Decoding Sale and Loan Docs, Part 5.
In What’s in a Preliminary Title Report? I told you about the importance of the preliminary title report/title commitment. The commitment is an important buyer “Transactional” category document (see Part 1‘s description of the four categories), because it is the prerequisite to issuance of title insurance. The title company researches the public records, and excludes from coverage under the title insurance policy items that are called exceptions. Common exceptions include liens, mortgages and easements and any existing item that affects title to the property. So a knowledgeable review of the commitment is necessary to properly assess the state of the title and determine which exceptions are unacceptable. Failure to make an objection (per the terms of the AAR Contract) means you will take title to the property subject to the exceptions – which means if an issue arises in the future, the title company will not provide coverage. Note that the AAR does not expect agents to have the expertise to be able to decipher a commitment, so buyer beware!