ALTA Title Commitment 2 — Questions and Answers
Question 1: Which of the following is a typical requirement found in Schedule B-I of a title commitment for a purchase transaction?
- A copy of the prior owner's homeowner's insurance policy
- Payment and satisfaction of all outstanding taxes and assessments of record (Correct answer)
- A zoning compliance letter from the local planning department
- Proof of the buyer's income and creditworthiness
Correct answer: Payment and satisfaction of all outstanding taxes and assessments of record
A common Schedule B-I requirement is that all outstanding taxes and assessments must be paid or satisfied before the title company will issue its policy.
Question 2: When a title commitment includes a requirement for a 'satisfactory survey,' this typically means:
- The buyer must personally walk the property boundaries before closing
- A licensed surveyor must prepare a survey meeting ALTA/NSPS Land Title Survey standards (Correct answer)
- The title company will conduct its own survey at no additional charge
- Any survey from any source, regardless of age or standard, will satisfy the requirement
Correct answer: A licensed surveyor must prepare a survey meeting ALTA/NSPS Land Title Survey standards
A survey requirement typically calls for an ALTA/NSPS Land Title Survey prepared by a licensed surveyor to identify boundary issues, encroachments, and other physical conditions.
Question 3: The 'gap' in a title transaction refers to:
- The difference between the purchase price and the mortgage loan amount
- The period between the commitment's effective date and the recording of the new deed and mortgage (Correct answer)
- Missing links or documents in the chain of title
- The delay between the title application and issuance of the commitment
Correct answer: The period between the commitment's effective date and the recording of the new deed and mortgage
The 'gap' is the period between the commitment's effective date and the actual recording of the new deed/mortgage, during which new liens could be recorded without the insurer's knowledge.
Question 4: If a seller has an existing mortgage that must be paid off at closing, this obligation would appear in the commitment as:
- A Schedule A notation identifying the current vested owner
- A Schedule B-I requirement to be satisfied at or before closing (Correct answer)
- A Schedule B-II exception that remains permanently in the owner's policy
- A separate endorsement attached to the commitment
Correct answer: A Schedule B-I requirement to be satisfied at or before closing
An outstanding mortgage that must be satisfied before the policy can issue is listed as a requirement in Schedule B-I because it must be cleared to convey clear title.
Question 5: When a purchase transaction is financed by a mortgage lender, the title commitment should typically name as proposed insureds:
- Only the buyer, as the ultimate owner of the property
- Only the lender, as the party with the primary financial risk
- Both the buyer (owner's policy) and the lender (loan policy) (Correct answer)
- The real estate broker representing the buyer in the transaction
Correct answer: Both the buyer (owner's policy) and the lender (loan policy)
A financed purchase typically results in two title policies: an owner's policy for the buyer and a loan policy for the lender, so both are named as proposed insureds.
Question 6: What is the legal effect of a title commitment on the title insurance company?
- It is a non-binding estimate with no legal obligations attached
- It contractually obligates the company to issue the policy once requirements are met (Correct answer)
- It is a final insurance policy that provides immediate coverage
- It is only binding if the buyer signs and returns the commitment
Correct answer: It contractually obligates the company to issue the policy once requirements are met
A title commitment contractually binds the title insurer to issue the described policy once all Schedule B-I requirements are satisfied and the premium is paid.
Question 7: Which statement best describes the relationship between a title commitment and the final title policy?
- They are legally interchangeable documents with identical coverage and effect
- The commitment automatically converts to a policy 30 days after the effective date
- The commitment is a pre-closing conditional promise; the policy is issued after closing when all requirements are met (Correct answer)
- The policy must be issued before the commitment can be prepared and delivered
Correct answer: The commitment is a pre-closing conditional promise; the policy is issued after closing when all requirements are met
The commitment is a pre-closing document outlining conditions for coverage; the actual title policy is issued after closing once all Schedule B-I requirements have been satisfied.
ALTA Title Commitment 2
Which of the following is a typical requirement found in Schedule B-I of a title commitment for a purchase transaction?