Quick Answer
Investors should verify the ownership, legal description, proposed insured, purchase and loan information, requirements, liens, judgments, taxes, easements, restrictions, access, and all exceptions that could affect the investment strategy or the ability to resell or refinance later.
A title commitment is one of the most important documents in any real estate transaction. For investors, reviewing it carefully is essential because title issues that affect the exit strategy can turn a profitable deal into a money-losing one. For a complete guide, see how to read a title commitment.
Investor Review Checklist
- Current owner: Does the vested owner match the seller in your contract? If not, there may be a chain of title issue.
- Legal description: Does it match what you expect? An incorrect legal description can delay or derail closing. See what the legal description tells you.
- Proposed insured: Is your entity name listed correctly? A typo in the entity name on the commitment can mean the wrong party is insured. For more on this, read what proposed insured means.
- Requirements on Schedule B: What must happen before the policy issues? Requirements include mortgage payoffs, lien releases, document recordings, and entity documentation. See what title requirements are.
- Exceptions on Schedule B: What will the policy not cover? Easements, restrictions, mineral reservations, and other matters can affect your use of the property. See what title exceptions are.
- Liens and judgments: Are there existing mortgages, tax liens, judgment liens, or HOA assessments that need to be addressed? For a full discussion, see Liens, Judgments and Encumbrances.
- Tax information: Are property taxes current? Are there any delinquencies or special assessments?
- Access: Does the property have legal access? An access easement or lack of recorded access can affect value and usability.
Investors Should Think One Transaction Ahead
An investor reviewing a title commitment should think not just about the current closing but about the next transaction. Will the title issues shown on the commitment affect a future resale, refinance, or transfer? An exception that is acceptable for a buy-and-hold strategy may be a problem for a fix-and-flip that requires a clean title for the end buyer.
For example, a recorded restriction that limits the number of structures on the property may not affect a rental strategy but could derail a development plan. Review the commitment with your exit strategy in mind.