Title Insurance & Closing FAQs
It is the evidence that states the rightful and legal owner of the property. Titles are recognized and protected by the law.
Title insurance protect you against any loss or damages resulting from defects in the title.
An important part of the closing process is purchasing an Owner’s Policy to protect your investment. Most new homeowners think about buying new furniture or painting the new walls, not worrying about being responsible for the bills that could be left behind by the previous owner.
Lenders require you purchase a title insurance policy to protect their investment, and you should have a policy to protect your investment as well. For a one-time fee paid at the closing table, an owner’s policy can protect you, your lender, and your property rights for as long as you own that property.
The owners policy can protect you from:
- Unpaid mortgages
- Unpaid property taxes
- Child support liens
- Improper recording of documents
- Conflict of wills
- Missing heirs who could claim the property belongs to him/her
- Missed easements or rights of way (property lines) that could limit your use of the property
Buyers, sellers, and lenders all benefit from title insurance. Without it, purchasers and lenders are not protected from possible defects.
A buyer makes an offer on a home and the seller accepts. Partners Title then acts as the intermediary between all parties (on both buyer and seller sides) to record the necessary legal documents to finalize the purchase.
We may work with several different places, companies, and/or people as it orchestrates the close of your transaction.
Real Estate Agents: The buyer’s and seller’s real estate agent(s) are in constant communication with their clients and us to gather all the information we need. While we conduct a title search and gather the information from other parties, the real estate agents are coordinating an inspection of the property, and negotiating the final price and the final closing date. If any issues arise in the title search, we will work with the seller and both real estate agents to resolve the issue.
Lenders: If you need a loan to purchase or refinance your home, a lender will be involved. The lender approves and provides your loan, and sets the terms and conditions of that loan. We will work with your lender to ensure those conditions are being met. On closing day, we will give you the final settlement statement from the lender.
Home Owner’s Insurance Companies (HOI): Homeowners insurance protects you if your home gets damaged or destroyed. We will work with your homeowners insurance to make sure the invoice amount for the first year is correctly stated on your final settlement statement. We also mail the initial check to the HOI company to make sure the first term is paid on closing day.
The fee for the first term is listed in the final settlement statement and should be reflected in your closing costs.
Surveying Companies: Some lenders may require a survey, or map of the property. A survey company will provide one of two types of surveys:
- Location Drawing: Shows the property as inspected, and shows the locations of any other buildings or structures affecting the property.
- Boundary Survey: Is more involved and is required to set or redefine a property’s boundary lines
If your lendor does not require a survey, you have the right to request one yourself, just make sure to clarify which type best suits your needs.
Homeowners Associations (HOA) & Property Management Companies: If you’re purchasing a home in a shared community, we will contact the homeowners association (HOA) or it’s property management company to find out which HOA dues and fees are required at closing. We will also check to see if any outstanding dues are owed by the current homeowners so you will not be responsible in the future.
County Records Office: Public records that track ownership, use, and assessments for a specific real estate property are filed at county records. When performing the title search, a title company checks with the county to identify the current homeowner as well as its ownership history. We use this information to record the transfer of ownership in a deed, then make it official by filing the deed with the county.
Although you may be the first owner of your home, the purchased lot has had previous owners.
In addition, the builder may have failed to pay subcontractors and suppliers, who could then put liens on your home. Title insurance will protect you against these potential problems and cover any legal fees involved in protecting your rights to the property.
A title search is where we contact with county records office to identify the current owner of the property, as well as the complete ownership history of the property. This information is then used to uncover any title issues or competing issues in the property. If an issues pops up, we will work with both the seller’s and the buyer’s real estate agent(s) to resolve the issues.
After the title search is completed, we will summarize our findings in a report, which is called a Title Commitment. You will receive a copy of this report before the closing so you are aware of any issues that may have found. We will work with the seller, the seller’s real estate agent, and your real estate agent to resolve these issues. All issues must be resolved before you can close on the property.
If something was missed in this search, your Owner’s Title Policy protects you against any of those consequences.
There are two types of title insurance policies. The homeowner’s policy (mentioned above) that protects the homebuyer, and a loan policy that protects the lendor. An owner’s policy is issued in the amount of the entire real estate purchase, no matter how much you’re borrowing. This provides protection for as long as you or your heirs own the property.
Most lenders require a loan policy when they issue the loan to you. The price of the loan policy varies depending on the amount you are borrowing. This type of policy protects the lender’s interests in the property if a problem should arise with the title, and it does not protect the buyer. The policy amount decreases over time, and eventually disappears as you pay off the loan.
In Minnesota, the buyer is responsible for paying for both the owner’s and the lendor’s policy.
In Wisconsin, the buyer is responsible for purchasing the lender’s policy and the seller is responsible for paying the owner’s policy. The lender’s policy in Wisconsin is a flat fee of $250, no matter how much you are borrowing.
If you are paying for your home in full, purchasing a lender’s policy is not necessary.
Closing fees could include:
- Appraisal: Pays for an appraisal report made by the appraiser.
- Attorney Fees: Both the buyer and the seller might have their own legal representation to prepare and record legal documents.
- Credit Report: Covers the cost of a credit report. The lender uses the information to help decide whether or not to approve you for the loan, and how much you can borrow.
- Document Preparation: Covers the cost of preparation of final legal documents, such as a mortgage, deed of trust, note, or deed.
- Flood Determination: This is paid to determine if the property is located in a flood zone. If it is, you will need to purchase flood insurance, which is paid separately.
- Home Inspection: Fee to verify the condition of the property and to check for home repairs that may be needed before closing.
- Lender’s Title Insurance: The cost of the lender’s policy that protect the lender’s investment
- Notary: Cost of having a person who is licensed as a notary public swear to the fact that the persons named on the document were in deed signed by those individuals.
- Origination: The fee the lender and any mortgage broker charges the borrower for making the mortgage loan. This includes taking and processing your loan application, underwriting and funding the loan, and other administrative service.
- Owner’s Policy: The cost of the owner’s policy that protects the homeowner’s investment for as long as they, or their heirs, own the property.
- Pest Inspection: Covers inspections for termites or other pest infections of your home.
- Real Estate Commission: The total dollar amount of the real estate broker’s sales commission, which is a percentage of the selling price of the property. This percentage is agreed upon prior to closing date and is paid for by the homebuyer.
- Recording Fees: Fees associated with legally recording the new deed and mortgage to the county records office.
- Settlement: Paid to the closer for the time spent gathering all necessary documents to create the final settlement statement.
- Survey: The lendor may require that a surveyor conduct a property survey to determine accurate boundary lines. This is a protection to the buyer as well.
- Title Search: Fee to search public records of the property
- Transfer Tax: The tax is collected in some localities whenever property changes hands or a mortgage loan is made. These fees are set by state and/or local governments. City, county, and/or state tax stamps may also have to be purchased.
- Underwriting: Paid to the lender, this covers the cost of researching whether or not to approve you for the loan.
Provided by American Land & Title Association (ALTA): Home Closing 101, here are some examples of real-life title issues:
A couple purchased a home from their landlord, who had taken out a $419,000 loan to purchase the property along with several other properties. The lien was missed during the title search, so the lender paid the landlord instead of paying off the lien. Despite making their payments, the bank sent a letter saying the home would be auctioned. Because the couple purchased an Owner’s Title Insurance Policy, the title company paid the lien and the husband and wife kept their home.
Properties were sold to unsuspecting buyers. Unfortunately, the sellers weren’t the rightful owners of the properties. Instead, death certificates of the real owners were falsified and the fraudsters appeared at settlement to sign the closing documents. The criminals were caught and the properties were returned to the rightful owners. But what about the unsuspecting buyers? If they had purchased an Owner’s Title Insurance Policy they would have been covered. However, if they weren’t properly advised to protect their investment they would not have only been without a home, but also lost their entire down payment.
Underground Utility Lines: After a months-long search, you finally find your family’s dream home—a safe neighborhood and great schools, and a big backyard for the swimming pool you plan to build. You move in and hire a contractor, but a few days into construction the contractor finds an underground utility line running right through the middle of your backyard. You check your owner’s policy and find out that the title search did not discover this easement. If the homeowner purchased an owner’s policy, their title insurance company would pay to have the underground utility relocated so they could build their swimming pool.
Fraud and Forgery: Fraud and forgery are examples of hidden title hazards that can remain undetected until after a closing despite the most careful precautions. Although emphasizing risk elimination, an owner’s policy protects you financially through negotiation by the insurer with third-parties, payment for defending against an attack on the title as insured, and payment of valid claims. Innocent buyers purchased a home site through a real estate company, accepting a notarized deed from the seller. After the purchase, another couple—the true owners of the property who lived in another city—initiated legal action to prove they actually owned the property. Because the innocent buyer purchased an owner’s policy for a one-time fee at closing, the title company provided a money settlement to protect against financial loss. As it turned out, a forger spent time in advance at the local courthouse, searching the public records to locate property with out-of-town owners who had been in possession for an extended period of time. The individual involved then forged and recorded a deed to a fictitious person and assumed the identity of that person before listing the property for sale to an innocent purchaser, handling most contacts through an answering service. Also, the identity of the notary appearing on deeds was fictitious as well. Homeowners without this coverage would have lost their home.
For a one-time fee, an owner’s policy provides protection for as long as you or your heirs own the property. Your owner’s policy also covers any legal fees and the costs of defending your property rights.