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hey this is Seth from the re tips your blog and in this video I'm gonna give you a run-through of how to read in decipher and make sense of the things that are written inside of a title insurance commitment every now and then I come across deals that are really really cheap and it's kind of hard to justify the full-blown cost of closing with a title company but it is a situation where it does justify me going out and getting title insurance and whenever you get title insurance like this and you're trying to still facilitate the closing yourself eventually gonna come across this document and this right here is the title commitment and whenever you get a title commitment like this this means that the title company has gone through and done the actual title search portion of the process so they've looked at all the historical Deeds documents and record and they've developed a thorough understanding of what is the situation with the property who owns it who has owned it in the past are there any outstanding liens of record anything like that and then this document right here is basically a checklist of the things that they need to see from you in order to finalize the deal and then give it to the title insurance companies so they can issue your title insurance policy which essentially ensures that you do officially have clear title to the property and if anything comes up in the future or if anybody ever comes back and tries to blame a title issue on you this title insurance policy will actually protect you from financial liability if any issues ever come up in the future and just speaking for myself the first time I ever saw this document I was just wildly confused I could not figure out what it meant the title company I was working with at the time did not really explain anything to me at all and I just kind of felt stuck and I didn't know what to do and so given how confused I was and given how long it took me to figure out what this document said I wanted to record this video and give you just a very detailed overview of what a typical title insurance commitment says and this is a sample that I actually got from my current title company which is right here America's one title agency and they do just an awesome job actually sat down and went through this with me to make sure I understood and they even put together this sample for me to use here so that's why I'm gonna go through this one this is not a real property and obviously every real estate transaction ever is gonna have some differences to it so if you're looking through a title insurance commitment and you're trying to follow along with this there's gonna be at least a few things that do not match up but my hope is that by going through this document and just showing you an example of what one typically says I'll kind of help you to understand and decipher what's written in your title insurance commitment should you be going through one so to start off with every title commitment is gonna come with a first page that looks almost exactly like this at the top you're gonna see the name of the title insurance company that's insuring it so it could say first American title or a fidelity national title or Old Republic national title any one of those huge title companies and Schedule A is fairly straightforward it's going to start off with the address of the property which is right up here assuming it actually has a legal address and then the commitment date so this is like the snapshot in time at which all of this information here is relevant this next section here is where it talks about both the owners policy in the loan policy and it's actually very important to understand the difference between these two and owners policy is what's going to protect the owner of the property so say if I am out there buying a piece of vacant land and my intent is to buy a policy to protect myself for the purchase price that I'm paying for the property that's what this is gonna do for me the loan policy is going to protect the blender for the amount of their loan and it's actually going to do nothing for the owner if a peddle issue ever comes up so if you're closing a deal where financing is not even involved then there really should be nothing here in the loan policy that's just not even relevant if you are doing a deal with financing it is possible to get title insurance only as a loan policy and not as an owners policy this kind of thing typically comes up when you're doing like a refinance of a property so the owner already has their own policy and they don't need to buy themselves another one but they are bringing a new lender into the mix and that lender is gonna want one so that's the kind of scenario where that would come into play but just so you understand there's definitely a difference between these two and if you are the actual owner of the property you want to make sure this is what's showing for the amount that you're paying for the property and a lot of real estate transactions the cost of the owners policy is actually paid for by the seller and not the buyer and the reason it works that way is because if there are any title issues that come up they're actually the sellers problem because they're the ones who owned it when everything went wrong and they signed a warranty deed promising that everything was clear so it's actually the seller protecting themselves and that's why they typically pay for it but it does not have to work that way for example when I buy a lot of my properties and I'm only paying you know a few hundred or a few thousand dollars for them part of the reason these sellers are willing to sell for that low is because I told them I would pay for all the closing costs and I would cover everything so if you're like me and you actually made the commitment to cover all the closing costs and that would come out of your pocket even though you're the buyer so now that we've got that covered let's move on down here to where it says fees simple interest in the land describing this commitment is owned at the commitment date by and in this case it says John and Jane Smith husband or wife so that's basically just saying that as of February 2 2016 when this title commitment was written John and James Smith which is a married couple is the most recent deed on record so they are the current owner this next section down here is where it lists out the legal description of the property and the legal description is actually extremely important because title insurers ensure legal descriptions they do not ensure addresses they don't ensure parcel numbers so the legal description must match whatever is written on the deed so anywhere in your documentation where it lists out this the legal description you're gonna want to be absolutely positive that it matches what it says here and legal descriptions are a bit of a strange thing as you can probably surmise just by reading this most legal descriptions will make absolutely no sense to the average person but if you understand how to read these and you usually kind of have to like read them backwards you probably know that they can actually get very very very specific about where the property is located where the metes and bounds are everything so it's just very very important that this legal description matches exactly what it says everywhere else sometimes legal descriptions are very simple just like this one where it's just a couple lines sometimes they're extremely complicated and then go on for like you know 14 pages and I wouldn't say that's common but when you get some of the larger or more complex complicated types of properties you can see that come up sometimes and then lastly down here you should see this signature block with an actual signature there this particular example is obviously not signed but when you get your title commitment you should see a signature here okay now moving on to the next page this page right here is known as Schedule B section one all this really is is a big laundry list of stuff that you're gonna have to collect get signed and verify in writing and then once you have all this stuff pulled together you're going to give it to the title company so they can go and complete the title insurance policy and I just want to go through each one of these things so you understand what every one of these things is saying these first three things up here are kind of like boilerplate it's saying that for this title insurance policy to be effective you need to actually pay the interest for the mortgage if you have one you need to pay the title insurance premium fees and charges to the title company for the actual policy and then all the documents that are listed below need to be completed correctly and executed correctly by the right people and notarized and all that stuff so like I said before and no to real estate transactions are ever going to be identical so this particular list is kind of like specific to this property but these are some pretty common items that you're gonna see in many many deals this first one right here owners sellers affidavit covering matters of title this is basically a form that the title company is gonna provide for you where the current owner of the property is gonna say that they do not know of any title issues or liens or any problems outstanding on the property it's just a boilerplate form that the title company always has everybody's science so it's a pretty simple form just get that from them get it signed notarized and put that in the pile of stuff to return to the title company the second item here warranty deed from recited owner to reset at purchaser that's just saying that there needs to be an actual warranty deed completed you know filled out correctly with all the correct information and signed by the seller and then notarized and then recorded and then that recorded copy with the actual recording stamp needs to be the document that is return of the title company so a lot of times you're not going to be able to give this to the title company until well after the deal is closed the money has been paid because it's gonna take at least a little bit of time to get that document recorded and then get the recorded copy and give it to the title company so just so you understand how the logistics of that work you don't give the warranty deed to the title company and they get it recorded because if they're not facilitating and closing that's on you to do that so you got to get it recorded and then get the recorded copy back to the title company for them to finish their job these next three sections here rarely apply to me when I'm buying vacant land cuz usually when I'm buying land I'm buying it for a very low price from somebody who does not have a mortgage on it so they don't have to discharge anything and I'm also not getting mortgage when I'm buying it I'm just paying cash so I don't have to get a mortgage completed either so with a lot of my vacant land deals these three items are just not even gonna be there but if you're working on a deal that does have an outstanding mortgage from the current owner in this case there are actually two different mortgages on the property from two different lenders and both of those mortgages need to be paid off and each of these lenders need to sign a discharge of mortgage that discharge of mortgage then needs to get recorded and then you have to give those recorded copies to the title company just like you did with the warranty deed and then item number three here is saying that the buyer if they are getting a mortgage and in this case they obviously are as it is shown right here that mortgage needs to be signed notarized recorded and get that a recorded copy back to the title company with items two four and five as well so as you can see whenever you've got financing involved there's a lot more moving pieces and a lot more time involved with just getting different parties to sign different things and then sending it all to get recorded and then getting the recorded copies back to the title company all that stuff takes time and it takes a lot of attention to detail to track it and make sure it's happening correctly and that's where a title company or a closing attorney it really proves their value because they really handle all of that work getting all the documents signed getting them notarized tracking everything handling the flow of money it's really a lot of stuff that they do in some of these transactions and I think whenever you've got a deal that's you know worth anywhere north of ten thousand bucks it's pretty easy to make a case for getting them involved just because they're gonna take a huge amount of work off your shoulders and make sure that it's all being done correctly this section down here where it says no note relative to the identified mortgage a discharge of Sam may be presented at closing or in lieu thereof all of the following actions must be performed so this is telling us is that we actually have an option B if we are not able to get these discharges signed notarized recorded and sent back to the title company instead we can actually collect all of this stuff and verify that it's going to happen with a lot more documentation it's gonna be a lot cleaner to just get these two things but it's also gonna take time and if you want to work around it you can do these other steps here so moving on down the list item 6 right here says a legal description of the property to be insured was not furnished at the time of application please verify that the description as shown on Schedule A covers all the intended property if there are any discrepancies please contact our office immediately the reason this is in here is because a lot of times when title companies start their order for a title insurance policy all they're given is either an address of the property or a parcel number but they don't necessarily have the full legal description or even if they do they need to go out and verify that and as I said earlier title insurers do not insure addresses or parcel numbers all they insure is the legal description and so what they did in this case was they probably just got the address and then they went out and they pulled this legal description and put it in here and while they're reasonably confident that it's correct they want you as the closer to verify that so that they're not on the hook if they got it wrong so that's why this section is in here and then item number seven years secured and submit a letter from an officer of the homeowners association stating that there are no liens claimed or unpaid assessments the reason this is in here is because the title examiner as they were reviewing all of the historical beads and other documents on record with the county it probably came across something either in those documents or they found something else that tipped them off that this property is part of a homeowner's association and homeowners associations if you've ever been a part of one or if you know how that worked almost always gonna require some kind of monthly or annual fee that the property owner has to pay in order for them to maintain certain benefits for everybody that lives in that association and they work a lot like property taxes the difference is property taxes are very easy to track and make sure they're paid current but HOA fees are not necessarily that easy in many cases it's not something where you can just get on a website and check the status and make sure it's good sometimes you have to figure out how to get ahold of them and give them a call in this case they're saying we want something in writing from that HOA proving that there is nothing past you and they don't have any liens or other claims against this property so long story short you can just put together a very brief word document it could be as little as one sentence long and then signed by an officer of that HOA and then print it on their letterhead and if you get a copy of that and send it back to the title company along with all your other recorded documents that should take care of that issue items 8 & 9 here are talking about two liens that showed up against the property in the title history and the reason they're showing up here is because the liens showed up but there was nothing else of record showing that those liens had been paid off and released so the title examiner is basically concluding that those two liens are still out there against the property they need to be paid off and we need actual written proof of that and usually what that's going to be is an actual signed and notarized and recorded it release of lien or something to that effect whenever these kind of things come up the first thing I do is I call the seller and I just say hey did you know that these are out there if so I'm gonna need the original signed and notarized discharge or satisfaction or release of that lien and until I have that this deal is not moving forward sometimes if you're lucky the seller is gonna have that original documentation they just never got it recorded so they can just give it to you and then you can get it done other times they won't necessarily have it but they can go through the steps of getting it because they did pay it off and they just never receive the release documentation it's not supposed to work that way but it can happen from time to time and the worst case scenario the seller is gonna have no idea that these things are out there which means they haven't paid him off which means they're gonna have to cough up this money to take care of that so whenever there's liens on a property this is the kind of thing that's gonna show up telling you what it's for how much it's gonna cost to pay off and that will hopefully be enough for you to work with the seller to get that taken care of this next item down here where it says payment of taxes this is a section of the title come that is basically just going to tell you what the current status is but the property tax is it's gonna not only say what the taxable value is but it's also going to tell you how much has been paid in taxes over the past year here in Michigan we actually get two tax bills every year there's one in the summer and then one in the winter other states will just have one annual tax bill but whatever the situation is with the property taxes whether they're current or delinquent and if they're don't go into how to link what they are all of that stuff should be included right here in this section if there are any delinquent property taxes that's going to mean that those taxes need to be actually paid off whether it's by you or by the seller somebody has to pay the bill and then you have to get written verification that it's paid off and typically you can get that in the form of like an invoice from the county or from the city or the municipality as long as you're actually able to pay those off it should be pretty simple to get that written verification and then down here it should list the property's parcel number and then the last three things you see down here is sort of like more boilerplate stuff that's gonna be baked into most of the title commitments that you'll see out there this first one is saying that you must tell us in writing the name of anyone not referred to in this commitment who will get an interest in the land or who will make a loan on the land we may then make additional requirements or exceptions so that's basically saying if there are any other owners or people who have some kind of an interest in this property but it's just simply not a record so they couldn't have possibly known about it it's your responsibility to figure that out and then let them know and just so you know this is kind of like a catch-all thing that you don't necessarily have to provide anything or give anything to the title company to meet this item it's just kind of a cya for them saying that hey if we don't know about it then it's not our problem we can't do anything about it and it's your job to let us know and then item eat here is saying that if the property has a mobile home or a modular house on it you need to actually let them know about that because in Michigan there are some additional laws and regulations that may require additional paperwork to be done depending on what state you're working in this may or may not show up and you may or may not have to do anything this is kind of like a Michigan specific thing and then lastly item F this is just saying that if America's 1 title agency is not the actual closure of the transaction which would be the case in our situation the mortgage is going to need to be recorded within 20 days of ex cick you sh in for purchase money mortgage --is or within 10 days of execution or non purchase money mortgage --is this is obviously only gonna be relevant if you're dealing with the property that actually has a mortgage on it if you're doing vacant land transactions for cash like I am this is gonna be completely irrelevant and shouldn't even be there but if it is you won't have to worry or financing involved and one thing I should note here is that all of the documents that the title examiner went through to come up with this list if for any reason you ever want to see those documents like you actually want to sift through the deeds and the liens listed here or any mortgages or anything like that the title companies should be able to provide that for you fairly easily it's usually gonna be a lot of pages of stuff that you're not even really gonna care about but if for some reason you ever want to dig into the actual detail and figure out what they were looking at to come up with this stuff that's something they should be able to give you without any issues or extra charges because they already have it on hand that's what they look through to come up with this just ask him for it and they can send it to you the idea behind this list is it take all of that stuff and just simplify it rather than making you look through all of it which is what you would normally have to do if you're doing title search they already look through it for you and they're giving you just a very simple checklist of things that you need to provide in order to make everything okay so hopefully that makes sense and we got a blank page here and then the last page is Schedule B section two which is called the list of exceptions and this is basically just one big list of things that are not covered by the title insurance policy so if any of these things become issues it's not the title insurance companies problem and it's your problem that being said you don't need to be alarmed by this if you read through these things I think you'll understand pretty clearly or why these are listed because it's like impossible for the title company to truly mitigate the risk for example here the first one rights or claims of parties in possession not shown by the public records well if it's not in the public records there's no way the title company can have any awareness of that issue so they obviously can't insure against that any encroachment encumbrance violation variation or easements or claims of easements not shown by the public records and existing water and mineral oil and exploration rights what this is referring to is things like power line easement going over your property or underneath your property or water lines or sewers or anything that just goes through your property and that's just how it needs to be those are public utilities and they have a right to go through your property in order to give your property the benefit of that utility and you can't just move it on a whim because you don't like it there item 4 here again is talking about any kind of lien or claims against the property that are not shown in the public records so again if the title company had no awareness of it they can't really insure against that item 6 here is written like your classic legalese that makes no sense to the average person but basically what it's saying is that if there are any title issues that arise after the date of this title commitment but before the warranty deed is recorded and the new owner becomes the official owner so for example if this commitment date was written on February 2 and if we actually closed the deal on February 6 and then we send in the deed and all the documentation to transfer it to the new owner and that gets recorded on say I don't know March 1 and in between that time something came up that is not reflected in this title commitment so in other words they had no awareness that that future event was going to happen when they wrote this commitment any of those issues are not going to be covered and logically speaking it's pretty easy to understand why item 7 is kind of similar just saying any taxes or assessments that become a lien against the property after the date of closing so just anything going for it in the future is not gonna be their problem again it's a pretty understandable one to have in there item 8 here is saying that if there are any like easements restrictions or rights to the property of any kind that are based on a person's race color religion sex handicap familial status or national origin this policy is not going to insure against that because it basically conflicts with US law so it's just not going to be valid and then finally number nine here if the US government or the state of Michigan or any other governmental entity has some kind of rights to your property you actually have this one time when I owned a property on Lake Huron and I found out that the US Army Corps of Engineers had rights to my property up to like 50 or 100 feet from the water I remember what the actual distance was but basically since my property was right on a federal body of water the federal government essentially had rights to a good chunk of my property and the title insurance company was not going to insure over that so as you can see a lot of this stuff is really pretty understandable and it makes sense why they're not going to be able to insure against Nick most of this stuff you're not even gonna have to think twice about because the utility lines are there the easements are already there the roads are already there nothing is really moving or changing so there's just not a whole lot that needs to be worried about however I will say that with vacant land especially if you have an immediate plan to develop that land and start building on it you'll probably want to pay just a little bit of attention to this because for example if there is like a water line going right through your property or a telephone pole right in the middle of it and that's right where you want to put your house that's gonna be a problem and you're gonna have to readjust your plans so as to not get in the way of those things that are already there so just keep that in mind if you are planning to build on that property or subdivide it or develop it in some way if that's what your plan is you almost definitely want to order a survey just to understand where all of those easements are and what you can and can't do with that property based on the pre-existing conditions there and once you have all this done and you've collected everything that you need to hear from Schedule B section one and you've delivered it to the title company and it's all done and wrapped up and ready to go eventually what you're going to get is your title insurance policy and I've got an example right here from one of the properties I actually bought and this one is from first American title and this is cow what it looks like it kind of takes on a similar format to like a life insurance policy just lists all the relevant information what's covered what's not covered all the conditions of it and that's pretty much all there is to it and then if you were to ever have a title issue arise in the future say if somebody was coming back and trying to see you for a title defect and you needed to cover yourself if you ever needed to file a claim against that title insurance policy you would want to go to the title insurance company which in this case would be first American title which should be the exact same name that is written right up here at the top whatever title company name you see written there that is the actual insurer who's going to be able to help you out this is not necessarily the same entity that helped you get this policy in place that's the title agency but that's not the title insurance company it's the same thing that like a State Farm agency is - State Farm Insurance you have the actual office that does the legwork and gets business and then you have the insurance company that does the insurance part so just make sure you understand if you ever do have to go and file a claim on a title insurance policy make sure you're going to the right person and I think a good title insurance agency would be able to help you connect those dots see if you'd called them and even if it wasn't their problem technically they could at least tell you who you should be calling so if you aren't sure who to start with you could either start by googling this title company name whatever it is and finding a number and giving them a call or you could call the title agency office where you closed it and see if they can help you out so if you're still with me I want you to just stop and give yourself a pat on the back to see a little congratulations to yourself I know that was a lot but hopefully if you're ever trying to close the deal yourself and get title insurance this will help you connect the dots and understand what you need to be looking for what certain things mean in these title commitments and how you can pull things together and get it closed officially and get your title insurance policy in place thanks a lot for watching if you're looking for more information I'll have a link beneath this video that links to a blog post on our a tipster blog which goes into a lot more detail on how to put all this stuff together and make sense of it so that's all I know we shell the best as you're getting your deals closed