Know what each represents and what they require of you
You’re just a few steps away from owning the home of your dreams or the property you’ve been hoping for. But now there’s paperwork, and loads of it. Among the mountains of paper in your growing homebuying files, you will encounter two important documents related to the work your title insurance company has done on your behalf: the title commitment and the title report. These two documents sound much the same, but they actually serve different purposes. Let’s examine what each does.
The title commitment
The title commitment — which can go by various names, previously known as a preliminary title report — is essentially a promise from your title insurance company to issue a title insurance policy after you close on the property. The title commitment will spell out the terms and conditions of the agreement as well as exclusions, and that’s important. The title commitment arrives in your hands before closing, which means you have an opportunity to examine those exclusions and follow up on anything that needs to be addressed, whether it’s a lien on the property, an encumbrance of some sort, or any type of title defect that could be rectified and save you some headaches down the road. Bottom line: take time to review the title commitment; it’s essential.
Any exclusion spelled out in the title commitment that leads to an issue for you after you’ve taken ownership, represents a matter you cannot take back to the title insurance company, because it is not covered under your policy. You may want to appeal to your title insurance company and even enlist the help of an attorney if you feel the root cause of the exceptions has been addressed and the exceptions should be removed from your policy.
The title report
A title report is the result of the title search and is often a section of the title commitment as well as the final title policy that is issued following closing. As a result, it can be sometimes be referred to as the “search report.”
Title reports typically are not issued during the homebuying transaction and are generally not used during the closing. Instead they are issued for those who want to know the history of a property and its title. They can be ordered for a number of reasons, whether a spouse wants to know if their estranged loved one still owns the house they shared, if a financial institution needs to know what’s going on with a property, or if an heir has recently inherited some property. In short, a title report details the legal and ownership status of a property.
Getting a title report for a property outside of the property buying experience is possible, for the many different reasons people want or need to know a property’s history. But it can be a complex matter, involving searching through property deeds, visiting city and county officials or working with a title professional.
Understanding the complex title-related paperwork is helpful
Title paperwork, like lots of paperwork that will come your way during the homebuying process, can be complicated. Understanding the purpose of a title commitment (to promise title insurance coverage and list exceptions) and title reports (to detail the legal and ownership status of a property) is important as you work your way through the homebuying process. In the end, you’ll be grateful you took time to understand the exclusions in your coverage and address those you could before closing.