Many Brokers in our state will order a title commitment at the time of listing a property for sale. That is a very good practice. However, if you as a broker are not aware that the minute that you receive that title commitment that it is out of date, you may be in for a great surprise. Title commitments are living breathing documents and may change after they are published. A story will illustrate my point.
Our office was asked to assist a seller to remove an easement from their property. It was not a short sale. It was merely a normal purchase and sale and the seller agreed to eliminate a burdening easement from their property prior to closing. The Listing Broker referred them to our office. Life was good.
The sellers walked in armed with a title commitment in hand giving us the information we needed to start the necessary actions to eliminate that easement from the title. However, upon seeing that title commitment, my assistant asked for copy and immediately called the title officer at the title company that issued the commitment and asked whether that title commitment was current and sought a “date-down supplemental” from that title company for which the company promptly provided that necessary information by fax to our office.
As I was reviewing the information provided by my assistant, I discovered a number of interesting things:
A. The title commitment that the seller brought in was dated about 7 months earlier and had been replaced by a new commitment two months ago.
B. There had been a series of supplementals eliminating certain matters from even the new updated title commitment.
Upon review, (even before I walked in to meet the seller whom I had never met before), I was surprised to see that Title Exception Paragraph 5, which was the paragraph containing the easement, was eliminated by a Supplemental!
I asked my assistant to tell the sellers I would be delayed as I needed to talk with the title officer at that title company. To cut to the chase, the title company independently had discovered that the pesky easement, that was going to be the source of our engagement, had expired according to its terms and they had eliminated that easement as an exception to the title.
As I walked into the meeting with the seller, I had to inform them that they had wasted a trip to our office as the matter of the easement had already been eliminated by the title company. They were, of course, pleased. However, they were also a bit distraught as their broker had received a copy of that title update literally a month earlier and they had not been advised.
WHAT HAPPENED? The Broker received it, but did not read it and, as a result, his seller expended useless time and effort.
More importantly, what would have happened if WE had not obtained an updated title commitment? We may have started doing a whole heck of a lot of work and the seller may have spent a lot of money uselessly.
PRACTICE POINTER: Whenever you receive a title report that isn’t fresh out of examining, call the title officer whose name is on the commitment and get a date-down supplemental and ask to be included in the distribution of any further updates. It is just good practice.
Today's blog courtesy of McFerran & Burns