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A title to a piece of property, or the Deed, provides evidence of lawful ownership. At every real estate closing, the Seller provides the Buyer with a Deed which transfers ownership free of any liens or encumbrances. Title insurance is a policy that insures a property owner or mortgage lender against loss by reason of defects in the title to a piece of real property. Defects can range from liens which are public notices of money owed on the property, encumbrances which are registered interests on the home from someone who is not the owner and defects are serious errors, omissions or other complications related to the ownership of the home.

All property records are maintained by the County Clerk's office, also called the Registrar. There are Deed Books and Mortgage Books that archive all transactions related to properties within the county. In a Deed, there is a recitation of the book number and page number for prior deeds transferring the property to the Seller.

It is important to note that each title insurance policy has its own terms, conditions, and exclusions. Unlike other insurance policies, title insurance protects the home buyer and lender from past events that affected the property and guard against future claims.

Title insurance is required by all mortgage lenders
This insurance covers the lender against the costs of defending against legal actions and will cover the lender up to the amount of their mortgage lien. It also will protect the lender against issues that may not have been found in the public records such as documents executed through fraud or forgery.

Buyers are often really surprised at the requirement of title insurance and the cost. Title insurance rates are set by state agencies according to the sale price of the property or a certain charge per thousand dollars. It is typical for a policy in North Jersey to cost between $1,500 - $3,000. 

During the transaction, the closing attorney will start the process of obtaining a title insurance policy by requesting a title commitment from the company. The Title Insurance company will issue a title commitment after reviewing the public records such as deeds, mortgages, court judgments, tax records, divorce decrees, wills and trusts and bankruptcy filings. This is really important because the holder of a court judgment can execute on that judgment by seizing the property. Similarly, a tax lien can be sold by a municipality and the purchaser lawfully will gain ownership of the property.

As real estate professional, you may be called on to assist with clearing any defects in the title. The Closing Attorney will negotiate and demand evidence to clear all defects in the title binder through the seller's attorney. However, as the Agent, you should know what is required. Often a seller may need to escrow monies at closing or make a direct payment to clear any judgments or liens. The Agents are often the glue that can help keep a deal together so having a good understanding of issues raised in the title commitment will help to address and potential complications.

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