The Difference Between Traditional Title Commitment and Abstract Services

A traditional title commitment and abstract services are both essential elements in real estate transactions, but they serve different purposes and offer distinct types of information. A title commitment is a formal document provided by a title insurance company that outlines the conditions under which a title insurer will issue a title insurance policy. It includes a legal description of the property, current ownership, and any recorded liens or encumbrances. In contrast, abstract services involve compiling a comprehensive history of the property's title through a detailed examination of public records. While a title commitment offers a forward-looking perspective, focusing on clearing title defects before closing, an abstract service provides a historical review of ownership and encumbrances. Understanding these differences is crucial for buyers and lenders to ensure a smooth and secure transaction.  

There is a difference between a title commitment and a title policy. The first occurs before closing and the second after closing. The commitment states that a title company is willing to issue the title insurance under certain conditions and if the seller fixes any issues. A title commitment is a commitment by a title insurance company to issue a title insurance policy after closing. It includes a commitment to insure the title subject to certain conditions being met. Title commitments are based on a search of public records and typically go back a specific number of years, which may be shorter than the search done for a title abstract.

A title commitment will document any potential issues, exclusions and exceptions. This includes issues that are known and could cause problems in the future. The commitment doesn't guarantee that there are no issues now or possibly in the future. The title company will help a buyer with clearing potential problems.

Title insurance protects a home or property buyer and or lender from problems with an ownership title when real estate is purchased. Examples of possible issues existing before the purchase include unpaid property tax; fraud or forgery of existing paperwork; or a spouse or heir claiming ownership. Title companies search for problems that need to be corrected before the property is purchased. The title company will then handle any future disputes.

The title insurance premium is paid when the sale is closed. There are two kinds of title policies: an owner's policy and a loan policy. The owner's policy protects the home owner as long as they own the property. A loan policy protects the rights of the lender and is good until the loan is paid off. In Texas, the title policy language is the same for every title company. The rate for title insurance is set by the State of Texas and all title companies charge the same rate.There may be differences in some closing cost fees. The cost of an owner's policy is based on the property's sale price. The cost of a loan policy is based on the amount of the loan.

Coverage begins immediately; however, it may take at least thirty days for the purchaser to get the paperwork. A good title company will follow up with the buyer to ensure the policy was received and answer any questions or concerns.

A title insurance policy protects the buyer against loss due to title defects, liens or similar occurrences. In other words, claims of ownership by other parties are covered. A title policy usually will not cover mistakes or defects, financial issues or rights issues. Some examples are defects created after the policy is issued or problems arising from nonpayment of mortgage payments. Other issues could be claims from people with certain rights to the property or condemned land. Violations of building and zoning codes would also not be covered. That is why it is extremely important to research the complete legal history of a property. 

An abstract of title is a written history of everything discovered in relation to a property or home. The document will provide every transaction on the property beginning with the initial grant deed or Patent. A completed set of documents will tell a potential buyer about any mechanic's or monetary liens, tax liens, including property tax in arrears, homeowner or property owner association assessments for unpaid dues, restrictions, covenants and easements. A lien is defined as any legal claim against a property or property owner that can be used as collateral. An abstract does not provide any commitment to insure the title. Title abstracts are used for informational purposes and do not offer protection against title defects. Best case scenario for buyers is finding property or a home with a clear title.

There are different types of title searches which determine the scope of the search. The most common types are current owner; two-owner; 30-year; full state statute; and an assignment verification report. A search can be made going back to the current owner or to the last two owners of the home or property or over a 30-year period. A full state statute search is based on the State of Texas statute to issue insured title. A verification report for assignments and mortgage related documents is another type of title search.

In summary, the key difference is that a title commitment involves a commitment to insure the title, while a title abstract provides a more detailed history. The depth of the search conducted for a title commitment may not go as far back in time as a title abstract. It is extremely important to have an abstract of title before closing on any type of property or home to avoid future issues.

A title search or an abstract of title should be handled by a qualified abstractor. . An experienced abstractor understands county records, land surveys, legal filings and other methods of recording property or home transactions. The title company can review an existing abstract or create a new one based on the latest records and documentation. 

Hollerbach & Associates knows Texas better and has served Texas property owners since 1985. Our associates are experts in title research of all 254 Texas counties. Our professional and skilled abstractors have spent decades mastering Texas property and title research. Our property transaction services department can assist with obtaining title searches and abstracts providing important transactions your clients will need when purchasing a property in Texas.