Title insurance is an extremely important protective measure used in the purchase or refinance of residential or commercial real estate. However, many consumers do not understand title insurance or why it's necessary. Click on a question in the list below to review answers and helpful information.

What is Title Insurance?

Title insurance is similar to many other types of insurance. Title insurance protects a Buyer or lender from defects in the title to the real estate. Title insurance protects against loss resulting from any inconsistencies in the title of a property from liens or other title problems relating to a property. Title insurance is an actual insurance policy which a Buyer or lender receives after a closing. The title insurance company promises the Buyer that he/she has good title to the real estate. In addition, a loan policy promises the lender that it's mortgage has first position as far as liens are concerned. A lender wants to protect their interest in the property and a title insurance policy is an efficient way to accomplish this protection. In addition, Buyers should always insist upon an owner's title policy to protect their equity in the property. Title insurance commitments are issued after a complete search and examination of the public records which shows the condition of the record title, including any money obligations outstanding against the property, easements and other matters which may affect the rights of ownership, possession and use of the property.

Remember, real estate, like every other asset is worth protecting. A title insurance policy provides you with peace of mind. It takes the risk out of acquiring real estate. Typically, a Buyer or lender knows nothing about the history of the real estate involved. River Title Company researches the history of the real estate and provides a thorough report of any negative conditions that must be cured prior to good title being conveyed. In this day and age, it is not uncommon to find unreleased mortgages, judgments or construction liens against real estate. Through the years, your new property may have changed hands many times through sale, inheritance, foreclosure or bankruptcy. Each transfer was an opportunity for an error in title to arise. If an error occurred, and has never come to light, it puts your title in jeopardy. You could lose your property and the money you invested in it. And, even if you successfully defend your rights of ownership, the cost in time and legal fees could be prohibitive.

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Types of Title Insurance

There are two types of title insurance: First, there is Lenders title insurance, also called a Loan or Mortgagee Policy, and Owner's Title Insurance. Lenders generally require a Loan (Mortgagee) Policy when they issue you a loan which is secured by real estate. The Loan Policy is usually based on the dollar amount of your loan. It protects the lender's interests in the property should a problem with the title arise. This insurance protects possibly the most important investment you'll ever make - your investment in real estate. The Loan or Mortgagee Policy protects the lender for the amount of their loan. If they loan you $80,000.00 on your property, then their policy will be for that amount only. Secondly, there is Owner's Title Insurance. As the name implies, an Owner's Policy insures the new owner of the property. The policy, subject to legal conditions, guarantees that ownership is free from defects or encumbrances, except any listed as exceptions in the policy; the policy further guarantees that the new owner has access to the land. Moreover, the Owner's Policy will guarantee that you have the legal right to sell the property and convey marketable title to a new owner, subject to any new restrictions on the property imposed by the new owner. If you buy the property for $100,000, then the owner's policy will be written for the full amount of the purchase price. It is purchased for a one-time fee at closing and lasts as long as you own the real estate. Only an Owner's Title Insurance Policy fully protects the Buyer should a problem arise with the title that was not uncovered during the title search and closing process. Owner's Title Insurance also pays for any legal fees involved in defending a claim to your title.

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How Am I Protected?

In order to issue a title insurance policy, River Title Company must generate a search of public land records for matters affecting that title. This may require a search of the "chain" of title back 60 years or more. According to ALTA (the "American Land Title Association"), Twenty-five percent of title searches find a title problem that is fixed before the insurance is issued. Some examples of items that can cause a problem are: deeds, wills and trust that contain improper information, outstanding judgments or tax liens against the property, and easements. River Title Company makes the parties aware of the problems and either repairs the defects before closing or has the necessary corrections made by an attorney. After all corrections are made and defects are cured, then River Title Company issues the final policies. River Title Company ensures that the "record" title, is good subject only to the exceptions expressly set forth in the title insurance commitment and eventually the final policy. Title insurance insures against certain matters which do not appear of record, such as forgery, identity of parties, incompetence of former owners, interest of missing heirs, and status of individuals not having the "right" to sell property. Occasionally, in spite of an exhaustive title search, hidden hazards can emerge after closing. Items such as mistakes in the public record, previously undisclosed heirs claming to own the property, or forged deeds could cloud the title. Title insurance offers financial protection against these by negotiating with third-parties, and paying claims and the legal fees involved in defending the title. ALTA reminds us that owner's title insurance is necessary to fully protect a Buyer. Lender's title insurance, which is usually required by the mortgage lender, serves as protection only for the lending institution. The loan policy protects the lender against loss due to unknown title defects. It also protects the lender's interest from certain matters which may exist, but may not be known at the time of the sale.

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What can make a Title defective?

A title is the evidence that you have outright ownership and possession of land. In Wisconsin title to real estate is evidenced by a deed. There are many possible causes of title defects that no examination can disclose. This occurs because certain documents may never have been recorded and thus do not appear in the public record. A title insurance policy protects the owner against all these hidden risks. Hidden risks include the items listed below, and many more:

Fraud: False claims of ownership, forged deeds, wills, signatures, conveyances, instruments, false representations, false records of all sorts, illegal acts of trustees, guardians, administrators, and attorneys.

Human Error: This includes errors in copying, indexing, or recording; and errors by administrators, executors, trustees, guardians and attorneys. This might also include the destruction of records.

Improper Deeds and Wills: Deeds by persons of unsound mind, minors, deeds delivered after death or without the grantor's consent; invalid, suppressed erroneous wills, missing heirs, unsettled estates.

Liens and Other Rights: Liens for unpaid estate, inheritance, income, property and taxes; homestead rights, community property rights; irregular court proceedings, money judgments against the Seller or Buyer, court opinion reversals, lack of court jurisdiction; defective foreclosures. The standard owner's policy and standard mortgagee policy are based on public records maintained by the Register of Deeds office for the county where the real estate is located and also upon searches of other public records. Title insurance does not insure against matters that would only be disclosed by actual inspection or survey of the property. It also does not insure against certain matters not shown by the public records, such as unrecorded easements, liens or money obligations, unrecorded utility rights of way, public or private roads, community driveways and other types of encumbrances, or against the rights or claims of persons in possession of the property who are not shown by the public records.

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I'm refinancing, why do I need title insurance?

When you refinance your loan, you are obtaining a new loan, even if you stay with your original lender. Your lender will require title insurance to protect their investment in the property. However, you are generally not required by your lender to purchase a new owner's title policy. Even if you recently purchased or refinanced your home, there are some problems that could arise with the title. For instance, you might have incurred a mechanic's lien from a contractor who claims he/she has not been paid. Or you might have a money judgment against you which now has become a lien against your real estate due to unpaid taxes, homeowner dues, or child support for instance. The lender needs reassurance that the title to the property they are financing is clear of defects. The lender wants a guarantee that their lien will be in first position.

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I'm buying a newly built home, do I need title insurance?

Construction of a new home raises special title problems for the lender and owner. You may think you are the first owner when constructing a home on a purchased lot. However, there were most likely many prior owners of the unimproved land. A title search will uncover any existing liens and a survey will determine the boundaries of the property being purchased. In addition, builders routinely fail to pay subcontractors and suppliers. This could result in the subcontractor or supplier placing a lien on your property. Again, lenders want to be sure the property has clear title. Purchasing owner's title insurance will protect you against these potential problems and pay for any legal fees involved in defending a claim in the future.

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Who selects the title company?

Most owners of real estate and Buyers let the realtor and/or lender choose where their closing will take place. Normally they will just accept the title company that the Realtor or Lender has selected, not knowing they have a right to choose who performs the closing themselves. Federal law provides that a Seller may not force a Buyer to use a particular title insurance company. If your realtor or lender has selected your Title Company for you, don't be afraid to ask them why. Many title companies are national corporations. River Title Company is a local company with an excellent reputation. In addition, River Title Company is owned and managed by a local attorney who reviews transactions. No other title company in Rock County can give you this assurance. Please instruct your realtor and lender to have River Title Company provide your title insurance and perform your closing. Your realtor and lender do not pay for the title company's services. You do. Be a wise consumer and make your choice known.

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How are the fees determined?

Title fees and charges are regulated by the state insurance commissioner's office and vary from state to state. Don't be afraid to ask River Title Company for an estimate of costs up front. If you choose to go with a title company whom charges less, you may get what you pay for. Closings can be delayed for weeks because the title agent cannot perform the duties it has been hired to do, such as perform a title search and clear the title to make it marketable. The responsibilities of the title agent are vital to your investment or sale. When you evaluate River Title Company you will discover we are very competitive and provide the service you desire. The amount and type of coverage provided determines the cost of title Insurance. Unlike other insurance premiums, however, the title insurance premium is paid only once, as the policy is effective for so long as title or "ownership" remains in the name of the insured. River Title Company, offers a licensed staff, experienced in the Real Estate Industry. When you are dealing with River Title Company, you are dealing with a competent and knowledgeable professional. If your request is outside the scope of our service, we will refer you to someone who can handle your situation. Kindly consider placing your title insurance or closing order with River Title Company. We will provide you with excellent service and prompt results.

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Need More Information?

River Title Company welcomes your questions on title insurance, closing services and pricing. For more information, visit our Contact Us page or email River Title Company at: info@rivertitle.net.

Note: The above is a summary of general information related to title insurance available under a title insurance policy issued by River Title Company. Please refer to the title insurance commitment and policy itself to determine the exact benefits and the exclusions from coverage.

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