The home buying process is complex, and there are many documents associated with a real estate transaction. Occasionally home buyers or sellers ask what is title insurance and why do I need it?
The Wisconsin form WB-11 Residential Offer to Purchase states that the seller shall give evidence of title in the form of an owner’s policy of title insurance in the amount of the purchase price.
A title insurance policy provides coverage for certain losses due to defects in the title that occurred prior to your ownership. Title insurance protects buyers against losses that may result in claims against ownership and threats that could cause them to lose the property. It assures a buyer that they are acquiring a marketable title from the seller.
By issuing the policy, the title company agrees to defend the policyholder’s title in court against any lawsuits that may arise from defects covered in the policy.
Title issues may include things like fraudulent or forged documents in the chain of title. There may be unreleased judgments or mortgages on the property, or there could be unpaid taxes or liens attached to the property.
A title insurance policy has a one-time premium and discounts are available if an existing title policy can be provided when the owner’s policy is ordered. This is because the title only has to be searched from the date of the existing policy. Title policies remain in effect as long as you are in a position to suffer a loss.
In Wisconsin, typically the seller pays for the owner’s policy and the buyer pays for the loan policy. An owner’s policy for a $200,000 home in Wisconsin, with a prior policy provided, costs $819. The cost of the policy is uniform throughout the state.
A gap endorsement or gap coverage provides coverage from the time the title insurance policy is issued until the deed is recorded. This will protect the buyer from any liens or encumbrances that occur after the title search is completed. Typically the seller pays for the gap coverage in a real estate transaction.
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