How Do I Interpret a Title Commitment?
For most people, purchasing a home will be the single most expensive purchase they will make during their lifetime. Along with being expensive, a home is a long-term commitment in terms of time and energy. With all of that in mind, it only makes sense to make sure everything relating to the purchase of the home goes as smoothly as possible. It also means you should take all of the steps available to protect your investment. Purchasing title insurance is one of those steps. Although you have likely been told you need to purchase title insurance, you probably have very little idea of exactly what is included in your commitment. For that matter, you may not know how to interpret a title commitment at all.
Like most buyers, you will likely take out a mortgage loan in order to finance your real estate purchase. Even a relatively modest home will require you to borrow a sizeable amount of money, meaning the lender is taking a considerable amount of risk by loaning you the money. Understandably, both you and the lender want to protect your investment. One way to do that is with title insurance. Title insurance is a form of indemnity insurance used to insure against financial loss caused by defects in the title to real property. A title insurance commitment is basically a written offer to issue title insurance.
State law governs what type of title commitment form may be used in that state. In Pennsylvania, a modified version of the American Land Title Association (ALTA) commitment form is used which consists of five parts:
- Schedule A – includes the terms and conditions of the title insurance policy. The parties to the policy are also described in this section.
- Schedule B-Section I – sets forth the terms that must be satisfied before the title insurance policy will be issued. For example, you will likely need to provide acceptable forms of identification, proof that certain taxes and other encumbrances have been paid or satisfied, and show that the mortgage loan documents have been executed and filed.
- Schedule B-Section II – contains the exclusions and exceptions. This section is very important because it tells the buyer what risks the policy does not protect against. In Pennsylvania, for example, there are several “standard” exceptions of which a buyer should be aware.
- Schedule C – describes the property to be insured
- Commitment jacket – also includes terms and conditions that apply to the policy along with definitions used throughout the policy.
Given the importance of title insurance when purchasing real property, if you are still unsure about any of the terms in your commitment it is in your best interest to contact an experienced Conshohocken, Pennsylvania real estate law attorney for assistance. Contact the real estate law attorneys at Curley & Rothman, LLC by calling 610-834-8819 today to schedule your free consultation.