Title Report, Commitment for Title Insurance, and Title Insurance

What is a Title Report, Commitment for Title Insurance, and Title Insurance in Texas.

First, no one should ever purchase real estate in Texas without obtaining at the closing of the sale and purchase an owner’s policy of title insurance from a title insurance  company which is licensed by the Texas Department of Insurance.

Title insurance in Texas is a regulated industry.  This means to the consumer that all policies of title insurance are uniform in content and cost, no matter which title company sells the policy.  Service, competence and congeniality among title companies, however, are not regulated by the Texas Department of Insurance.

The first document generated by the title company upon the deposit of an earnest money contract and the related earnest money is its receipt of the contract and the money.

Next, the title company will undertake an examination of the "title" to the real property which is the subject of the earnest money contract.  The written report of this title examination is called a commitment for title insurance (and its content is also a uniform document), and it sets out the following information in Schedule A: what type of policies they anticipate will be issued at closing; the amounts of the policies; identification of proposed lender; identification of proposed buyer; record owner of the property; legal description of the land; in Schedule B, the exceptions to title (that is, all matters affecting title to the land which the title company will not defend or protect in the event of a problem or a dispute), for example: land use restrictions; ad valorem taxes; boundary problems; easements; utilities; mineral reservations; mineral leases; building setback lines; and maintenance charges; and in Schedule C, the matters which must be cured or resolved on or before the closing, for example: existing liens against the land which must be released and discharged out of the sale proceeds (for example, the seller’s loan to purchase the property; the seller’s unpaid federal or state tax liens; and judgment liens against the seller); and unresolved ownership issues (for example, one of the record owners is deceased and the estate has not been probated).

What are some common concerns related to title insurance in Texas?

Many clients and real estate agents are unaware that there exist many title policy endorsements which are available to address common and uncommon circumstances or concerns affecting a tract of land. And if a specific endorsement is not available, you may request "express insurance" coverage which might be appropriate under the circumstances. Availability of endorsements and express insurance coverage may also vary depending on whether the land is residential or commercial property.

One common question often asked by my clients, "what or who is a mortgagee?"  A mortgagee is the prospective lender who will loan funds to the buyer to purchase the land or refinance an existing loan secured by the property.  The lender/mortgagee will require that its lien against the property also be covered by title insurance.  The lender’s title insurance coverage is commonly called a mortgagee’s policy, while the buyer’s title insurance coverage is commonly called an owner’s policy.

I’m not aware of any attorneys in Harris County who actually abstract title to land (that is, they research recorded documents affecting a tract of land, then they give their written opinion on the ownership of land and matters affecting title to the property), so if you don’t purchase title insurance you are taking a huge risk.  Don’t buy land without it.  And by the way, if you think that you can rely on a commitment for title insurance and then not buy title insurance, the title company is off the hook for its errors or omissions unless and until a title policy is purchased.