An overview of the title process when purchasing or refinancing a property.
The acquisition of title insurance is an important part of any real estate closing. Title insurance, issued to the buyer, proves that the buyer has full ownership of the property, and insures him against any future discoveries of past claims on the property. The affirmation that the property does not have any liens or claims against it is known as clear title.
When a title order is received by a title agency, the first thing that needs to be done is the title search. The title search is performed by trained title officers, who complete a thorough examination of all available records on the property: deeds, mortgages, and titles, which are recorded on the county level; property and name indexes, which are found in upper court records; as well as any other document relevant to the
real estate purchase
. The title search uncovers any liens, claims, defects, or open mortgages on the property. This essential information must be identified, so that the above-mentioned issues can be addressed and cleared from the record before the transfer of title occurs. The entire process affords the buyer clear title.
A survey may be required as part of the title process. A survey is a legal description of the property, which is produced by a surveyor who determines the metes and bounds of the actual property. The title agency carefully reviews the survey in order to insure the buyer adequately.
If the property under consideration was foreclosed on, additional searches are required to confirm that the foreclosure proceedings were done properly and completely. This type of search is called a chancery. A title reader must review the chancery to ensure that all lien holders were addressed appropriately.
Once all the applicable searches are complete, a title commitment/binder is issued, and sent to all involved parties. The commitment is comprised of an itemized account of what the search revealed, including a list of requirements to be addressed prior to closing, and a list of exceptions which are not covered by the title policy. The attorney, mortgage broker, and bankers involved will see to it that applicable requirements, including payment of open mortgages, tax liens, or probate, are addressed in a timely manner. Occasionally the title agency will assume this responsibility.
When title is clear, the title agency assures the buyer of title insurance coverage, and the closing can be scheduled. A (HUD 1) settlement statement is prepared, itemizing all closing fees. Closing fees include bank fees for mortgages, applicable broker fees, outstanding taxes, and water dues. Closing fees also include title search expenses: the costs of the actual search, tax search, and upper courts search, as well as delivery fees and miscellaneous expenses. Finally, the actual title insurance premium is included in the total.
At closing, the buyer, seller, and their respective attorneys meet. After reviewing and executing all relevant documentation, the deal is consummated, and the title is transferred to the new owner.
- The insurance premium charge, which is state-regulated in New Jersey so that all title agencies throughout the state charge the same rate.
- Charges associated with the recording of the deed, mortgage, and discharge of any previously recorded mortgages. Additionally, transfer taxes paid by the seller are collected by the title company.
- Title search expenses, including: county, tax, and upper court searches; charges for amendments and endorsements required by the lender; delivery and notary fees; and any other miscellaneous expenses.
What is a title search?
A title search is a detailed inspection of the historical records concerning a property, performed by trained personnel. These records include deeds, court records, property and name indexes, and many other documents. The reason for the search is to validate the seller's right to transfer ownership, and to learn about any claims, defects or burdens on the property.
What needs to be done when a title search
When a title search reveals problems like unpaid taxes, open mortgages, or judgments against the seller, all outstanding obligations need to be paid off, or knowingly assumed by the buyer, before the transfer of title.
How can I clear up liens and other defects?
The title commitment must be carefully reviewed, after which all the necessary requirements should be addressed between you and the applicable parties.
What is a Title Commitment?
A title commitment contains an itemized account of requirements and conditions stipulated by the title agency before it can insure clear title. Generally, requirements involve an accurate survey, and the settlement of existing liens on the property. The commitment also lists certain exceptions that will not be covered by the title policy.
What Kinds Of Charges Can I Expect At Closing?
Closing charges include property taxes and condo fees; home, survey, pest, and any other inspections; bank fees associated with the loan; and title fees. The closing statement itemizes fees for matters paid on your behalf by the seller.
Do I have to pay for title insurance again
Title insurance is necessary when refinancing, since the current mortgage policy is only for the life of the existing loan. The new lender will require a mortgage policy on the new loan.
Do I need title insurance if I’m purchasing
a brand new home in cash?
There are no regulatory laws requiring a title insurance policy in this case. However, title insurance affords you protection against any mortgages, judgments, or acts of previous owners filed on public record.
Very often, there may be a mechanic's lien against new construction property that may not have been included in the original property search. If the builder refuses to pay the lien amount after the closing takes place, the buyer would be required to legally discharge this lien. Title insurance transfers the responsibility of a court defense to the title insurance company, all for a one-time premium.
What is a survey?
A survey is a legal description of a property, compiled of measurements taken by a licensed surveyor. The survey is necessary to make certain that the correct boundaries are recorded in the legal description, so that the purchaser can be issued title insurance accordingly.