The decision to purchase a home is an important one.  It involves a significant amount of thought, time and money.  For most people it is among the most important financial decisions that they will make during their lives.  Title insurance companies provide a critical service by supplying real estate buyers and lenders with crucial information about the property being bought or mortgaged.

Virtually every real estate contract requires that the seller provide the buyer with proof that the seller actually owns the real estate being sold.  The form of this proof – called “evidence of title” – depends upon the custom and practice of the state in which the property is located.  In Wisconsin, the most common form of title evidence is the title insurance commitment.

The commitment prepared by Chippewa County Abstract and  Company Inc. is the work of a number of title professionals.  The history of the property is researched in the records of the Register of Deeds; the County Clerk and Treasurer; the Secretary of State; the Department of Workforce Development; and the clerks of the state and federal courts.  A title examiner analyzes the results of these searches.  Title examiners are licensed and regulated by the state of Wisconsin.  They have many duties to perform when examining a property file.  The application must be carefully checked in order to ascertain exactly what the customer needs.  The examiner must verify that a complete chain of title has been examined, either in the current exam or in previous title insurance policies on the same parcel.  Copies of deeds that are revealed in the search will be reviewed in order to verify that they meet all of the legal requirements for a valid transfer of real estate.  The tax and special assessment searches are reviewed for accuracy and completeness.  If Court proceedings are disclosed, they will need to be investigated to determine the full “title picture”.  Matters that were raised in earlier policies will be evaluated to determine if they still affect the property, and if they do, they will be carried forward to the new commitment.

After completing this analysis, the title examiner complies the results into the title insurance commitment for delivery to the customer.  It is called a commitment because the underwriter is committing to issue a title insurance policy that conforms with its provisions.  The commitment consists of Schedules A and B.  Schedule A contains identification information about the buyers, sellers, lenders and property, and the date to which the searches are effective (the effective date). 

Schedule B consists of two sections.  Schedule B-1 is the requirements section, which lays out what needs to be done for the proposed transaction to occur and be insurable.  Common requirements include execution, delivery and recording of a deed from the sellers to the buyers; payment of the purchase price and title premiums; and specific transfer language needed to take into account the marital status of the sellers or buyers.

Schedule B-2 lists the taxes, mortgages, liens, easements and other matters that do or may affect title to the property described in Schedule A.  Each item shown on Schedule B is referred to as an exception.  They are called exceptions because each item disclosed is being excepted or removed from coverage.  In other words, by listing these and only these exceptions in the title commitment, the underwriter is assuring the buyer and lender that there are no other matters insured against that affect title as of the effective date except those that are stated.  If, for example, a mistake was made and an existing mortgage or other lien was erroneously omitted from Schedule B-2, the insured buyer or lender will have the right to recover damages that they have suffered as a result of the mistake or omission.

In many cases, Schedule B of the commitment will contain exceptions for defects, problems or issues that need to be removed before the buyer is willing to buy the property and the lender is willing to lend on it.  This process is referred to as clearance.  Clearance can occur prior to the closing, at closing, and in the follow-up after closing.

Once the transaction has closed, we perform a later-date examination.   This is an update of the search and analysis to show the recording of the closing documents.  It will also show any matters that have arisen between the effective date of the commitment and the recording of the new deeds and mortgages (the “gap”).

Assuming that the later date examination discloses no new defects, liens or other issues, the title insurance policies will be prepared and printed.  The owner’s policy insures the buyers as to their new status as record owners of the property and assures them that, as of the policy date, there are no defects, liens or other matters which affect their title other than those that have been disclosed or otherwise excepted under the provisions of the policy.

The lender’s policy insures the validity of the new mortgage, assuring that it is not a forgery or unenforceable for any other reason in a way that would jeopardize the lender’s lien and its ability to recoup the money it is owed should be borrower default in repaying the loan.  More importantly, the loan policy insures the priority of the mortgage lien as of the policy effective date.  The policy will show what taxes and liens are superior to the mortgage.  This is important to the lender, since its title following a foreclosure will be subject to these superior liens.