The reference “title company” implies a purpose of assuring title, but the title company goes further than that. The title company actually handles the closing of the transaction by coordinating all parties-the lender, the buyer and the seller- and assembling all necessary documents and preparing, based on the contract of the parties, the settlement statement (HUD-1). It also handles all the money involved in the closing. Through all this, the title company’s main function is to provide title insurance to the prospective buyer and any lender financing the purchase.
Title insurers differ from other kinds of insurers in that they attempt to research and “eliminate” all risks of the title defects rather than to “assume” risks. It is the ancillary function of the title company, then, to handle the actual closing to assure that the documents necessary to convey title have been properly executed and filed, and that previous interest in the property have been disposed.
Title insurance in the State of Texas is regulated by the Texas Department of Insurance. The title company performs four major functions described as follows:
- Coordinate – Working with all parties, i.e., realtors, lenders, buyers, sellers & other entities of the transaction for a successful closing for all parties.
- Cure – The search and examination of titles sufficient to prepare a commitment for title insurance and to cure any issues regarding the title to be able to close the transaction.
- Closing – The closing of the transaction is the handling of all documents necessary to effect the transaction and disbursing the funds accordingly as escrow agent.
- Coverage – The issuance of the title insurance policies to the buyer and any lender insuring the title as transacted.
Title Commitments from A to D
Once the executed contract goes to the Title Company you will receive a Title Commitment. Here’s a quick and basic overview of the four sections of the Commitment for Title Insurance. In general, a title commitment is a commitment by the title company to insure the sale of the property and issue a title policy if conditions in the commitment are met.
Schedule A – “Actual Facts”
“A” is for “Actual Facts.” In other words, this is the “Who, What, Where and How Much” of the transaction. You’ll see the names of the seller and buyer, a description of the property, the sales price, and the name of the lender and loan amount if available.
Schedule B – “Buyer Notification”
“B” is for “Buyer Notification” of areas where other parties have some interest or control of the use of property. An example would be a utility easement where the city would have a part of the land reserved for their use, or a building setback requirement that prevents the homeowner from building within a certain distance from the front of the property. These are exceptions from coverage; items that are not insured on the title policy.
Schedule C –“Clear to Close”
“C” is for “Clear to Close.” These items MUST be resolved in order to transfer title to the new owner. This would include such things as a mortgage to be paid off, marital status, home improvement liens, unpaid taxes, or a requirement that another person – such as an heir or a former spouse – participate in the sale of the property by executing closing documents.
Schedule D – “Disclosure”
“D” is for “Disclosure.” This last section outlines all parties who will collect any part of the insurance premium including underwriters, title agents and attorneys.
Please contact your escrow officer with any questions about a particular title commitment or transaction.