Frequently Asked Questions
What is Title Insurance?
A home is most likely the largest, single investment any of us will ever make. When purchasing a home, you will purchase several types of insurance coverage to protect your home and property. These insurance coverages may include Homeowners and Termite coverage. We remember these well, because we pay them every year.
Unlike other insurance policies, title insurance premiums are charged one time and the policy remains in effect as long as you retain an interest in the property.
Title Insurance, while not as well understood as other types of insurance, is just as important. When you purchase a home, you are actually purchasing the title to the property which includes all permanent improvements located upon the property. That title may be affected by rights and claims asserted by others which may limit your enjoyment and use of the property. There also may be other claims to the property which may cause large financial losses. Title Insurance protects against these types of title hazards.
How Is Title Insurance Priced?
Title insurance premiums are based upon the amount of coverage required which will be the sales price and/or loan amount.
What Title Insurance Protects You Against?
Here are a few of the most common hidden risks:
- False impersonation of the true owner of the property
- Forged deed, releases or wills, Instruments executed under invalid or expired Power of Attorney
- Undisclosed or missing heirs; Mistakes in recording legal documents
- Misinterpretations of wills
- Deeds by minors or by person(s) of unsound mind
- Deeds by persons supposedly single, but in fact married
- Liens for unpaid estate, inheritance, income, gift taxes and child support
Why Do I Need Title Insurance?
To protect possibly the most important investment you will ever make – the investment in your home. With a Title Insurance Policy, you as Owner, have an indemnity contract that will protect and reimburse you for loss in the event someone asserts a claim against your property that is covered by the policy. A title insurance policy means Peace of Mind in knowing that the investment you’ve made in your home is a safe one. Title Insurance will pay for defending against any lawsuit attacking your title as insured and will either clear up title problems or pay the insured losses.
What Does a Title Company Do?
A title company serves two primary roles in a real estate transaction:
- The first role is a title search and examination of the property. A careful search of the public records is made to search documents which may affect the title to the property. These items include mortgages, liens, unpaid taxes, easements and other restrictions which may encumber the property. Upon completion of the search and examination of the property, a title insurance commitment is prepared which sets forth the requirements for establishing good and marketable title for the purchaser. The title commitment will also reflect any restrictions or other exceptions which may encumber the property.
- The second role is known as the “escrow services.” The title company, through its escrow officers, oversees the closing of the transaction and insure that all the terms and conditions of the sales contract have been met and satisfied. The title company makes sure that all necessary documents have been properly executed and makes all the appropriate disbursement of funds to insure that at the completion of the transaction, the buyer receives good and marketable title to the property. In many instances a lender provides funds to assist the buyer with the purchase price and the title company insures that it has followed all the closing instructions provided by the lender.
After the closing, (now known as “consummation”) the title company will record all necessary documents, forward all payments to any prior lender, County Tax Collector, and pay all parties who performed services or are due funds in connection with the closing.
How Can Title Insurance Protect You?
Title Insurance policies insure titles to real property for owners and mortgage lenders and provide the following protections:
- Payment of loss arising from hidden defects not found during a title examination or recording.
- Payment of legal expenses incurred to clear title defects, which threaten the lender or owner with loss.
- Assurance that the marketability of the property remains unimpaired from title defects.
Policies are issued based upon a search and review of the public land records and other relevant documents. A thorough examination is performed to determine title ownership and any other matters affecting the property title and use of that property. Items that may affect a title include easements, restrictions, rights of way and judgment liens.
The coverage provided by a title policy is long lived. The mortgage holder continues to be protected upon foreclosure of the insured mortgage or deed of trust. The owner of real estate is insured for as long as he or she owns the property, is the holder of a purchase money mortgage or deed of trust secured by the property or is liable under the warranties included in his or her deed to convey the property.
Does the Bank or Lending Institution Always Arrange for Title Insurance?
It usually does, but the lender only requires a loan policy. The lender does NOT arrange for an Owner’s Policy that protects and insures an owner’s interest in the property. You could lose your equity if you do not have an Owner’s Policy.
If I don’t have owner’s title insurance, how will a claim against my home affect me?
It could be very serious. It would mean you would have to pay all expenses involved with the legal defense of your rights and could even result in complete loss of your equity if your defense is unsuccessful.
What is a Title Defect?
It is any one of a number of things that could jeopardize your interest. It could be an unsatisfied mortgage, lien, judgment or other recorded claim against the property. A defect could also take the form of a claim by a third party such as an unknown heir or prior owner whose title was transferred by forgery or fraud.
Perfect Title Company is a full service title company with headquarters in Madison Wisconsin. Please contact us today with any other title related questions you may have!