Those who are buying a home in New Jersey for the first time sometimes wander if title insurance is really necessary. In short, the answer is yes, and there are a number of important reasons why this is the case. When a property is purchased, the title will be awarded to the buyer at the closing. The title is the document which gives the buyer right to take position and use the property. However, a title can come in numerous forms, such as tenants in common, life tenant, individual ownership or joint tenants.
Types of Land And Property Use
Investment property and land can be used in different ways and there are distinct rights for those uses. There may also be distinct owners for certain uses, as one owner may have mineral rights while another might have utility rights. Prior to buying a property and taking title to it, it is essential to perform a title search so that you can ascertain its title type, and whether it is clear and transferable to you. Some properties are in fact encumbered by either liens or judgments. While it is possible to perform a title record search yourself, you have to know where to look and what to look for, so this is a task that is best left to a professional, which will be required by most mortgage lenders.
What Title Insurance Covers
Title insurance is responsible for covering past events which are connected to a property, and which otherwise would become the responsibility of the owner. When title insurance is acquired, there are no policy exceptions which are associated with certain issues, so a title company, rather than the owner, would have to resolve certain issues that come up. For example, if a piece of property has a tax lien due to the taxes not being paid by its previous owner, then the current owner would be covered under their title insurance and would not have to pay it.
How Title Insurance Is Processed
When a contract purchaser makes an order for title insurance, a title company will perform a search so that they can discover any limitations or issues which exist with the title. If major issues are present, title companies will insist on these issues being corrected before the closing. These issues might include judgments, easements, improper vesting via trusts, wills or deeds, tax liens and notary acknowledgements which are improper.
The title search will usually reveal these issues and they should be cleared before the title closes. If for some reason the issues are unable to be cleared in time, they will typically be given an exemption within the policy coverage. At this point the buyer has the option of contract cancellation. At the same time, it must be emphasized that a title search doesn’t always find title defects. This is why having title insurance is so important. There are many issues that might not be found during a title search, such as fraudulent activities which were performed by previous owners.
