the seller will probably require that the seller provides you with a copy of their title insurance policy. Also, if you are taking out a mortgage, the lender may require you get a title commitment before they sign the final documents to give you the loan.
The document will contain all of the items that your title insurance policy will not cover. This is what the lender will want to see. They need to protect their investment when they loan you money, and this is another reason why title commitments are important for you to have if you want a successful and easy closing.
Is a Title Commitment the Same as Title Insurance?
No, title insurance is the legally binding agreement that you get after the closing of a property sale. A title commitment just says that the title company will agree to provide you with a policy. There are also two types of title insurance policies. You can read about the difference between a lender’s and owner’s title insurance policy here.
Is it the Same as a Marketable Title?
A title commitment is different than a marketable title in that it does not guarantee there will be zero issues with the deed to the property you are buying. Instead, this document only says that you will be able to have an insurance policy on the property, and only if you’ve cleared all requirements by the title company before closing.
What is the Title Commitment Form and What Should I Look For?
The most important things to look for on the form are what is not covered, and what potential issues could arise. The issues themselves are what can cause a deal to fall through, or if it is from the seller, what potential issues you may inherit. These issues can include encroachments, claims on your property, liens, debts owed, incorrect boundary lines, improper zoning and easements to name a few.
If you have any questions about title commitments, or need help with a closing, contact us using the phone number or email at the top of this page and we will be happy to help.