Two weeks before closing, a PDF lands in your inbox called a title commitment. It runs thirty pages, most of it is legal description and boilerplate, and the overwhelming majority of investors scroll to the last page, see nothing on fire, and file it. Then something blows up at the table and everybody acts surprised.
The commitment is the single most informative document you receive in a real estate transaction and almost nobody reads it. It is also the easiest document to read once somebody shows you the structure, because it only has four parts and only two of them matter. Here is how to read one in about ten minutes and know before closing whether your deal has a problem.
What the commitment actually is
A title commitment is a title insurance company saying, in writing, this is what we found, and here is the policy we will issue if these conditions are met. It is a promise to insure, conditioned on things happening. It is not a title report, not a guarantee of clean title, and not an opinion that title is good. It is a list of conditions.
That framing changes how you read it. You are not looking for a verdict. You are looking for a list of things somebody has to do, and deciding which of them are yours.
Schedule A: the four facts
Schedule A is one page and it tells you four things: the effective date, the policy amount, who is being insured and in what capacity, and the legal description of the property.
Check all four, every time, because errors here are common and cheap to fix early. The effective date tells you how current the search is, and anything recorded after it is not reflected. The policy amount on a lender’s policy should equal the loan amount and on an owner’s policy should equal the purchase price. The vesting line should name exactly the entity that is taking title, spelled exactly as it is registered with the state, not the trade name, not an abbreviation, not last year’s version of the name.
That last one is worth thirty seconds of care. If you are closing in an LLC, the name on Schedule A has to match the state registration character for character, and the entity has to be in good standing. Files get held at the table over exactly this, and if your entity is registered in one state while the property is in another, the rules in foreign qualification, registered agent, and good standing are what determine whether you can take title at all.
The legal description matters most on split parcels, corner lots, and anything that was subdivided. Compare it against the deed you are buying from and against the tax parcel identification. A property with two parcel numbers and one legal description, or the reverse, is a problem you want to find now.
Schedule B-I: the requirements, which are the to-do list
This is the section that decides whether you close on time, and it is the section people skip because it reads like formalities. Some of it is. The rest is the actual work of the transaction.
B-I is a list of things that must happen before the policy issues. A typical investor file has some mix of the following: a deed from the seller in recordable form, a payoff and satisfaction of the existing mortgage, evidence of the buyer’s entity authority including an operating agreement and a resolution, a mortgage from the buyer, proof of payment of taxes, a survey or a survey affidavit, releases of any liens shown, and a signed owner’s affidavit.
Read every item and ask one question about each: whose job is this, and has anybody started it? The ones that sink closings are almost always the ones where both parties assumed the other was handling it.
Three that deserve specific attention on investor deals. First, payoffs on the seller’s side, which routinely come back with numbers that differ from what the seller expected and sometimes surface a second lien nobody disclosed. Second, entity documents on your side, which title companies increasingly want in full rather than in summary, including every amendment. The version your lender reads is described in the operating agreement your lender actually reads, and title usually wants the same thing. Third, municipal items, because in a lot of jurisdictions a rental cannot transfer without a certificate or an inspection, and that requirement shows up here first. The pattern is covered in municipal rental registration and occupancy inspections.
The rule of thumb that has saved our clients the most closing dates: read B-I the day you receive the commitment, not the day before closing. Almost everything on it takes a week of lead time and almost nothing on it takes a week of work.
Schedule B-II: the exceptions, which are what you are not covered for
B-II is the list of things the policy will not insure against. Everything on it is a risk that remains yours after closing. This is where the real information lives.
The list divides cleanly into two groups once you know the difference, and knowing the difference is the entire skill.
Standard exceptions appear on almost every commitment and are usually removable. Rights of parties in possession. Matters a survey would disclose. Mechanics liens not yet recorded. Taxes not yet due and payable. These are generic and most of them come off with a survey and an owner’s affidavit, which is why the survey is sitting on B-I. If yours are not coming off, ask why.
Specific exceptions are the ones written for your property, and they are the ones to read word by word. Recorded easements. A utility right of way. Deed restrictions or covenants. An oil, gas, or mineral reservation. An unreleased mortgage from 1998. A judgment against somebody with your seller’s name. An access easement that runs across the parcel you are buying.
Take each specific exception and ask two questions. Does this affect the use of the property, and does this affect the value? An easement along the rear lot line for a sewer main is noise. An access easement across the middle of a lot you were planning to develop is a different deal than the one you thought you were making. A utility easement over the exact spot where the driveway would go changes what the property is worth.
The exceptions your lender will not accept are a shorter list than you would think, and the two that reliably kill investor files are anything that clouds the priority of their lien and anything that impairs legal access. A property with no insurable access is not financeable, full stop.
If the commitment shows an old mortgage or a judgment nobody expected, that is a specific and solvable problem with a known process, laid out in clearing a cloud before a rental closing. It takes time. Find it three weeks out and it is an inconvenience. Find it three days out and it is a postponement.
Schedule B-II on a tax sale or distressed acquisition
If you are buying at a tax sale, from a foreclosure, or anywhere in the distressed channel, B-II is not a formality, it is the whole diligence. These properties routinely come with exceptions that a normal purchase would never carry, including redemption rights that survive the sale and prior liens that were not divested.
A lot of lenders will not finance a property inside a redemption period at all, for the straightforward reason that the person who redeems takes the property back and the lender’s collateral evaporates. The full version of that problem is in redemption periods, title risk, and why lenders wait. If you are working that channel, get a commitment before you bid, not after.
Endorsements: buying coverage back
When an exception matters and cannot be removed, the remaining move is an endorsement, which is coverage purchased over a specific risk. Common ones on investor deals insure over a zoning classification, over an encroachment shown on the survey, over access, or over the effect of a restriction. Some cost a few hundred dollars. Some require underwriting and get declined.
Your lender will have its own required endorsements on the loan policy, and those are theirs, not yours. The question worth asking is what endorsements you want on the owner’s policy, which is the one that protects your equity rather than the lender’s lien.
Which raises the point most investors get wrong: the lender’s policy insures the lender for the loan amount and does nothing for you. If you skip the owner’s policy to save money at closing, you own the property with no title coverage at all. On a 300,000 purchase, the owner’s policy is one of the few line items on the settlement statement that buys you something durable. Everything else on that page is a cost of doing the transaction. Who issues these policies and how the closing is structured varies by state, and the map is in title agents, escrow states, and attorney states.
The ten minute read
Open the commitment. Confirm the four facts on Schedule A, with particular attention to the vesting name and the legal description. Read every line of B-I and write a name next to each one, yours or theirs. Read every line of B-II, separate the standard exceptions from the specific ones, and for each specific one decide whether it touches use or value.
Then send one email to the title agent with your questions, and send it the day you get the document. A title agent who receives clear questions three weeks before closing will answer them. A title agent who receives the same questions the morning of will reschedule you.
One thing this exercise will occasionally tell you is that the deal is worse than you priced it. That is the commitment doing its job. A deal that gets repriced or dropped in week two costs you a title fee. The same deal discovered at the table costs you the appraisal, the inspection, the rate lock, and sometimes the earnest money, and the mechanics of getting that money back are narrower than most buyers assume, as described in how your earnest money credits back at closing.
If you want to know whether a specific exception is going to be a problem for financing, send us the commitment. We read these constantly and we can usually tell you in a day whether a lender will clear it. If the deal is still in underwriting, run the numbers alongside it in the DSCR deal calculator so you know what the file needs to look like, and if you want us to look at the document itself, send it over.
Title practice, required endorsements, survey standards, redemption rights, and what a policy will and will not insure vary by state and by underwriter, and they change. This is not legal advice. Have a licensed attorney in the property’s jurisdiction review any exception you are uncertain about before you waive a contingency, and read the actual policy jacket rather than relying on a summary of it.
FMC Capital is a Pittsburgh-based mortgage brokerage financing investment property for real estate investors across Pennsylvania and additional states. NMLS #1840537.
This article is for general information only and is not legal, tax, or investment advice. Loan terms, program guidelines, and applicable law vary and are subject to change. FMC Capital, NMLS #1840537. Equal Housing Opportunity.