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Buyer’s need to Understand Title Insurance Commitment’s

Buyer’s need to Understand Title Insurance Commitment’s

This article was originally posted by a REALTOR® in Texas.  Nevertheless, the information is relevant for buyers in Oklahoma who are trying to understand their title opinion.

Keep in mind, however, that you cannot get title insurance on the mineral estate.

Title insurance was only ever intended to cover the attorney’s opinion regarding the surface estate.

What gets confusing for me is that even when a property is being conveyed in fee simple, the title insurance will make an Exception in Schedule B of the title insurance policy regarding the oil, gas & other minerals.

So if you want to know for sure whether or not you are getting oil, gas, and other mineral rights, be sure to get an opinion regarding the mineral estate from an oil & gas attorney.  Many real estate attorneys in Oklahoma also have this kind of expertise.

In Oklahoma the abstract companies will prepare separate mineral abstracts when the minerals have been severed. 

If the land is being conveyed in fee simple, then you will have to pay extra to have the abstract certified for the minerals in addition to the surface documents.  Then when your attorney looks at the abstract, he can render an opinion about all the leases and other oil & gas documents.

This is a very complicated area of the law and gets really confusing when the minerals are severed and then divided up.

REALTORS® typically are not trained regarding minerals.

An alternative would be to hire a landman to go to the court house and look for documents to show the ownership of minerals.

Valuations regarding mineral rights are typically done by Professional Engineers who are certified in oil & gas in order to evaluate reservoirs and reserves.

In short, your title opinion will only tell you about what you are buying on the surface.

You’ll have to pay more for expertise regarding what lies below the grass.

Buyer’s need to Understand Title Insurance Commitment’s

Title Commitment | Chain of Title

How often do you hear your buyer’s say I received a large envelope from XYZ Title company but I haven’t opened it? This is a typical response unfortunately and it’s up to us as buyer representative’s to help our buyer’s understand how to read a Title Commitment.

When a title company receives an order for title insurance, they research all of the title records for the subject property and produce what is commonly called a title commitment. Perhaps the easiest way to understand a title commitment is to view it as an offer from the title company to issue a title policy.

Title companies divide title commitments (offers to insure) into Schedules A, B, C and D. And, like most offers, a title commitment is open to negotiated changes.

Schedule A describes the property the title company is offering to insure, confirms that the seller owns the property and names the parties the title company will agree to insure; usually the buyer and the buyer’s lender.

Schedules B and C list title exceptions, which the title company has discovered in researching the title. When a title exception is listed under Schedule B, the title company is informing the parties to be insured of matters they have discovered. They are offering to insure the title if those parties will agree to allow them to except to all of the matters listed in Schedule B.

When a title matter is listed under Schedule C, the title company is informing the parties that they will insure only if all title matters listed under Schedule C are resolved.

Schedule D lists the owners of the title company and its underwriter. This information is not relevant to title issues and will not be discussed here.
The title matters listed in Schedule B are more important to a buyer in the initial review period than those listed in Schedule C. If you are using a contract promulgated by the Texas Real Estate Commission (TREC) or the Texas Association of REALTORS® (TAR), the purchase contract has a built-in objection to all title matters listed under Schedule C.

 

If those title matters are not resolved, the buyer does not have to complete the purchase.

Matters listed under Schedule B are another matter entirely. The title company, by listing a matter under Schedule B, rather than Schedule C, is offering to insure while listing all Schedule B title matters as exceptions to their title insurance coverage. It is easier to understand the difference between Schedules B and C by reviewing some of the title exceptions normally listed under each schedule.

For instance, easements, restrictive covenants and encroachments are typically listed under Schedule B. By listing a title exception on Schedule B, the title company is informing you that those title exceptions are there but they are offering to insure if you will allow them to list the easements, restrictive covenants and any encroachments shown under Schedule B as exceptions to the title insurance policy.

Existing mortgages, missing deeds, bankruptcy issues, probate problems or divorce issues would typically be listed under Schedule C. This means the title company is not willing to close unless these title matters are resolved.

Our TREC and TAR contracts contain an objection to all title matters listed under Schedule C, but there is no objection in the contract for Schedule B exceptions. If there is a matter listed under Schedule B which is objectionable to the buyer, the buyer must object to that title exception.

If you or someone you know is consider buying or selling real estate in Northwest Austin, Leander, Lago Vista and Cedar Park I welcome the opportunity to consult with you or them about the many possibilities our Texas cities have to offer.