Title to your property is its history of ownership.
I admit it: when my husband and I bought our house almost two decades ago, I sailed through signing our documents without paying too much attention to the mounds of paperwork. My legal practice areas at that time didn’t involve much real estate, and I hired my boss to represent us through buying our home. We had no issues.
Then, I represented a client purchasing a home and was “aghast” at what problems my husband and I could have had. I decided to become extremely educated on things many ignore, particularly, title commitment policies. The home buying process and the paperwork can be daunting, and my blog will run a short series (Home Buying 101) to make it a little easier to digest. You might not become a real estate expert but hopefully my posts will poise you to ask questions most relevant to your situation.
“Title” to your property is basically a history of its ownership. It is important when you buy property to know that you have “clear and marketable title.” The land is yours, and no other interest or defect is going to come along and mess with your ownership, which could cost you a lot of money. For example, you bought your home and assume it’s all yours. But–at some point in the past (along the “chain of title”) someone who owned the home before you and died had an unknown heir who now says that he owns part of your property, as his dad’s will stated. This stuff happens, and without insurance, you could become involved in a law suit. Or a past contractor has a lien against your property for unpaid work. Or a past owner has a court judgment against her that attaches to the property. This list of possible “defects” is endless.
A title commitment policy ensures you–the buyer–that the property you buy will be free from any “problems” (defects) regarding ownership. No one from the past will step forward and state that they have a right to your property–if anyone does, you are protected by insurance.
Once you decide you want property that is for sale, your realtor will order a title commitment. You get the title commitment before closing, and the title policy after closing. The title commitment is reviewed, amended if necessary, then becomes your policy after you close on your home. You should carefully review your title commitment so that it says and covers what you want. This might be where readers drift away because the document seems overwhelming, so if you are not likely to read the entire document, then 1) hire me (or any real estate attorney), or (better yet) 2) read Schedule B of the commitment. Schedule B of the document is specific to you, the seller, and your situation. Keep in mind that you typically have only a few days to review a title commitment so be sure to review as soon as you receive it.
Schedule A is the nuts and bolts of identifying information–buyer and seller information, commitment date, property price, loan amount, etc. Schedule B is what you want to really pay close attention to, read more than once, read again. Schedule B lists the exceptions to the policy, especially the Covenants, Conditions & Restrictions (CC&Rs). Exceptions can affect the property being insured and are not covered by the title policy. Examples include restrictions, easements (most utility easements are standard, but some easements exist that aren’t of public record and can affect your use of your property), setback requirements, and mineral rights. What are your restrictions? Do you understand how they could impact your ownership and use of the property?
For many of my clients, their home is their biggest asset. Know what Schedule B says in your title commitment, at the least. I do recommend having an attorney review your documents, particularly your title commitment.
If you have any questions about purchasing a home, or your title commitment, contact me at firstname.lastname@example.org. I represent buyers and sellers in residential real estate purchases.