One of the many steps when completing a residential or commercial real estate transaction in New Jersey is a title search. A title search is not legally required in New Jersey, although many mortgage lenders require one before approving a loan for a piece of real estate.
Regardless, a title search is an essential part of the homebuying process. It is designed to protect your real estate investment and avoid delays or complications in the real estate process.
What does a title search do?
The purpose of a title search is to examine historical records of the property to verify that the property is free from any legal issues, such as liens or claims by anyone else that they are the rightful owners of the property. If the search turns up no legal issues or claims, you are considered to have clear title.
A title search should trace the history of the property back to the original owner. A title search should be able to tell you whether the person selling the property to you is the rightful owner.
In addition to liens, a title search can also reveal any outstanding mortgages, judgments or unpaid taxes on the property. Additionally, a title search will tell you if there are any restrictions on the property, such as easements or covenants.
For example, perhaps you plan to purchase a residential property but want to build a large fence in the backyard for privacy because you believe the property is too close to the neighboring homes. You conduct a title search which turns up a restrictive covenant stating that only fences up to a certain height are allowed.
If this means you cannot build the fence you wanted, you might decide that the home purchase is not worth it. Without conducting the title search, you may have purchased the home, began building the fence and then found yourself in legal trouble by violating the restrictive covenant.
Requirements for a title search
The specific legal requirements for conducting a title search vary depending on the transaction.
Typically, a title search involves reviewing public records, such as deeds, mortgages, judgments and tax records. The search is usually conducted by a title company or real estate attorney.
The title search process can take as little as a few hours or as long as several days, depending on the availability of public records and the complexity of the specific search. One to two weeks is a typical timeframe for a thorough title search to be completed.
Who pays for the title search also depends on the specifics of the real estate transaction, although it is common for the buyer to pay for the costs of the title search as part of their closing costs. Payment arrangements are negotiable and sometimes the seller will agree to cover part of the costs.
New Jersey title searches go back at least 40 years, although it can go back farther in some cases. Although you might view a title search as nothing more than another step in the process, a title search protects everyone involved in the transaction and is a step you should not overlook.