Title Terminology Every Real Estate Agent Should Know

Title Commitment

When your client receives a title commitment, they're looking at the title company's promise to issue insurance once the sale closes. Think of it as a report that shows what the title company found during their search of public records and what conditions must be met before they'll provide coverage.

The commitment lists the property's current owner, any debts or liens attached to the property, and requirements that must be satisfied before closing. These requirements might include paying off an existing mortgage, resolving a tax lien, or clearing up a boundary dispute.

Title Commitment vs. Title Policy

Your clients might wonder why they receive multiple documents that look similar. The commitment comes first, during the transaction period. The policy arrives at closing. The commitment says "We will insure this property if these conditions are met." The policy says "We now insure this property, subject to these specific exceptions."

When clients ask, "Is this my title insurance?” upon receiving the title commitment, you can explain that they're looking at the promise to insure. The actual insurance policy will be delivered after closing, once all the commitment requirements have been satisfied and the transaction is complete.

Schedule B Exceptions

Schedule B within the title commitment lists items that won't be covered by the title insurance policy. These exceptions identify specific issues, restrictions, or rights affecting the property that fall outside the policy's protection. Common exceptions include utility easements and homeowner association restrictions.

Most Schedule B exceptions are standard and won't affect your client's use of the property. For example, utility easements typically run along property edges where homeowners wouldn't build anyway. However, some exceptions deserve closer attention. An easement running through the middle of the property where your client plans to add a pool, or a restriction that conflicts with their intended use, needs further discussion with the title company and potentially a real estate attorney.

Owner's Title Insurance Policy

An owner's policy protects your client's ownership rights in the property. This coverage defends against financial loss if someone challenges their ownership or if undiscovered issues with the title surface after closing.

Standard owner's title insurance policies protect against issues like forged documents, unknown heirs claiming ownership, or recording errors in public records. These policies cover problems that existed before your client purchased the property but weren't discovered during the title search.

Enhanced policies offer broader protection. They add coverage for items like post-policy forgeries, forced removal of existing structures due to permit violations, and certain boundary disputes. Enhanced policies also extend coverage to include unrecorded liens from homeowner associations and building permit violations by previous owners.

Lender's Title Insurance

Lender title insurance policies protect the mortgage company's investment in the property, not your client's ownership interest. When buyers finance their purchase, the lender requires this policy to protect their loan amount. If a title defect surfaces, the loan policy covers the outstanding mortgage balance.

This is why buyers need their own separate policy. Without an owner's policy, your client has no protection if someone contests their ownership or if a previous owner's unpaid contractor files a valid claim against the property. The lender's policy won't help them in these situations.

When clients ask why they need to pay for owner's coverage when they're already paying for a lender policy, you can explain it this way: the lender policy protects the bank's money, which decreases as the mortgage gets paid down. The owner's title insurance policy protects your client's equity in the property, which typically increases over time. The owner's policy remains in effect for as long as they or their heirs have an interest in the property, with no additional premiums after the one-time closing cost.

Curative Work

Curative work refers to the process of fixing title issues discovered during the title search before closing can occur. The title company identifies these problems and works to resolve them so it can issue a clear title policy.

A common example involves an unreleased lien from a previous refinance. When a homeowner refinances their mortgage, the old loan gets paid off, but sometimes the lender fails to file the release document with the county. The old lien still appears in public records even though the debt no longer exists. The title company must track down the original lender, obtain the proper release document, and have it recorded before your client's closing can proceed.

Other curative work might involve resolving an estate when the previous owner passed away without properly transferring the title, or correcting a deed that contains an incorrect legal description. Some issues resolve quickly, while others take weeks or even months depending on the complexity and how responsive the other parties are.

Clear to Close

"Clear to close" sounds straightforward, but this term can create confusion because both the lender and the title company must give their approval before closing can happen.

The lender's clear to close means your buyer's loan has been fully underwritten and approved. The underwriter has reviewed income documentation, the appraisal, and all other loan requirements. The lender is ready to fund the purchase.

The title company's clear to close means all title issues have been resolved, the required documents are prepared, and they can issue the title policy at closing. Any curative work is complete, all parties have been confirmed, and the title is ready to transfer.

Both approvals must align for an actual closing to occur. Your buyer might receive the lender's clear to close first, but if the title company is still working through a boundary dispute, the closing date won't hold. Conversely, the title might be clear, but if the underwriter needs additional documentation from your buyer, you'll need to wait.

Recording

Recording is the official filing of documents with the county clerk or recorder's office after closing. When documents are recorded, they become part of the public record and establish legal priority for ownership and liens.

The title company typically handles the recording process and confirms when documents are filed. They'll provide recorded copies to all parties, showing the official recording date and reference numbers. These recorded documents include the deed, the mortgage (if applicable), and any other instruments that need to be part of the public record.

Affidavits

Affidavits are sworn statements used to resolve title issues or clarify information without requiring extensive documentation or court proceedings. These notarized documents allow someone to legally attest to specific facts.

Some common affidavits include:

• Name affidavit: Confirms spelling variations of a person's name refer to the same individual
• Gap affidavit: Attests that no title issues occurred during a brief ownership period
• Marital status affidavit: Confirms whether the seller is married, single, divorced, or widowed
• Heirship affidavit: Establishes family relationships and identifies heirs when property transfers through an estate

When your client needs to sign an affidavit at closing, reassure them this doesn't mean something went wrong. Affidavits are standard tools that help the title company resolve minor discrepancies efficiently. Signing one more document is often simpler and faster than gathering alternative documentation or going through other verification processes.

Title Defects

Title defects are problems that must be fixed before the title company can issue a clear, marketable title at closing. These issues create uncertainty about ownership or create valid claims against the property that could affect your client's rights.

Common title defects include:

• Unreleased mortgages or liens that should have been satisfied but still appear in public records
• Breaks in the chain of title when documents don't clearly show how ownership passed from one person to another
• Judgments against previous owners that attach to the property
• Errors in legal descriptions that don't match the actual parcel or conflict with adjacent properties
• Forged signatures on previous deeds
• Transfers made by someone who didn't have legal authority to sell

Don't confuse title defects with title exceptions. A defect is a problem that prevents clear title and must be fixed. An exception is a disclosed limitation on what the title insurance policy will cover, such as a utility easement or HOA restrictions.

Unmarketable Title

An unmarketable title contains defects serious enough that a buyer can't obtain title insurance or a lender won't fund the purchase. The title company has determined they cannot insure the property in its current condition because the ownership risk is too high.

Several types of defects can render title unmarketable. An outstanding tax lien that the seller can't pay off creates unmarketable title because the government's claim takes priority over new ownership. A missing heir who hasn't signed off on an estate transfer leaves ownership in question. Significant boundary disputes make title unmarketable because no one can definitively say what your buyer would actually own. Forged documents in the chain of title or transfers signed by someone legally incompetent raise questions about whether previous sales were valid.

Most purchase contracts include contingencies that allow buyers to walk away if the seller can't deliver marketable title by closing. The contract typically requires the seller to make good faith efforts to cure defects, but if those efforts fail or will take too long, the buyer can cancel and recover their earnest money.

Your title company will advise you when defects rise to the level of unmarketable title and help you understand whether the issues can be resolved within your transaction timeline.

Quitclaim Deed

A quitclaim deed transfers whatever interest someone has in a property without making any promises or warranties about what that interest actually is. The person signing the quitclaim essentially says "I'm giving you whatever rights I have, if any, but I'm not guaranteeing anything."

This type of deed appears frequently in divorce situations when one spouse transfers their interest to the other. If the couple owned the home jointly and the divorce decree awards the property to one spouse, that spouse needs the other to sign a quitclaim removing their name from the title. The deed doesn't promise there are no liens or that the title is clear. It simply removes one person from ownership.

Quitclaim deeds also help clear up title issues when someone might have a potential claim but isn't certain. For example, if an heir's name appears in old estate documents but they're not sure whether they actually inherited an interest in the property, they might sign a quitclaim to remove any doubt. Family transfers commonly use quitclaim deeds when parents add children to title or transfer property between siblings, especially when no money changes hands.

You don't need to become a title expert to serve your clients well, but understanding these fundamental terms helps you navigate transactions with confidence. When you can explain the difference between a title commitment and a policy, or recognize when a quitclaim deed warrants extra attention, you provide real value during what can be a confusing process for buyers and sellers.

Questions will come up that go beyond the basics covered here, and that's where your title and closing partner comes in. South Oak Title is here to help you work through complex situations and provide clarity when unusual issues arise. Contact us with your questions or concerns, or order a title and schedule a closing today.