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Beware of title defects before you close

If you are considering purchasing a home in New Jersey, it is important for you to ensure that the person selling it to you has clear title to the property. If you fail to address any title issues before you close, you may later find it difficult to sell the home, find yourself embroiled in litigation, or suffer similar undesirable outcomes. To protect yourself, it is vital that a thorough title search be conducted during the purchase process by a licensed NJ Title Insurance company, and the searches conducted are reviewed by a competent real estate attorney. If a title defect is discovered, you may have the right to cancel the transaction if the seller cannot cure the defect in a reasonable time prior to closing.

Watch out for these title defects

Defects in the home's title can be very serious. One of the most common types of title defects are filing or clerical errors. These can occur if there is missing or inaccurate public record or the owner has concealed or forged documents that will have an effect on the title. It is also vitally important that integrity in the "chain of title" be maintained. That is, all prior owners must appear in the recorded documents and be traceable back to prior transactions. Since these errors can adversely affect the title to the property (or mean that the seller does not legally own the property at all), it is important that these are discovered long before closing and addressed.

Another type of title problem arises when there are unresolved liens or other encumbrances on the property. It is not uncommon for banks or mortgage companies to neglect to properly cancel or discharge their mortgage lien against a property, even though the loan may have been paid in full. For example, this is a common occurrence when people refinance their mortgage without an attorney. Such a lien could remain undetected until the property is sold. Also, in NJ, if someone wins a judgment in a lawsuit against a property owner, that judgment automatically becomes a lien against any real estate owned. Until and unless the judgment is satisfied it cannot be "cleared" from the title. Liens can also attach against a property if the seller fails to pay property, income or other taxes. Since these liens typically stay on the property, even after it has been sold (and may subject the property to foreclosure), it is important for you to ensure that they are paid off AND properly canceled (the term is "discharged) before you close.

In addition to liens, unknown easements can also be troublesome. Easements on a property give someone else the right to cross or use that property for a specified purpose (e.g. accessing the beach or a public road, using the driveway to access their garage, etc.). Since easements can substantially interfere with your use and enjoyment of the property, as well as adversely affect the value of the property, it is imperative for you to discover their existence before you complete the transaction.

Lastly, when buying a house, many people try to save money by not buying a property survey (i.e., engineer's drawing of property boundaries, buildings, etc.). This is usually a very bad idea. Typically, your title insurance company will not insure the boundaries or other conditions on the property unless you have a new survey drawn at the time of your purchase. A survey will reveal important information, such as if a neighbor's fence or other object is encroaching on your property, or vice-versa. It is also disconcerting to plan for a swimming pool, for example, only to learn that an easement or property set-back lines exist that would prevent the installation. A new survey is money well spent for peace of mind.

Consult an attorney

Since title defects are difficult to detect, but may negatively impact you and your property, it is advisable that you seek the skilled services of an experienced real estate attorney before you close. The attorneys at Mariano & Coiro, P.C. can examine the title to the property for defects or issues and ensure measures (including title insurance) are in place to protect your best interests should title defects exist.

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