Minimizing Confusion With the ALTA Title Commitment

What is a Title Commitment?

A title commitment is a legal document that outlines the terms and conditions under which a title company can issue lender’s or owner’s title insurance for a property. Emily Grant, Attorney at Bluegrass Land Title, says, “For homebuyers, the title commitment serves as a detailed report of what was found during the title examination. It also explains the scope of their future title insurance coverage.”

Your title company issues the title commitment after completing a thorough title search and examination, which is a comprehensive search of public records that identifies any potential issues or claims against the property that could affect the buyer’s ownership rights or the lender’s security interest. 

The title commitment provides documentation of the following:

• Specific requirements that must be met to close the transaction and issue title insurance
• Issues that the title company must resolve before closing, such as existing liens
• Standard exceptions, such as utility easements, which are present on most properties

The title commitment is a standard part of nearly every real estate transaction. 

What to Expect When You Receive Your Title Commitment

If you close at Bluegrass Land Title, you’ll receive your title commitment through Qualia Connect, a secure messaging portal. Grant says, “When you receive your title commitment, our goal is to inform you of the results of your title search and exam.”

Every title commitment includes both requirements and exceptions. Requirements outline what needs to happen before closing, while exceptions note standard items that are not covered by title insurance. These are normal parts of the title commitment, not a sign that there’s an issue with your transaction. 

“Clients should know they’re not receiving the title commitment because there’s a problem,” Grant explains. Serious issues discovered during the title search are rare. But if the title company finds something truly concerning, they won’t inform you through the title commitment. Instead, they’ll contact your real estate agent directly. 

For example, if the title search reveals that the seller doesn’t actually own the property, the title company will immediately contact the listing agent to discuss the situation. This could happen if there was an error in how the property was transferred in the past or if proper legal procedures weren’t followed during a previous sale. The title company works directly with the parties involved to determine the next steps towards resolution. 

Most issues that homebuyers find concerning are actually standard requirements and exceptions that exist on almost every title commitment. 

Title Commitment Sections

A title commitment contains three main sections that provide key details about your transaction and future title insurance coverage: Schedule A, Schedule B-1 (Requirements), and Schedule B-2 (Exceptions).

Schedule A

Schedule A lists the basic transaction details, including:

• Names of buyer(s) and current property owner(s) 
• Purchase price
• Loan amount and lender
• Property address and legal description
• Date of title commitment

Always review Schedule A to verify that the transaction information is accurate. If you spot any errors in names, addresses, or other information, let your title company know right away.

Schedule B-1: Requirements

Schedule B-1 lists the requirements that need to be met before closing to ensure a clear title. These items must be resolved to protect both the buyer’s ownership rights and the lender’s interest in the property. 

Common requirements include:

• Existing mortgages that must be paid off at closing
• Outstanding liens against the property, such as contractor liens or HOA assessments
• Tax judgments or other financial claims that need to be released
• Specific documentation needed based on the transaction type, such as corporate resolutions if the seller is a business entity 

When reviewing requirements, it's important to understand the difference between liens and judgments. A lien is a legal claim against a property that must be paid when the property is sold. Common liens include mortgages and unpaid HOA dues or fines. For example, if a seller hasn't paid their homeowner's association dues, the HOA may place a lien on the property to ensure payment.

Judgments, on the other hand, are court orders requiring an individual to pay money to another party. For instance, if a seller has unpaid child support, this would appear as a judgment rather than a lien because it's attached to the person, not the property. 

You might see judgments listed on your title commitment for common names that don't actually belong to the parties in your transaction. For example, if the seller is named Ann Smith, you might see judgments for other Ann Smiths in the area. The title company will verify identities using social security numbers to remove any judgments that don't apply.

Grant says, “Home buyers should remember that these requirements aren’t their responsibility to solve.” Bluegrass Land Title handles title clearance as part of their service. The team works behind the scenes with sellers, lenders, and other parties to address each item and receive a clear title at closing. 

Both liens and judgments must be paid before closing can occur. This ensures the new owner receives clear title to the property without any outstanding financial obligations from the previous owner.

Schedule B-2: Exceptions

Schedule B-2 lists exceptions to your title insurance coverage. “In every title insurance policy, there are going to be things that exist that simply cannot be insured,” Grant explains. Common exceptions include utility easements that allow service providers access to maintain power lines, water pipes, and other utilities and HOA restrictions and covenants that govern property use.

These exceptions don’t create gaps in your coverage. Instead, they simply document known conditions that exist with the property. For example, utility easements appear as exceptions not to limit coverage, but to acknowledge their existence as a normal part of property ownership.

Title insurance protects against unknown issues. When something appears on the title commitment as an exception, it means that it’s a documented condition that buyers accept when purchasing the property. 

For example, while HOA restrictions are listed as exceptions, title insurance still provides coverage for undisclosed HOA liens. The exception simply acknowledges the HOA’s existence and its standard restrictions.

Serious or concerning exceptions are rare. If your title company does discover one, they’ll contact your real estate agent directly rather than letting you discover it in the title commitment. 

Key Things to Remember About Your Title Commitment

After you receive your title commitment, you may have questions about what the document means and what action you need to take. Here are the key points to remember as you review your title commitment:

1. Your title commitment documents the results of your title commitment. It’s designed to inform, rather than raise concerns. If there’s a serious issue, your title company will contact you.
2. Don’t panic: almost everything you see in the title commitment is a standard part of real estate transactions. For example, nearly every property will have utility easements and a mortgage that needs to be released. 
3. Remember that your transaction will not proceed unless there is a clear title. Bluegrass Land Title will manage the resolution of any title issues, so you don’t need to address any of these issues yourself. Requirements will be cleared by closing. Your transaction will not close without a clear title. 
4. When you receive your title commitment, you’ll also receive a helpful reference guide through Qualia that explains common terms and findings. 
5. If you have questions, contact your escrow officer through the Qualia Connect portal. We’re happy to answer any questions or concerns about your title commitment. 

The Bluegrass Land Title team wants homeowners to understand their title commitment and close with confidence. If you have questions about your title commitment, contact your closing location or reach out to your escrow officer. We're here to help you navigate the closing process and ensure a smooth transaction from contract to closing.