The Ins-and-Outs of a Title Commitment
The document by which a title insurer discloses all liens, burdens, defects and obligations affecting subject property is known as a title commitment. The title commitment is the result of an order placed with a title insurer, which is usually a mutually executed contract, to buy and sell real property. The Commission approved real estate contract in Colorado calls for the seller to convey marketable title to the purchaser, clear of all liens and encumbrances, except if specifically noted as evidence by a commitment for title insurance.
Title commitments serve two functions under Colorado real property transfer in conformity with the Commission approved Contract to Buy and Sell Real Property. The title commitment is a binder for insurance evidencing insurable title. Also, it’s the primary evidence of marketable title called for in the sale contract. A real estate broker will serve his or her client title commitment for two reasons: to ensure that the title is insurable and decide whether the title meets the contracts requirements (generally markable).
Title commitments may look different from title insurance entity to title insurance entity. All title commitments generally have the same information on them, but information listed may be slightly different.
The effective date represents the last time the title entity searched the country lands records.
Policies to be issued
The most common policies are owner’s title insurance policy that protects the interests of the buyer/insured and a lender’s title insurance policy to protect the lender’s interests. The names of the insured will be listed in this particular section.
Premium charged the policies and any other charges for endorsements requested by owner or lender, if applicable.
Estate covered and title holder
The estate tends to be covered in “Fee Simple.” Also, check the title holder’s name to ensure that the Seller under the sales contract is properly in a title.
Schedule B-1 depicts requirements necessary for insurance of the title insurance policy. This is also known as the “if, then” statement:
If, and only if, the requirements of Schedule B-1 are met, then title insurance as described in the commitment will be issued.
Myriad issues may be addressed in Schedule B-1, depending on the title’s status. Typically, it’s required that there’s a payment of consideration, payment of premium amounts for insurance plus any endorsement costs, payment of charges, and taxes and assessments levied or assessed against the property that is due and payable. Also, execution, delivery, and recordation of any document conveying an interest in the property or creating a lien pursuant to the purchase of the property.
Additionally, there may be requirements for the preparation of an ILC, a survey, payment of delinquent homeowner assessments, payment of lien, and still a cloud on title.
Schedule B-2 possesses all the matters on a title that the title entity is taking exception to, or simply, is not providing insurance coverage over. The first seven or eight exceptions are considered the preprinted or standard exceptions, which is found in all title commitments.
Disclosure or impairment records can be found in Schedule B-2.
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