Real estate can be tricky to understand—especially if you’re a first-time homebuyer. It gets even more confusing when you throw in terminology like escrow, due diligence, and title insurance. As a real estate agent, it’s your duty to make sure your client’s know exactly what they’re doing, and what you’re doing, to help them find success. And nothing can make or break a successful real estate transaction quite like title insurance.
Title insurance protects the new homeowner and their right to the property’s title. Before you get your title insurance policy, however, your title insurance agency will issue you a title commitment.
Like title insurance, the title commitment can be difficult to understand because it has a number of different moving parts. We’re here to set the record straight and break down everything you need to know about title commitments.
The Title Commitment Comes Before Closing
Think of the title commitment as a preliminary document to obtaining your title insurance policy. The title insurance company will send it out before the closing and it includes all the terms and conditions that must be met before a title insurance policy can be issued.
Those conditions differ by state, which is why it’s so important to partner with a title insurance agency that understands North Carolina title insurance law.
In addition, the title commitment states all the careful details about the intended property and determines whether there will be any limitations in the title insurance policy. It’s important to remember that a title commitment is not the same as a title insurance policy: it does not yet protect your investment.
The ABC (and D)’s of Title Commitments
Title commitments are comprised of four distinct sections, also known as “schedules.” Each schedule outlines and sets conditions for different aspects of the title insurance policy. The four schedules are:
Schedule A provides the most basic information regarding the transaction. Also known as the actual facts of the transaction, this section includes:
- Amount of money for the full policy coverage
- Owner’s coverage and lender’s coverage
- Names of the buyer(s)
- Current recorded property owners
- Sales price
- Legal description of the property
- Effective date of coverage
Typically, Schedule B covers the exceptions: the aspects of the property purchase that won’t be covered by the title insurance policy. That includes:
- Setback lines
- Survey matters
Clear to Close
Schedule C includes the items relating to the property that must be resolved before closing—and before the title insurance policy can be issued. They include:
- Mortgage to be paid off at time of closing
- Abstract of judgments
- Any unpaid labor liens
- Unpaid taxes liens
- Deed of trust to be paid off or released
- Any other unpaid liens
Essentially, this list is all the relevant parties involved in the title insurance process that will benefit from the premium. Those parties include:
- Title insurance agents
Have Questions About Your Title Commitment?
Here at Tryon Title, we’re committed to helping our North Carolina real estate agents better assist their clients. When it comes to buying a home, having a thorough title insurance policy is paramount to a successful transaction.
Need a title insurance agency to refer your clients to? We’re here to help. Give us a call today to learn more.