Last month’s article was about the basics of title insurance and why a note investor should get a Lender’s Policy of Title Insurance when buying an existing note. I get a lot of questions, especially from new note brokers and note investors about what to look at and how to read a title commitment and subsequently the title policy.
When you order a title policy the title company does their research and gives you a title commitment to review. The Commitment for Title Insurance is the preliminary document issued by the Title Company that contains the conditions and requirements under which a title policy may be insured. It is a state promulgated form and may only be revised as indicated in the rules and regulations disseminated by the State. The four “schedules” or sections of the Commitment are as follows:
Schedule A – Actual Facts – Schedule A outlines the facts including:
- – Effective date of commitment
- – Name(s) of proposed insured(s) (Note Investor/Lender)
- – Proposed amount of title insurance coverage
- – Current recorded owner of the property
- – Legal description of the property to be insured
You should read Schedule A and confirm that all information is accurate including spelling and name abbreviations. The names should reflect the note investor’s and the payor’s (borrower’s) legal name.
Schedule B – Payor Notification & Exceptions – Schedule B outlines the specific details of the property to be insured as well as exceptions to coverage that are not insured, including:
- – Restrictions
- – Property Taxes
- – Easements
- – Mineral Reservations/Leases
- – Area and Survey Discrepancies
- – Rights of others
Review Schedule B carefully as the items in this section can affect property use and access. Title objections must be submitted in writing according to the provisions of the contract.
Schedule C – Cleared to Close – Schedule C of the Title Commitment identifies any items that must be resolved prior to closing such as:
- – Liens
- – Bankruptcies
- – Marital Status Issues
- – Probate Issues
- – Entity/Trust Issues
Read Schedule C and provide your title agent with the information or assistance in resolving the items prior to closing. Keep in mind that a title company is not permitted to provide legal counsel regarding the Title Commitment. If you have any legal questions ask a competent note professional or a real estate attorney.
Schedule D- Disclosure – Schedule D is simply a disclosure of information about the title company’s owners, directors, officers and underwriters required by state rules and regulations. Additionally, it outlines title policy amounts.
This information is provided as a courtesy and does not cover the Title Commitment in its entirety. Please contact legal counsel for any legal advice. Reading and understanding the Title Commitment is paramount for note investors for both individual transactions as well as the long-term success of your note business. Hope this helps! Be kind, keep safe and stay healthy. Remember success demands action, keep on marketing, it’s going to work! TWITA! (That’s What I’m Talkin’ About!)
Jeff Armstrong of Armstrong Capital has been a note investor and broker specializing in the performing seller financed note industry since 1991. For more updated and current information on how he can help you with your note business, note investments, note appraisals or to request pricing options on a note visit www.armstrongcapital.com to email him and subscribe to Jeff’s Weekly Training & Tips Newsletter.