Whenever you purchase real estate in New Jersey, the seller has a duty to provide you with clear title to the property. That means the property must be free from claims by any third parties. In order to make sure the property has clear title, your attorney must order and review complete title searches for the property you are buying from a reputable Title Insurance Agency licensed to conduct business in New Jersey. Searches include a record owner and municipal search; complete judgment/lien searches on the property and all buyers, as well as all sellers in the “chain of title”; and applicable flood and tideland searches.
Once all searches have been received, the title company will provide a full report in the form of a Title Binder, which recaps any liens, judgments or other areas requiring attention and resolution. Your attorney will then work with your lender and all other necessary parties to clear any existing title issue, ensuring the transfer of title from seller to you is “clear” and free from all defects and other encumbrances. Once this is done, your file is clear to proceed to closing. For a one-time fee for all searches and insurance, which you will pay at closing, the Title Company will insure your title for as long as you own the property against any future title claims.
What do title searches look for?
A title search will look for anything that may interfere with or “cloud” your ownership interest in the property, including:
- Liens – A lien could include an outstanding loan, such as a prior mortgage, that uses the property as collateral. An outstanding mortgage is not unusual and must be paid off at closing and the lien canceled. Your attorney will ensure any such lien is satisfied and removed/released at closing.
- Judgments – If your seller has been having financial problems, collection agencies or other parties may have judgments against the seller. In New Jersey all recorded judgments against an individual attach to any real estate that person owns. Hence, the judgment acts as a lien against the property which must be satisfied and removed at or prior to closing.
- Delinquent taxes – A property owner who fails to pay property taxes could end up with a municipal tax lien against the property. That lien must be satisfied and “redeemed” at closing to ensure you receive clear title. Sometimes the IRS or State may also file a lien against a person’s property for unpaid or overdue income taxes, which must also be resolved and removed.
- Easements – A title search should include a detailed examination of the property’s legal description for any easements to or from a neighboring property. Is there a shared driveway or access through an alley? Do utility companies have the right to access a portion of your property? Is a portion of your property restricted by conservation, farmland or similar easements? Your title search will reveal any such information so you can make an informed decision about your purchase.
- Ownership claims by third parties – A title search may reveal that another person or company had or has an ownership interest in the property or one that was never properly conveyed to the seller in the chain of title. This often happens when businesses or probate estates sell a property but fail to have all necessary parties sign the deed. Obtaining these signatures at a later date can often prove difficult, especially if the necessary parties have since died or cannot otherwise be located.
Can you forego the title search and title insurance?
If you plan to finance your purchase through a mortgage lender, your lender will always require both the title search and the title insurance. You do not have to use the title insurance they recommend, however. Lenders often have a business relationship with the insurance company, so there is a risk that their business interests are prioritized over your interests. If appropriate, the real estate attorneys at Mariano & Coiro, P.C., can help you choose an independent title company to conduct your search and offer a title policy.
Even if you are purchasing your property for “cash” and do not plan to go through a lender to make your purchase, it is vital to conduct both complete searches and pay for title insurance at closing to protect your investment. To find out more about how Mariano & Coiro, P.C., can assist you through this process, schedule a FREE and CONFIDENTIAL consultation with our skilled and dedicated team by calling 732-860-7620. You can also reach us through the firm’s contact page.
The real estate attorneys at Mariano & Coiro, P.C., can make recommendations for how to resolve issues that come up in this process. We have more than 36 years of experience in New Jersey real estate transactions, and we have facilitated thousands of real estate closings for individuals and families throughout New Jersey. A diverse and valued clientele turns to our firm for service and guidance they can trust.
Please see our overview of purchasing a home in New Jersey to learn more about the process and how we can help.