New Jersey Title Insurance: Do I Really Need it?

Purchasing real property in New Jersey (or in any state, for that matter), is definitely not a time to take short cuts. While most home buyers acknowledge this fact, some may still question the necessity of some of the steps along the journey to home ownership. The process of buying a home involves a pretty long checklist – if you’re doing things the right way.

One standard task that you need to accomplish before the closing date is purchasing title insurance. Buyers who aren’t familiar with title searches and title insurance may be caught off-guard when they discover another fee that they are responsible for in their quest to own a home. Important questions you may have include:

What is the purpose of a title search?
The person or persons listed on a property’s title are the rightful owners of the home. When the title insurance company (or your NJ real estate attorney) performs a title search on your intended home, they are looking for anything in the history of the property’s ownership that suggests there may be a problem in transferring the ownership of the home. This preliminary examination combs through records surrounding the previous ownership of the home, i.e: deeds, trusts, wills, divorce agreements, judgments, bankruptcies, tax records and liens. Any minor encumbrances (a lien that needs to be paid off, missing signatures) can usually be cleared up, allowing the sale to proceed.

Why do I need to buy title insurance if the title search was clear?
The reason title insurance is necessary is because it is virtually impossible for any initial title search, no matter how thorough, to foresee a claim to ownership that was filed incorrectly and/or is long-buried in a pile of dusty paperwork. Misspelled names, long-lost relatives, estate planning snafus and other problems can pop up at any time in the future – after you’ve already closed on the property and have moved in.

If a title problem arises after I’ve moved in, how will title insurance help me?
Your title insurance lender’s policy will act as a safety net if a buried problem turns out to present a real claim to the property even after you’ve closed on it. If a long-lost co-owner turns up and wants to enforce his claim of ownership, he can take the matter to court, however, even if he wins and is granted ownership of the home, your title insurance lender’s policy will pay your lender the balance on your mortgage. If you also purchase an owner’s policy, that will kick in to reimburse some or all of the money you already paid, such as a down payment and any initial mortgage payments.

How much does title insurance cost?
Purchasing title insurance is going to cost you a one-time fee of around $1,000, give or take, for the lender’s policy, and less than $100 for an owner’s policy. This is money well spent even if you never make use of the coverage. That may sound strange, but here’s why it’s true: on the very small off-chance that a missed claim surfaces and you are without title insurance, you could lose your home and a significant amount of money.

Virtually all lenders will require you to acquire title insurance before they agree to approve your mortgage. In addition, most NJ real estate attorneys won’t represent you if you attempt to refuse title insurance because of the inherent risks involved in your future as a property owner. Title insurance may seem unnecessary, but it is absolutely, without a doubt, a crucial piece of any New Jersey real estate transaction.

 

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