Title Commitment

Understanding Title Commitment

A title commitment, also called a preliminary title report or title binder, is the title company's written commitment to issue a title insurance policy once certain requirements are met. It is divided into schedules that detail the property description, the proposed insured parties, requirements for insurance (items that must be cleared), and exceptions from coverage.

Schedule A identifies the property, the proposed policy amount, and the current vesting (who owns it). Schedule B-1 lists requirements that must be satisfied before closing, such as paying off existing mortgages or obtaining releases of liens. Schedule B-2 lists exceptions—items the title company will not insure against, such as easements, restrictions, or mineral reservations.

For tax delinquent property investors, the title commitment is the most important document in any transaction. It reveals every recorded issue affecting the property and tells the investor exactly what needs to be cleared to obtain title insurance. Without title insurance, the property is essentially unmarketable to retail buyers.

Common issues found on title commitments for tax-delinquent properties include: unreleased deeds of trust, judgment liens, mechanic's liens, lis pendens, unpaid HOA assessments, estate issues (property still in deceased owner's name), code enforcement liens, and breaks in the chain of title.

Investors should order title commitments early in their due diligence process. The cost is typically $200-$500 and is money well spent, as it can reveal deal-killing issues before significant capital is committed. Title companies may be reluctant to issue commitments on properties with severe title defects, which itself is an important signal.

Real-World Example

Texas-Specific Information