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Frequently Asked Questions
You buy a home. Everything is signed, sealed, and delivered. At long last, it's all yours -- land, house, lawn, trees, and mortgage. Time to celebrate!

Maybe. Maybe not.

What if, many years ago, a deed was forged on the property you just bought? What if there are unpaid taxes? Or a clerical error in public records? Or previously unknown heirs of a former owner?

What if?

Hopefully some of the questions surrounding your protection can be answered here.

1. What is title insurance?

Title Insurance is an insured statement of the condition of your "title" or ownership right to a certain piece of property. A title insurance policy describes your property in detail and states what limitations, if any, there are to your ownership. (For example, you may take ownership subject to existing liens or encumbrances. Or you may not own mineral rights. Or easements may have been granted to utility companies or adjacent property owners.)

Title insurance differs from other types of insurance in that it protects the insured from a loss that may occur from items or occurrences from the past. Other types of insurance cover the insured for what might happen in the future. Another difference between Title insurance and all other types of insurance is that the insured pays a one time up front premium rather than a monthly or annual premium.

Most importantly, a title insurance policy guarantees that the property you are purchasing is free of undisclosed liens, confusion in the rights of ownership and other clouds on the title. In short, it guarantees that you own the property for which you bargained.

2. Why do you need title insurance?

When a lender commits to loan money on a piece of property, they have gone to great lengths to insure the security of the investment. The security of the mortgage is protected by performing a due diligence investigation of first, the purchaser/borrower and second, the property.

A significant part of the property due diligence is insuring the quality of the title to the property. The lender does this by obtaining a loan policy of title insurance.

THE LOAN POLICY DOES NOT PROTECT THE PURCHASER/BORROWER

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 not to be known at the time of sale.

But this policy only protects the lender's interest. It does not protect you. That is why you need an owner's policy, which can be issued at the same time as the loan (mortgagee's) policy.

3. What danger of loss could you face?

For example, let's say you purchase a piece of property in the amount of $100,000. The down payment on the loan is $20,000, leaving the loan amount at $80,000. However, your equity of $20,000 is not covered since you did not get an owner's policy. Now, what would happen is some matter arises affecting the past ownership of the property? The title insurance company will only defend and protect the interest of the lender because of the insurance of a loan policy. Your self as the owner would have to assume the financial burden of legal fees. If your defense proves to be unsuccessful, the result could be a total loss of title. The title insurance company would pay the lender's loss, and you as the borrower would lose your down payment and any other equity you may have accumulated of the property itself. Not to mention the amount you owe on the note if still due.

4. How can there be a title defect if the title has been searched and a loan policy issued?

Title insurance is issued after careful examination of the copies of the public records. Here in Wisconsin, these records are stored in the Register of Deeds office and are available for any party to look at. But even the most thorough search by professionals cannot absolutely assure that there are no title defect present. In addition to matters shown by public records, other title problems may exist that cannot be disclosed in a search.

Here are a few of the most common hidden risks that can cause a loss of title or create an encumbrance on title:

• False impersonation of the true owner of the property
  
  
• Forged deeds, releases or wills
  
  
• Undisclosed or missing heirs
  
  
• Instruments executed under invalid or expired power of attorney
  
  
• Mistakes in recording legal documents
  
  
• Misinterpretations of wills
  
  
• Deeds by persons of unsound mind
  
  
• Deeds by minors
  
  
• Deeds by persons supposedly single, but in fact married
  
  
• Liens for unpaid estate, inheritance, income or gift taxes
  
  
• Fraud

5. What protection does title insurance provide against defects?

Title insurance will pay for defending your title in the courts, as the insured, at its own expense, and will either clear up title problems or pay the insured's losses. For a one time premium, an owner's title insurance policy remains in effect as long as you, or your heirs, retain an interest in the property, or have any obligation under warranty in any conveyance of it.