Don’t Overlook Information from the Title Company Before Closing a Real Estate Deal

Real estate transactions almost always close through a title company.  Among the things a title company frequently does to assist with the closing process is to provide a title search and title insurance commitment.

When a title company is preparing to assist with the transfer of a particular piece of real estate, an agent from the title company will search the real estate record to see if there are any liens, encumbrances, conditions or other issues that might have an impact on the title to the real estate.  For example, a title examiner might uncover relatively common and unproblematic utility easements or highway rights of way. However, a title company might also uncover mortgages, unexpected easements, mechanic’s liens, or other potentially problematic items.

In any case, once the title company is finished with its evalution of the real estate record, it will nearly always prepare a commitment for title insurance. That commitment will contain a list of exceptions. After some standard exceptions that are built into every policy, the title insurance policy will also list all those items discovered in the real estate search as exceptions to title insurance coverage in the commitment.  In other words, if the title company finds it in the real estate record; it is listed as an exception and therefore not covered by title insurance.  Due to the lack of coverage for listed exceptions, the list of exceptions in the title commitment becomes an extremely important document to fully understand before closing. Consider, if the buyer knows of a problem on the title commitment that he knows won’t be insured, he has an opportunity to negotiate with the seller to fix the problem before letting go of the purchase price at the closing table.

So what’s the take away? The take away is that reviewing the exceptions to title insurance coverage is an extremely important part of a real estate closing that is (in my opinion) often misunderstood and cannot afford to be ignored.

Mark Coriell

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