What is a Gap Endorsement?
When you are selling your home one of the requirements in the Offer to Purchase is that the Seller pays for the Title Insurance Policy. When the Offer to Purchase forms were changed early this spring, one of the provisions in the new contract was an option for the Seller to pay for a GAP endorsement to the title insurance policy. The option is almost always included in the offer to purchase based offer language. I won’t digress on that for now. Soon after the offer to purchase is accepted by both parties it now becomes a “Contract of Sale” and the listing agent usually orders a title insurance update. The title company will search for any liens or encumbrances against the property that is being sold and will issue, shortly after the offer is accepted a “Title Insurance Commitment” This is not the actual policy. The formal policy is issued about 2 weeks after the closing and is sent to the new homeowner. This time period between the issuance of the title commitment and the title policy is called a GAP. In this gap in coverage a seller technically could purchase a boat or car, use the house as collateral all un-noticed by the title company or the buyer. The Gap endorsement is signed by the Seller, under oath, which states that the seller will be responsible for this activity during this gap in actual coverage. I know you would never do something like this, but that is why we have a request for GAP endorsements with offers now. Someone abused the system.
Posted by: 
Glenn Hanon
Leave a Comment