Title commitment gap issue (Texas)

7 Replies

We're a couple of days from closing. According to the title company the title commitment effective date can't be updated. They stick with the last date the country clerk database was updated. In our case, the last date it was updated was the 17th.

So what happens if something comes up between 17th and closing day? 

Shouldn't there be some sort of a gap insurance?

For reference, we're in Texas. 

Thanks

Originally posted by @Guy Gimenez :

There is an endorsement for gap coverage but you have to request it. 

Thank you! 
As cash buyers we're having a very difficult time dealing with the title company. 
I'm assuming when a lender is involved, they do everything in their power to make sure it's a safe investment. As cash buyers, due diligence is much harder than I thought. Especially with an uncooperative escrow officer. 

Like any insurance company, a title company is there to provide a service but also look out for the insurer's best interests. So few agents and investors understand the purpose of a title commitment and what the investor should be looking for and objecting to (See Sch. B). Like all businesses, their job is to sell their product and mitigate as much of their risk as possible when doing so. That's why understanding endorsements is imperative. It's also necessary to review the title policy when received as more than 50% of mine have coverage errors that were not noted on my marked up commitment that included the title company reps. initials. 

With all this said, a title company is not required to issue a gap endorsement. If they won't do so, require a downdated commitment the day of closing. 

Originally posted by @Guy Gimenez :

Like any insurance company, a title company is there to provide a service but also look out for the insurer's best interests. So few agents and investors understand the purpose of a title commitment and what the investor should be looking for and objecting to (See Sch. B). Like all businesses, their job is to sell their product and mitigate as much of their risk as possible when doing so. That's why understanding endorsements is imperative. It's also necessary to review the title policy when received as more than 50% of mine have coverage errors that were not noted on my marked up commitment that included the title company reps. initials. 

I did research endorsements and ended up asking them to add T-19.1 and T-3
We also asked them to remove the "rights of parties in possession" exclusion. 

On another note, yesterday we realized that paragraph 20 of the Trec 1-4 purchase contract basically says that the buyers have to get a certificate of non-foreign status from the sellers. I asked the title company if they can verify that the sellers are not foreign (otherwise the buyer will have to withhold around 15% of purchase price). The title company refused to help us to determine whether the sellers are foreign or not.
Is this something you faced before?

Thanks :)

(1) IRC Section 1445 places the burden on the buyer to confirm the seller isn't a "foreign person" as defined by the code. There are however exceptions so you might want to look at the code other than the most common exception to withholding, and that is if the seller furnished you a FIRPTA Affidavit. Bottom line is IF you're purchasing the property as your residence and the amount realized (sale price) by the seller does not exceed $300K AND the buyer signs an affidavit acknowledging the same, the no FIRPTA Affidavit is required. Otherwise, you must demand the FIRPTA affidavit from Seller or risk the Seller must prove he/she falls under one of the other exceptions. Title companies don't want the responsibility, in most cases, of obtaining the affidavit. 

(2) T-19.1 and T-3 are my most commonly requested endorsements, and are less expensive if purchased together. 

(3) In order to get "Right's of Parties" removed, most title companies will say they will have to do an inspection of the property. If I'm out of town and can't check the house myself on the way to closing, I'll tell them to go ahead and inspect it but charge the seller as this Sch. B item is not covered under 6(A) as an acceptable exception. Few escrow officers understand this. 

(4) I just pulled up what I believe is the most up to date list of title endorsements and I don't see one for buyer gap coverage, which is weird...appears only the lender is protected in this event. So, I might have to stand corrected on this endorsement. If so, just make sure you don't sign anything in the title docs that states the title company and add any additional exceptions found during a final search. Also, most title companies (in larger counties) will e-file...especially if they're on the hook for the gap period. I'm checking with my attorney on this matter tomorrow. 

Originally posted by @Guy Gimenez :

(1) IRC Section 1445 places the burden on the buyer to confirm the seller isn't a "foreign person" as defined by the code. There are however exceptions so you might want to look at the code other than the most common exception to withholding, and that is if the seller furnished you a FIRPTA Affidavit. Bottom line is IF you're purchasing the property as your residence and the amount realized (sale price) by the seller does not exceed $300K AND the buyer signs an affidavit acknowledging the same, the no FIRPTA Affidavit is required. Otherwise, you must demand the FIRPTA affidavit from Seller or risk the Seller must prove he/she falls under one of the other exceptions. Title companies don't want the responsibility, in most cases, of obtaining the affidavit. 

(2) T-19.1 and T-3 are my most commonly requested endorsements, and are less expensive if purchased together. 

(3) In order to get "Right's of Parties" removed, most title companies will say they will have to do an inspection of the property. If I'm out of town and can't check the house myself on the way to closing, I'll tell them to go ahead and inspect it but charge the seller as this Sch. B item is not covered under 6(A) as an acceptable exception. Few escrow officers understand this. 

(4) I just pulled up what I believe is the most up to date list of title endorsements and I don't see one for buyer gap coverage, which is weird...appears only the lender is protected in this event. So, I might have to stand corrected on this endorsement. If so, just make sure you don't sign anything in the title docs that states the title company and add any additional exceptions found during a final search. Also, most title companies (in larger counties) will e-file...especially if they're on the hook for the gap period. I'm checking with my attorney on this matter tomorrow. 

 Thank you. I really appreciate your reply