Why do I need Title Insurance?
Real Estate has such great value that many special laws have been enacted to protect the owner of the property and the heirs of the owner. Also many others may have rights in the property such as Mortgage and Lien Holders, Municipalities for Tax Liens, the United States for Federal Tax Liens and the others for Minerals, Oil or Air Rights. Because of these rights and the bundle of laws protecting the owners, and others that have an interest in the property, the purchase of real property must be done carefully and only after an extensive investigation of the title. Even after an extensive investigation, the only protection against such things as: errors on the record, missing heirs, mental incompetence of the seller, marital status, etc. etc. etc., is by the purchase of a Title Insurance Policy.
The following are some of the issues that must be addressed when purchasing real property: -The continuous record of all owners to the property must be searched. This is called a “Chain of Title”. If there is any break in the “Chain of Title”, the title you obtain may be defective. – Lawsuits, judgements and liens against former owners may be a claim against the property, and if not discovered during the search of the title, may have to be paid by you in order to clear the title. – Unpaid real estate taxes are a first lien on real property and if not paid may result in the loss of your title to the premises. – Have any former owners granted rights to others? Rights such as easements for a driveway or power line, any right of Access to or across the property. Did a former owner place restrictions on the use of the property? Will the former owner have the right to get the property back if the restrictions are violated? – A Deed will not answer these questions, an Abstract of the title may not reveal the answer. What protects you against Recorders errors or matters not of record? Only a Title Insurance Policy!
Is Title Insurance Expensive?
The answer to this is, considering the amount of the investment and the value of the property, the cost is small. You should be advised that “Title Charges” in New Jersey are regulated by the New Jersey Department of Banking and Insurance. In order to expedite the searching process the buyer of real property should always obtain a copy of the prior owner’s Title Policy.
My present mortgage is covered by a Title Insurance Policy and now I am refinancing, do I need another policy covering the new Mortgage?
Yes, you will need a new policy. The policy on your present mortgage is reduced as the mortgage is paid down. When you refinance and payoff the mortgage, the policy will terminate. You may be entitled to a reduced rate based on the amount remaining on the present mortgage.
When I purchased my home I also bought a Title Insurance Policy covering my ownership interest; why do I also need a mortgage policy?
The mortgage policy covers the interest of the Lender whose interest is different than that of the owner. The Lender wants to be sure that the mortgage is a first lien on the property, so that in the event of a foreclosure, the Lender will have good title which is free of any liens. In the event of loss under the Lender’s policy, the Lender will generally be compensated up to the amount remaining on the mortgage. The Owner will be compensated for the difference between this amount and the amount of the insurance under the Owner’s policy. The premium charge for the Lender’s policy, when purchased with an Owner’s policy, is called a “Simultaneous Rate” and is only an additional $25.00.
What happens if there is a claim against my property? Do I have to pay for the legal defense in the matter?
No! The Title Company will hire legal counsel, at the company’s expense, and take the action it deems appropriate to clear the claim. If the company is not able to correct the problem, your losses will be covered by the policy.
Will the company make any charges other than a premium charge?
Yes. There are Search and Exam charges. You should be aware that these charges are regulated by the Department of Banking and Insurance. Presently, the Exam charge is $100.00. Other search charges, such as those for judgements, taxes and assessments, are charged at the actual cost to the company.
How long does it take for the company to issue a Commitment and for me to get to Closing?
We try to allow 3-5 days in order to get the necessary searches and to do a thorough examination and reading of the title. If we are advised that there is a need to reduce the time, this can be accomplished in most cases. We do everything possible to accommodate the time constraints of our clients.