Key Takeaways

  • A title commitment (also called a binder) is a promise by the title company to issue title insurance after closing.
  • Buyers have a limited review window to dispute unacceptable terms before closing.
  • Title commitments are structured into sections like Schedule A, Schedule B, and Conditions, each outlining critical details about coverage, requirements, and exclusions.
  • Title insurance protects buyers and lenders from hidden hazards such as forged deeds, unknown heirs, or recording errors.
  • Exceptions and exclusions define what is not covered by the insurance policy. Some exceptions are harmless, while others may affect property use.
  • Both buyers and sellers benefit from carefully reviewing the title commitment, often with legal guidance, to avoid costly disputes.
  • Hiring a real estate attorney ensures proper interpretation of terms and identification of potential risks before closing.

Title commitment definition, also known as the title binder, refers to the promise of a title company to issue an insurance policy for a property after closing.

The title commitment covers the same terms, conditions, and exclusions found in a typical insurance policy. It is a document that specifies the details of what a title insurance policy will cover and exclude.

Advantages of the Title Commitment

A title commitment informs the buyer of any outstanding attributes of the building, such as an existing heir who has a claim to the property or a community association that constitutes a ruling body.

Is the Buyer Allowed to Review the Commitment?

The buyer can review the commitment and contact the title company, their agent, or a real estate attorney for clarification on some of the provisions. However, the buyer has a limited number of days to inform the seller about any unacceptable terms in the commitment.

Understanding the Structure of a Title Commitment

A standard title commitment is organized into several key parts:

  • Schedule A – Contains the basic details, such as the property description, proposed insured parties, and the type and amount of coverage.
  • Schedule B – Part I (Requirements) – Lists items that must be resolved before the policy can be issued. These may include payoff of existing liens, recording of deeds, or providing missing documentation.
  • Schedule B – Part II (Exceptions) – Outlines matters excluded from coverage, such as easements, encroachments, or restrictive covenants.
  • Conditions Section – Provides definitions, policy terms, and the insurer’s responsibilities.

Understanding each section helps buyers, lenders, and sellers identify potential issues before closing.

What Is Title Insurance?

Title insurance is an insurance policy that protects a property buyer against any unforeseen hazards associated with a property's title. This is unlike other insurance policies that are bought for future purposes. Title insurance requires a one-time payment and is meant to protect against any loss due to hazards or defects in a property before insuring.

What Are the Hidden Hazards That May Occur?

Some of the hidden hazards that may occur include the following:

  • The deed may be forged.
  • Heirs might have claims to the property.
  • There could be errors in the public records.
  • Transfer documents were executed under a false or expired power of attorney.

Why the Title Commitment Matters for Buyers and Sellers

The title commitment is more than a preliminary document—it serves as a legal contract between the title company and the party receiving the commitment (typically the buyer or lender). By issuing the commitment, the title company promises to provide insurance coverage once closing requirements are met.

  • For buyers, it highlights risks or restrictions that could limit property rights.
  • For sellers, it provides a chance to clear defects, resolve liens, or correct record issues before transferring ownership.
  • For lenders, it ensures the mortgage will have the intended lien priority.

Because it affects all parties in the transaction, the title commitment demands careful review and resolution of listed requirements.

What Will the Title Company Insure?

The title company buys an insurance policy to cover unforeseen surprises that can surface later.

What Will the Title Company Do Before It Issues the Title Commitment?

Before the issuance of the commitment, the title company investigates the public records of the property and excludes any item that may prevent insurance coverage. The excluded items are known as exceptions. The title company cannot help you if any of the exceptions creates a problem during your ownership of the property.

Common Requirements Before Issuance

Before the title company will finalize coverage, it often requires certain actions to be completed. These may include:

  • Payment and release of outstanding mortgages or liens
  • Proof of property taxes being paid up-to-date
  • Recording of deeds or other transfer documents
  • Execution of corrective affidavits to fix errors in public records
  • Providing entity documentation if the property is owned by a company or trust

Failure to meet these requirements can delay or prevent issuance of the final title insurance policy.

What Will the Title Company Do When It Issues Insurance?

When a title company issues insurance, it will provide a general list of standard exceptions that apply to all properties. It will also list exceptions for certain items identified during its pre-issuance research that are specific to the property being issued title insurance.

What Are Examples of Exclusions?

Exclusions can include:

  • Any legislation or governmental rule that affects the use of the property
  • Any governmental police power, except where recorded
  • Rights of eminent domain, except where recorded
  • Claims due to creditors' rights or bankruptcy laws
  • Defects, adverse claims, liens, encumbrances, and other issues the buyer agrees to

Should You Be Concerned About Every Exception a Title Company Lists in Your Policy?

You don't have to be concerned about every exception listed by a title insurance company. Exceptions, such as an easement allowing a water company to check the meter or carry out repair work, is a common exception, as long as the company doesn't infringe on your rights.

Advantages of Exceptions

Exceptions can help you identify things that should be changed in the property before closing. For example, say the title company excluded certain items identified on a survey of the property. On close observation, you discovered the seller erected a fence on the neighbor's property. If the fence is not moved before closing, you will be responsible for moving the fence should your neighbor make such a demand, and the title company won't be able to help you.

Exceptions can also let you know about certain expenses you will be paying on the property, such as owner association dues.

Disadvantages of Exceptions

Certain exceptions may affect your use or ownership of the property or include unfavorable conditions. For example, if you intend to build a dog kennel where the garden currently is, an easement on the property might prevent this.

State-Specific Rules and ALTA Forms

While the overall framework of title commitments is similar across the U.S., specific forms may vary by state. For example, in Texas, the Department of Insurance regulates standardized forms, while in other states, title companies often use forms developed by the American Land Title Association (ALTA).

Being aware of state-specific requirements ensures that buyers and sellers understand their obligations under local law, and it prevents surprises during closing.

Should You Hire an Attorney?

It's essential for your or your attorney to take a critical look at the provisions of the title commitment, understand the exceptions, and identify anything you find unacceptable.

Frequently Asked Questions

1. What is the difference between a title commitment and title insurance?

A title commitment is a promise to issue title insurance once certain conditions are met. Title insurance is the actual policy that protects against covered risks after closing.

2. How long does a buyer have to review a title commitment?

The review period varies, but buyers typically have only a few days to raise objections to exceptions or requirements before closing.

3. What are the most common requirements in a title commitment?

Common requirements include paying off prior mortgages, resolving tax liens, recording the deed, and providing proper documentation for trusts or business entities.

4. Do all exceptions in a title commitment pose a problem?

Not necessarily. Some, like utility easements, are routine and rarely affect property use. Others, such as encroachments, could limit how the property can be used.

5. Can I negotiate exceptions listed in a title commitment?

Yes. Some exceptions may be removed or resolved before closing. Others may remain, but buyers can decide whether to accept them or request changes from the seller.

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