Title Commitments – think they don’t matter or don’t even know what they are? Are you already falling asleep? You are not alone!
Can you say $10,000,000 mistake???
300+ people in Denver just found out they bought income restricted homes – and paid non-income restricted prices. (My bet – this is not isolated to Denver)
In one example, the property owner was forced to sell their house for $75,000 less than they thought they could have. In many cases, this could have been avoided if the owners or their real estate agents read through the Title Commitment.
I love reading Title Commitments! I always read through them, because I know my client’s won’t. It’s 100’s of pages of legalese. But its fascinating – and oh, so important!
“Title” is the cornerstone of real estate – it is THE most important concept in real estate. But it is perhaps the least understood concept by the general public (and far, far too many real estate agent.)
You think you are buying a house? No – you are buying the “Title” – or a “bundle of rights” on which a house sits.
Homebuyers get wrapped up in kitchen counters, bathroom finishes, roofs and yards. Rarely do they ever look at their “Title Commitment” – which is provided by the Title Company about 10 days after going under contract. This document is long and will put you right to sleep – BUT – it helps identify the known “encumbrances” to property to which your future ownership will be subject – it helps you understand the Title or “bundle of rights” you are buying (and it is essential to the Title Insurance which helps protect you against unknown disputes regarding Title).
Not only is the Title Commitment itself long, but it refers to (hopefully with links) each of the recorded documents associated with each of the encumbrances – Plats, easements, agreements, licenses, covenants, declarations – 100’s more pages to review – yea!!!
But, it is soooo important to read it all and understand what it means for your ownership. Here are some examples of items I have seen in Title Commitments:
- Deed restrictions preventing you from selling the property at a “market price”.
- Covenants which restrict the type of addition and types building materials you can add to your home, or places you can store your lawnmower.
- Historical District Designations which require you to get approval before making ANY exterior modifications.
- Easements and Rights of Way which allow the power company to come on your property, unannounced, and cut down all your trees.
- Restrictions that say you can may not sell your property to “non-whites” (these are illegal).
- City requirement on your property which require you to replace any tree that dies with two trees.
- 1,000’s of pages of documentation of the historical environmental contamination of the land on which your house may sits and on which your children may be playing (hello Stapleton!!!)
- Restrictions on subdividing your property.
- A Home Owner’s Association which you must be a part of, and which may create huge financial obligations in the future if it is not run properly (how does a $10,000 special assessment to each owner for wall repairs sound?)
What to protect yourself in your next real estate transaction??? – Read the Title Commitment and use a broker who understands the importance of this often overlooked, but oh, so critical component of the real estate transaction (like me!)