When purchasing a home, verifying that the seller has clear ownership rights is critical. A title binder serves as a preliminary assurance from the title insurance company, confirming that they have researched the property’s ownership history and are prepared to insure it under certain conditions.
How a Title Binder Works
After signing a purchase agreement, the involved parties—typically the lender, buyer, or real estate agent—order a title search. The title company investigates public records, including deeds, liens, and court filings, searching for issues that could affect ownership, known as “clouds” on the title.
Once completed, the title company issues the title binder (or title commitment) to the buyer, seller, lender, and agents, outlining:
- The property’s current title status
- Any requirements to clear issues before closing
- Exceptions to coverage that won’t be insured
Components of a Title Binder
A typical binder includes three main sections:
Schedule A: Basic Information
- Effective date
- Insurance coverage type and amount
- Property owner and proposed insured
- Legal property description
Schedule B-1: Requirements
- Items to resolve before final policy issuance, such as paying off mortgages, liens, or taxes
- Proof of identity and proper recording of documents
Schedule B-2: Exceptions
- Exclusions from coverage, like utility easements, subdivision rules (CC&Rs), and mineral rights owned by others
Title Binder vs. Title Commitment
These terms are used interchangeably. “Title commitment” is the formal term, while “title binder” is common industry jargon—they both represent the same document promising future title insurance.
Importance of a Title Binder
The binder helps buyers identify and resolve title issues before purchase, protects lenders by confirming their security interest, and guides sellers on clearing encumbrances. It is a crucial step in securing clear ownership and avoiding future disputes.
FAQs
How long is a title binder valid? Typically 30 to 90 days; extensions may be granted to keep the title status current until closing.
Who pays for the title binder? Usually, the cost is included in the overall title insurance premium paid by either buyer or seller depending on state customs.
What happens after the binder? Upon satisfying all conditions, the final title insurance policy is issued to protect against past title defects.
For more details on title insurance and lien issues, see our articles on title insurance and title insurance exceptions for liens.
Official information about title insurance is also available at the Consumer Financial Protection Bureau.
