query via e-mail - Would the "marked up" policy have been as good as a policy without the exceptions?

Hi Diane!

I found your blog in a search for title insurance info.  It was much more interesting and informative than anything else that I found.  I have a question that I hope you can help me with.  It's actually more of a situation.  We were in the process of purchasing a feed mill.  We had the winning bid at an auction. Yeah!  There was a commitment for title insurance before the sale and the buy sell that we signed stated that the seller had until Aug 23, 2008 to provide title insurance but they were given an extra 30 days if there were issues that could be cleared up in that time.  The title had never been looked at before, that we are aware of, and there were exceptions dating in the late 1800's.  They told us that anything older than 40 years could be written off but the other exceptions may need a "quiet title."  They said that this would take 2-3 months to clear up.  Then they said they found everything that they needed....and then they didn't...you get my point.  I'm sorry that this is going on, and on, and on.  We were scheduled to close on 3 different occasions but then the title insurance would not be ready. On the last scheduled day for our closing the title office emailed a copy of the title insurance to me.   The "title lady" had assured me that it was finally clean (she assured me at least 4 times).  Two of the exceptions that she told me were gone were still there!  Argh!!!  When I called her she said that they would be cleared up when the seller brought in some paperwork.  Well, not exactly.  It would be cleared up when the two documents were recorded but they could give us a "marked up" policy and that would give us coverage for those two exceptions when they were recorded which would take possibly 1 week but more likely 2 weeks.  The two weeks would put us at the end of their 30 days.  We opted not to go through with the purchase and lost our down payment.  The "title office lady" said that the "marked up" policy was binding and "as good as" a policy without the exceptions.  All that to ask you....Would the "marked up" policy have been as good as a policy without the exceptions? 

Thanks for your time and any help that you can give me.

Cheryl

PS We will not be going to any auctions anytime soon.

Cheryl:  Thank you for your kind words and thanks for reading.  This is a great query because there's good advice for consumers and title insurance agents.

First, let's chat a moment about exceptions.  They said there were exceptions going back to the 1800s and that those older than 40 years could be written off.  Exceptions listed in a title insurance commitment are items that your title insurance will not cover.  These are often rights that have been previously granted to another party - for instance a right of way.  The fact that an exception is older than 40 years does not make it passable.  A right of way established in the 1800s is still a right of way. I just wanted to make that clear before saying that the folks who were handling your file could have communicated more clearly, but perhaps they did not understand or weren't sure.

How does a consumer stay in control of communication when applying for title insurance?  You do it with the title insurance commitment.  It should take no more than 2 weeks to produce a title insurance commitment.  The consumer should get a copy and read it as soon as it is available.  You are looking for three things.

First, make sure that the property identified is the one you are planning to purchase.  Mistakes happen and this is your chance to fix it before it is too late.

Next, look at Schedule B I.  This is where the title agent will identify problems found in title that they intend to resolve prior to the issuance of the policy.

Schedule B II list items that will most often survive and be REAL exceptions in your final title policy.

Before we get to the essence of your query, I would like to suggest to title agents that they make certain that the consumer gets the title insurance commitment AND that if there are unusual or complicated circumstances that you correspond with the parties in WRITING.  E-mail is so very easy and it's such a great tool for keeping everyone on the same page.  If the consumer is having a hard time understanding your concerns or suggested solutions, putting your thoughts on paper will often clear the air.

Now, finally, to your real question, Cheryl.  The title agent is correct.  A marked-up title insurance commitment is binding.  Evidence of payment of a premium [your HUD-1] combined with a copy of a marked-up title insurance commitment gives you standing with the title company.  That said, it sounds like the title issues in your planned purchase were complex and given the inconsistent communication and the lack of clarity, I'd have wanted your attorney to review the entire situation before closing.  You still might want to have an attorney review what transpired.  Perhaps there is a basis for getting back your downpayment.  It sounds like the seller will have an easier time of it since you really laid the groundwork for the fix.  Good luck and don't forget to ask for the title commitment and don't let them give you any crap!  ;)

PS  Fonts are wacked out tonight.  Yoi.