RealTown Words

1. An agreement formed by the receipt of an earnest money deposit for the purchase of real property as evidence of the purchaser’s good faith and intention to complete the transaction. The agreement is used to bind the parties until a more formal contract can be prepared and executed. Receipt of the binder money, or deposit, is usually evidenced in the sales contract.
2. A written instrument giving immediate fire and extended insurance coverage until a regular insurance policy can be issued, sometimes obtained pending the closing of a real estate transaction.
3. A temporary contract of title insurance in which the insurer agrees to issue a specified policy within a certain period of time. Excluded from coverage are any defects, liens, or encumbrances affecting the title and intervening between the date of the binder and the date of the conveyance to the proposed insured.
Because a preliminary report does not constitute a commitment to insure the title, it may sometimes be advisable to obtain a binder or commitment from the title insurer stating its willingness to insure the title, particularly in complex transactions with multiple simultaneous closings.