Reading a Title Commitment: What Schedule A and Schedule B Actually Tell You
A title commitment is a promise to issue title insurance, and a list of what has to happen first.
You get it early in the deal for two reasons:
To confirm the title company will actually insure the transaction
To see what must be cleared before closing
Most people file it and wait for closing. It is worth twenty minutes, and this is what to look at.
What Is a Title Commitment?
A title commitment is not a policy. A commitment to issue one, conditional on a list of things being sorted out.
It comes in two sections: Schedule A and B.
Schedule A tells you what is being insured, for whom, and for how much.
Schedule B comes in two parts: the requirements, which are the things that must be cleared before insurance issues, and the exceptions, which are the things the policy will not cover.
That is the whole document. What is insured, what has to happen first, and what is not covered.
In my experience, commitments are usually largely correct. The review is mostly a careful read for anything out of the ordinary, and the errors that do turn up are concentrated in a few predictable places.
If you never got a commitment because the title company declined the file, that's a different problem and it is covered in Why Some Title Companies Decline Creative Finance Deals.
What Does Schedule A Tell You?
Schedule A tells you four things, and make sure you check all four.
The proposed insured. Confirm the name matches the buyer. If you are assigning the contract the name will change, and that is fine, just flag it so it gets corrected before the policy issues rather than after.
The insured amount. This is where the expensive mistake lives.
The insured amount should be the full purchase price. Not the cash to seller.
On a creative deal those are wildly different numbers, and some title companies default to the smaller one. I have seen a commitment come back with a $25,000 insured amount on a $470,000 purchase, because the title company counted only cash to seller and treated the rest as somebody else's problem.
That is the number that caps what you recover on a covered claim. Get it wrong and the policy is close to decorative. There is a whole post on why, in Title Insurance on a Subject-To: Why You Insure the Full Purchase Price.
The seller name and the property address. Sounds trivial but errors here cause downstream problems that surface at the worst possible moment.
PRO TIP: Check the insured amount on every commitment, on every deal, conventional or creative. It takes ten seconds and it is the single most consequential number on the page.
What Are the Schedule B Requirements?
The schedule B requirements is the list of what must be cleared before title insurance will issue.
Deeds of trust to be satisfied.
Liens to be released.
Judgments to be cleared.
Affidavits somebody has to sign.
Each one is an action with an owner and a deadline, and if nobody reads the list, nobody is doing them.
Read every requirement and work out two things: what action it needs, and who is responsible for it. Some are the seller's, some are the title company's, some are yours.
The ones worth slowing down on are the ones that are not routine. You develop a feel for normal after you have read a few dozen commitments. Until then, ask about anything you don't recognize, because the requirement you skipped is the one that holds up closing.
What Are the Schedule B Exceptions?
Schedule B exceptions are the things the policy will not cover.
On a subject-to deal, expect to see the existing mortgage excluded. The title company will not cover a due-on-sale claim relating to the underlying loan.
That is normal and expected. It is not a red flag, and it is not the title company being difficult. Due-on-sale is a contractual matter between the borrower and the lender, and it is not a title defect, so it sits outside what title insurance does.
Worth understanding what that leaves you with. The policy is not protecting you against the lender calling the loan. It is protecting you against somebody turning up with a claim to title. Those are different risks and only one of them is insurable. What happens on the other one is covered in The Due-on-Sale Clause: What Actually Happens When a Lender Calls It.
If a private lender is involved, check that a lender's policy is listed alongside the owner's policy. If it is missing, your lender is relying on paperwork that does not exist yet. Which policy protects whom is worth being clear on, and that is in Owner's Policy vs Lender's Policy: Which One Actually Protects You?.
What Should You Flag on a Commitment?
Just a short list is usually needed to flag items on a commitment, since most commitments need only minor corrections.
Insured amount set to cash-to-seller rather than purchase price.
Names that don't match the parties who will actually sign.
A requirement you do not understand or cannot see an owner for.
An exception that reaches something you assumed was covered.
A missing lender's policy where a private lender is funding.
None of these are exotic. They're the same handful every time, so just do the twenty-minute read-through.
PRO TIP: Title insurance looks backward, not forward. It examines the chain of ownership up to your closing date and covers claims arising from before you owned it. It is not property insurance and it does not cover what happens next.
How a Title Company Fits This
Creative Title issues the commitment, so this is our document rather than something we are interpreting for you.
Our job on the creative finance closings we handle is that the insured amount reflects the real transaction, the requirements are worked rather than listed, and the exceptions are explained before you sign.
My team pays close attention to these details every time, because a commitment that reads clean and a file that closes clean are not automatically the same thing.
The Takeaway
Three sections:
What is insured and for how much
What must be cleared first
What is not covered
Check the insured amount against the purchase price. Read every requirement and assign it an owner. Read the exceptions and know what you are carrying uninsured. Expect the underlying mortgage to be excluded on a subject-to, because it will be.
Twenty minutes, on a document that decides what your policy is worth.
Working a creative deal? Book a call and we will walk your commitment with you before closing. Or send your contract any time to [email protected].
This article is general information, not legal advice. Loan documents, lender policies, and state law vary, and outcomes depend on the specific facts of a transaction. Consult a qualified attorney in the relevant state before acting. Creative Title is a licensed title and settlement services provider in Colorado and Tennessee.
Questions?
Chat with our team by requesting a call back or scheduling a meeting.
