If you’re buying real estate in Washington, you will most likely encounter the terms title commitment and title insurance. Most real estate contracts mention the parties engaging a title insurance company and getting a policy. That said, you may not know what these items are because they don’t come up very often outside the context of a real estate transaction.
In this post, the Blado Kiger Bolan, P.S. estate legal advisors answer common questions about title commitments, such as “What is a title commitment in real estate, and is it different from title insurance?” We assist clients like you with navigating real estate transactions, from the day you find the house you want to when you get the keys.
What Is a Title?
The word “title” has several meanings in the real estate realm. Most commonly, “title” refers to someone’s ownership interest in land or property. It is also a shorthand way of referring to the title commitment and insurance policy.
In many real estate contracts, the seller promises to convey and deliver a good and marketable title to the buyer. This means there aren’t any issues that may interfere with the buyer’s ability to use, enjoy, sell, and do other lawful things with the property as they see fit. Examples of possible problems with the title are having the seller’s mortgage on the property or an unresolved boundary dispute with a neighbor.
The title company examines records about a property, transaction, and parties to determine whether to issue an insurance policy to cover specific issues involving the property.
What Is a Title Commitment in Washington State?
A title commitment is a proposal the title company submits to the parties saying that they agree to provide title insurance if certain conditions are met. The title company prepares and issues the title commitment after investigating the terms of the transaction, the parties, and the historical records involving property ownership.
The title company sends out the title commitment if it determines that the property meets the qualifications for issuing an insurance policy to protect certain rights in the land. The title commitment includes various information, including the following:
- Conditions that apply to the title company issuing an insurance policy,
- Basic information about the transaction,
- Requirements the parties must meet for the company to agree to provide the title insurance,
- Exceptions to the insurance policy, and
- Financial information about who pays for the policy.
The American Land Title Association provides forms and guidance that many title companies throughout the United States use in issuing title insurance. The title company may include additional or different materials in the title commitment and policy, depending on your specific circumstance and their procedures.
Conditions that Apply to the Title Insurance Company Issuing a Policy
In the first part of the title commitment, the company usually outlines the terms for agreeing to issue a policy. This typically includes a statement about what happens if the insured and the company disagree over something involving the policy. This section may also explain other conditions of the agreement to issue a policy, such as what happens if the parties fail to meet the requirements.
Basic Information About the Parties and Transaction
The title commitment includes information about the following:
- The date that the company issued the title commitment,
- What type of policy is being given,
- Who the policyholder is,
- The limit of the policy,
- The physical address of the property,
- The legal description of the property,
- Who holds title to the property,
- What type of interest the current title holder has in the property.
The above information is critical to the rest of the title commitment and the success of the closing.
For example, let’s say someone signs a real estate contract to sell their property, but the title commitment reveals that the seller and their ex-spouse hold an interest in the property. In this case, the parties will have to proceed differently to account for the other person who also holds an interest in the property. This may mean having the ex-spouse involved in the transaction to ensure there are no issues when the title passes to the buyer.
Requirements the Parties Need to Meet by the Closing
The title commitment also lists a host of requirements the parties need to meet before the company agrees to issue an insurance policy. Depending on the complexity of the transaction, this may be as simple as presenting acceptable legal documents to transfer ownership. In other cases, it may require a commercial seller to hold a vote and pass a resolution before closing the transaction.
Exceptions to the Title Insurance Policy
The commitment also contains information about what the policy does not cover. The exceptions can also include conditions that must be met for the title company to insure the buyer for losses or damages stemming from these items.
Breakdown of the Cost of the Policy
The last part of the title commitment typically includes a breakdown of the charges for the title insurance policy and who is responsible for paying what. This document also consists of a description of what different types of policies are being provided by the company (e.g., homeowners and lenders).
What Is the Difference Between Title Insurance and Title Commitment?
The title commitment is a proposal submitted by the title company to the parties, agreeing to insure the property if specific, named requirements are met. The commitment also includes information about the parties, the property, the terms of the policy, what is not covered, and other essential matters.
If the parties meet the requirements in the title commitment, the title company issues title insurance. It protects the buyer against specific losses or damages concerning the property, such as lawsuits involving land ownership. If the parties fail to meet all the requirements in the title commitment, the title company may refuse to issue the insurance policy.
Speak With a Trusted Legal Advisor Today
Real estate is an exciting and complex area of law, encompassing many aspects of land ownership. If you are buying or selling real estate, you may have many questions, such as, “What is a title commitment in real estate?” We’re here to answer those questions.
When you’re in the real estate world, it is essential to have a trusted legal advisor who understands Washington law. We have helped many clients close real estate transactions ranging from single-family homes to commercial buildings. Our job is to make your life easier, not more complicated. We pride ourselves on always looking for the simplest, most straightforward approach to any transaction or dispute.
If you have questions about title commitments or title insurance, contact our office today.
