Marked Title Commitments:  What are they and why are they needed?     November 27, 2009 Stephen J. Nash Nash & Lodge , PLLP nash@nashandlodge.com                                                                                                                                                                                    A title commitment is issued by the title company. It is their promise as to what title insurance they are agreeing to provide. Since title companies have no fiduciary obligations to their customers, they have no obligation to provide their customer with the cheapest, most comprehensive title coverage. They are not promising there is good, marketable title, they are simply saying what they are willing to cover. A “marked” title commitment is a title commitment that has been changed to provide the correct or better coverage. The title commitment is actually amended much in the way a purchase agreement is amended, by crossing out information to be deleted, adding clauses that are needed and initialed by someone at the title company with authority. The question then becomes – who is reviewing the title commitment to make sure that there are not tile problems and that the buyer obtains the best coverage? The normal buyer does not understand a title commitment but do you? Are you reviewing the title commitment? Is anyone reviewing it? In most cases, nobody is reviewing the title commitment much less obtaining a marked title commitment. In a normal market this is an unacceptable risk but in todays troubled market it is a disaster waiting to happen. With so many foreclosures and so many complicated closings, there are many things that can adversely affect title. In addition, the seller in REO transactions do not give any warranties of title. If there is a title problem the buyer cannot look to the seller. Even in a short sale transaction the buyer has no real remedy against the seller because the sellers in many case simply do not have the money needed to correct the title problem.  The most attractive target if something goes wrong could be you! When a title problem arises and the buyer finds out that their title insurance policy does not cover their problem, guess who the look to for a remedy? Their own agent. The seller will take the position that their agent was supposed to protect them at closing. The agent will say, I don't review the title commitment and I'm not at the closing to protect the buyer. When asked why the agent is at the closing there seldom is a good response. When asked who at the closing is protecting the buyer and an agent will often say the closer. Unfortunately, the closer does not have a fiduciary duty to the buyer and merely gives summary explanations of the what the documents are, the closer does not actually closely review them for issues or negotiate to get the buyer better protection. So the buyer ends up going to a closing thinking that their real estate agent is protecting them, the real estate agent thinks the closer will take care of everything and in reality nobody is reviewing the title commitment in order to insure that the buyer is protected and to get a marked title commitment so that the buyer has something to rely on. The first thing a real estate agent must do is explain what he/she is going to do for their buyer and what they are not going to do. What is your role at closing? Do you review the title commitment and obtain a marked title commitment? Do you explain this to your buyer at the beginning of your relationship so there is no confusion? A common question we receive is who is going to review the title commitment for the buyer? An experience real estate lawyer can review and obtain a marked title commitment for buyers. The attorneys at Nash & Lodge will do so for a flat fee of $150.00. We obtain a copy of the title commitment prior to the closing, review the title commitment and negotiate the changes prior to the closing. When you discuss what your role is and the importance of obtaining a marked title commitment that best protects the buyer, make sure that you take notes of the conversation or have a written disclosure to protect you in case the buyer chooses to complete the transaction without obtaining a marked title commitment. Practice Tip The buyer walks away form the closing with a title commitment (whether marked or not) and will not receive the actual title insurance policy for months after the closing. Since the title policy is the actual contract for the insurance, the buyer must compare the title policy with the title commitment to make sure that policy is what was promised and that they store the policy in a safe location. If the title policy is not correct, they must notify the title company immediately to obtain the correct policy. Since most buyers do not understand the process or the importance of the title policy a helpful reminder from you will provide a valuable benefit to your buyer and another chance to increase your value to them. NOTICE The foregoing is not intended to constitute legal advice for any specific circumstance, but is intended to reflect broadly applicable principles, under Minnesota law, relevant to a typical situation. Each set of facts and each contract are, or can be unique; the unique facts and specific language of the contract may require a different legal analysis and may result in a different outcome. Before proceeding in reliance upon this or any other general description of law, consult with an attorney competent in the field of practice relevant to your situation. Copyright 2008 Nash & Lodge, PLLP