How to Understand the Texas Title Commitment

Takeaways

• Always look through and verify the information in the title commitment – you have a limited time to object to issues as the buyer
• It’s a good idea to request and review any deed restrictions as well – it is separate from the title commitment documentation
• If you are a seller, get a preliminary title commitment before listing your home, so that you can jump on any issues before it torpedos a contract

What is the Title Commitment?

The title company’s main responsibility is to make sure that the owner owns the property and has the right to sell it. They’re going to do their best to find all recorded liens on the property, verify the seller’s marital status (if there are any spouses or inheritors who have rights to the property) so that they can give the buyer a “clean” title that no one can dispute.

The title commitment is the result of the title search that the title company performs.  The title commitment shares any potential issues, as well as disclosing encumbrances on the title that the buyer can’t get away from (like deed restrictions, easements, and leases).

Usually, a title commitment can be furnished within a week or so of the title company getting a copy of the contract. If you discover issues that the seller cannot resolve, Texas Association of Realtor contracts specify how long the buyer has to terminate the contract and get their earnest money back.

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Schedule A – Actual Facts

This is the who, what, where and how. It will include the legal description of the subject property, the buyer’s name (called the Proposed Insured) and the seller’s name, as well as the amount of coverage for the property.

Red Flags

• Check spelling/accuracy of buyers’ names under “Proposed Insured” (Section 1)
• Check that the sellers’ names match the contract (Section 3)
• Make sure the legal description is correct and complete (Section 4)

Schedule B – Buyer Notification

This is a “For Your Information” section where the title company advises you of encumbrances on the property, or items that they are NOT searching for and NOT responsible for.

These are things you can’t change as the buyer. However, you can object to them and walk away from the contract if there is an issue. Generally, they will reference:

• Deed restrictions / Restrictive covenants: restrictions imposed by the original property developer on how you can use your home, even if you are not in an HOA.
• Taxing jurisdictions
• HOAs: whether or not you belong to an HOA
• Recorded Easements: utility easements are most common, permitting access to your property to other people for specific purposes
• Leases / mineral rights: Even though leases convey with the property, the title company is not responsible for any leases in effect, nor do they generally know who owns the mineral rights. If you know the property has a lease, you need to get that lease from the seller and review it. You buy the terms of the lease with the contract.

Red Flags

• Check to ensure your survey coverage is properly updated if you are getting the survey amendment on owner’s title policy (optional and in the contract)
• Often the deed restrictions themselves are not included with the title commitment. You must either ask if the title company has a copy of any for your neighborhood, or you have to go to the County Clerk to get a copy

Schedule C – Clear to Close

This is the to-do list of everything that needs to be cleared up prior to successfully closing. Existing liens like the seller’s mortgage company will appear here. Many of the requirements listed here are a normal part of the transaction, like recording the new deed.

Other requirements may be specific from the title company’s underwriter. Perhaps the underwriter found another person with a bankruptcy and a similar name to the seller. The underwriter needs to confirm that this person isn’t the current seller.

Most issues are found here.

Red Flags

• Check for unexpected liens – city tax liens, second mortgages, mechanics liens, etc.
• Check for former spouses uncovered by the title company who may need to sign off on the deal

Schedule D – Disclosure

You should see the amounts that are being paid from closing toward both the owner’s and lender’s title policy. These should be the same amounts on the final documents (unless there are subsequent amendments changing the closing price or loan amount).

What Happens if We Find Problems?

Some problems are serious enough that the transaction cannot close without their being resolved. The title company cannot fix problems – only the seller can. Most problems are relatively small and swiftly resolved, but not all. In the event of a major problem that the seller cannot fix, the buyer terminates the deal and gets their earnest money back.

Some problems won’t cause the transaction to close, but still might be a problem for the buyer. For example, there may be easements or restrictions (no pools, for example) that cause the buyer to change their mind about the property. The contract has a negotiable number of days that the buyer can walk away after receiving the title commitment.

If there are specific or unique things you want to do with your property, like keep horses or put in solar panels and pools, be sure to pay close attention to the title commitment and deed restrictions to ensure that you can do those things!

Notice to Prospective Buyer

Realtors are not lawyers. The work that the title company is doing IS lawyer work. The title company has a lawyer who helps draw up deeds and can explain the particulars of what the title commitment means. That lawyer does not work for you. They work for the title company.

If you have questions about the title commitment, your Realtor may be a resource, though almost surely not as good a resource as the title company themselves. Call them up – don’t be shy! You are their customer.

But if you still don’t understand, or have a particular situation, or just want to be certain you know what you’re doing, the answer is to get a lawyer to review everything on your behalf.

We agents have a form advising clients to do this – the Notice to Prospective Buyer. I have all my buyers sign it. It recommends having a lawyer review the abstract and/or having title insurance (which is usually required if you are financing your home purchase – and always a good idea even if you’re paying cash).

Conclusion

The title commitment is usually a ho-hum affair. A Realtor gets a copy and forwards it to their client and that’s that. Often times the title company will mention if they see something out of the ordinary.

But buyers should take the title commitment very seriously. It is describing what you are buying. Making sure it is accurate and has no hidden surprises is critical to avoiding extreme headaches in the future, sometimes long after closing.

If you have questions, ask your title company ASAP!

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Recommended Fort Hood, TX Title Companies

Here are some title companies I recommend in the Fort Hood area.

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