In this solo instructional video, Joe Downs of Storage Moguls Mastermind warns self‑storage investors about the critical importance of reviewing a title commitment before closing. He opens with a cautionary story of a buyer who skimmed the commitment, only to discover a mechanic’s lien months later, leading to costly litigation. Downs then explains what a title commitment is—a promise from a title company to issue a title insurance policy once certain conditions are met—and breaks down its three main sections: Schedule A (property description, owner, buyer, price), Schedule B‑1 (requirements for issuance), and Schedule B‑2 (exceptions such as liens, easements, covenants, and restrictions). He enumerates common red flags found in Schedule B‑2, including unpaid property taxes, mechanic’s liens, mortgage liens, judgments, and various easements. A step‑by‑step review process is outlined: read Schedule B‑2 line‑by‑line, verify the property description matches the survey, and ask the title company or attorney about anything unclear. If issues arise, the title company must clear them before closing—typically by paying off liens from the seller’s proceeds; if they cannot be resolved, the buyer should walk away. Downs then covers title insurance, distinguishing lender policies (protecting the loan) from owner policies (protecting the buyer’s equity) and noting typical premiums of 0.5‑1% of the purchase price. He advises ordering the title commitment early (1‑2 weeks lead time) and budgeting for insurance. Finally, he shares two “cheat codes”: using AI (e.g., Claude) to parse and question the documents, and always consulting a real‑estate attorney for final review. The video ends with calls to like, subscribe, and share.
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Welcome to the Storage 100, day 46. And who is excited for title commitments? It's almost as exciting as survey and zoning, but we mastered our way through that. So here we are again. I am Joe Downs with the Storage Moguls Mastermind. And today I want to share with you a story that I heard last year that scared me into appreciating My real estate attorney. A self-storage buyer, no different than one of our students, is days away from closing on a self-storage facility. They get the title commitment, which of course is a document that shows, you know, who owns the property and what liens or encumbrances are on it. They skim through it, looks fine. They close the deal. 6 months later, they find out there's a mechanic's lien on the property from work the previous owner didn't pay for. Now they're fighting in court to clear the lien. Legal fees are piling up, all because they didn't carefully review the title commitment before closing. That blows, but it could have been avoided. And today we're going to cover what a title commitment is, what to look for in it, and why you cannot skip this step. As well as, if you stick around at the very end, the ultimate cheat code, the belt and suspenders for the title commitment and title process. All right, so what exactly is a title commitment? It is a document from the title company, and it's going to show you who owns the property, um, any liens or encumbrances, uh, that are on it, um, and the commitment itself. Think of the title commitment as a sort of promise Which is actually kind of funny, right, that I have to explain it as what it actually is— commitment, promise. But it's basically a title company saying they will issue you a title policy. They promise to issue you the title insurance policy. All right, it's a promise to issue the policy if you clean up all these things. So, or as they say, once certain conditions are met. And it's this document, the commitment lists all the issues. So the These are issues that need to be resolved before closing, and if you don't review it carefully, you might inherit someone else's legal mess or financial mess. And this is your chance to fix those problems. So let's look at the specific sections of what that document looks like. So the title commitment has three main sections. Schedule A describes the property and lists the current owner, the buyer, and the sales price. Schedule B one outlines. The requirements. These are the conditions you must meet for the title company to issue the insurance. But Schedule B-2 is the most important section. This is where you're going to find any problems. It's going to list the exceptions. So liens, easements, covenants, and restrictions. And these are things that will remain on the property even after closing. So you need to read every line of Schedule B-2 very carefully. And understand what you are inheriting. So let's look at some of the common issues that you might find here. So you've got unpaid property taxes, which is usually a big one. If the seller hasn't paid them, you know, there's a lien on the property. Mechanic's lien is another one we mentioned. If a— and that's typically if a contractor wasn't paid, they can file a lien. Obviously, mortgage liens are an important one. You're going to see an awful lot of all the time. Sellers' mortgage liens. The seller's mortgage needs to be paid off at closing. And you're going to make— want to make sure that these are all listed, right? Judgments or lawsuits can also create liens. If the seller lost a lawsuit, for instance, that could potentially be attached to the property. And then any easements, which can affect how you use the property. So, they're commonly utility easements or access and And drainage easements and stuff like that can limit your plans. So how do you actually review this document? So first, read the Schedule B-2 line by line. Do not skim it. Look for any liens that should be paid off at closing. These are typically seller's mortgage, unpaid taxes, mechanics liens. These should all disappear when you close. Definitely verify the property description matches the survey. If there's a mismatch, you've got a problem. And of course, question anything you don't understand. Don't assume it's fine. Ask the title company or your attorney to explain it. Better to ask a dumb question than to close on a property with a hidden lien or a restriction. Okay, so what if there's a problem on the title commitment? Well, the title company has to clear the issue before closing. So most liens tend to get paid off from the sale proceeds. You know, things like the seller's mortgage, property taxes, mechanics liens, they typically come out of what the seller receives at closing. But what if the seller doesn't have enough equity to pay off the liens? Well, they've got a problem, right? But so do you. And you might need to delay closing while that issue gets resolved. And if the problem can't be fixed, like a major lawsuit or a defect somewhere in the chain of title, You're gonna have to walk away. Do not close until the title is clean. All right, let's do title insurance now. Title insurance protects you from title defects discovered after closing. So if someone shows up claiming they own the property, or there's a lien that wasn't discovered during the title search, the insurance company has to cover it. It also covers your legal fees if someone challenges your ownership. And for that, you pay a one-time premium at closing. It's usually 0.5% to 1% of the purchase price. Your lender is going to require a lender's policy, but you should also get an owner's policy. The lender's policy only protects the lender and basically for the loan amount. The owner's policy protects you and your equity above that, up to the value of the property. Here's a real example. A buyer reviewed the title commitment and found a $22,000 mechanics lien from an unpaid contractor. The seller claimed the contractor— the— yeah, the seller claimed the contractor was paid but couldn't provide proof. The title company required the lien to be paid off before issuing the title insurance. So at closing, $22,000 came out of the seller's proceeds to clear the lien. If the buyer hadn't reviewed the title commitment, they might have inherited that lien. And they would have been on the hook for $22,000 potentially in someone else's debt. All right, when you begin your due diligence process, you're going to want to order the title commitment very early in that process. Usually takes 1 to 2 weeks to get it back. Remember to review Schedule B-2 very carefully. Do not skip that step. Don't forget to budget 0.5% to 1% of the purchase price for your title insurance. And do not close until all title issues are resolved. If there's a lien, make sure it gets paid off before you sign. All right, hit the like, subscribe, and share button so you can let your network know you are serious about self-storage investing. So, you know, one of these days you find that first deal and you need partners, they already know you as being in self-storage because you've been liking and subscribing and sharing so much. All right. All right, next up, day 47. How long should due diligence actually take. Oh, and I owe you some cheat codes. All right, cheat code number 1, AI. Claude would be my go-to, but take these documents. Why mess around? Take any of these, any legal document, any contract, anything, put it in AI and just ask away. Ask questions, ask if it's normal, ask if there's anything you should be concerned about, right? And that's going to educate you. Cheat code number 2, and this is, look, if you want to skip AI because you think it's the devil or I don't know, whatever your reason is, fine. Don't do this without an attorney. You have to use real estate attorneys for things. They know how to read these things. They know what they are. Use an attorney. All right. Like this video if you've ever caught a hidden lien on a title commitment. I, I guess I'm shooting for zero likes here on this one. Subscribe so you don't miss the daily drops. And day 48 coming up soon. Very soon, which is live with a special guest. So subscribe so you don't miss that. And of course, share this with someone who's about to close on a property without reading the title commitment. They will thank you later.
