Clear Skies Title AgencyClear Skies Title AgencyTitle insurance, escrow, mortgage payments, property taxes — there is a lot to understand when buying a home. It’s be confusing. Check out these answers below about NJ title insurance, mortgages and much more.
Title Insurance protects against any defects in title. Defects can range from errors in public records, forgeries, missing heirs, boundary/survey disputes, false impersonations of the previous owner, to unpaid mortgages and other debts. A property is often a substantial investment, why not protect it?
Title Insurance covers any loss sustained from a defect in title. It covers forgeries in title, missing interest in the deed chain, unknown liens, errors in public records, falsified deeds, unknown easements and encumbrances, impersonations of the prior owner, and unpaid/unreleased debts like mortgages, and more. Click here to learn how to chose the right title agency for you!
Title fees are fees and costs associated with completing a title search on the property in order to provide title insurance. Fees also typically include settlement, which are the services associated with holding escrow and disbursing funds.
While the lender requires title insurance in order to protect their interest in the property, that insurance lapses as soon as the mortgage is paid back in full. When bundled with the required lender’s policy, an owner’s title insurance can be purchased for a nominal additional cost, and it protects you for the life of your home-ownership. Check out this write up on how to save on title insurance!
Documents such as the Deed or Mortgage need to be recorded at the County Clerk/Register’s Office in order to take effect. The recording fee is the cost of recording which varies based on the type of instrument and number of pages. Any overages collected will be returned after the document(s) is recorded.
An escrow is a financial arrangement in which a third party will hold and regulate payment of the funds required of two parties in a given transaction. This helps to keep transactions protected by keeping payments in a secure account which is only released when all terms of the agreement are met and both buyer and seller are satisfied.
The counties in New Jersey have two different recording systems: Land Recording and Electronic Recording. Land recording is when the original deed and mortgage are mailed to the County Clerk/Register. They then record the documents in the Deed and Mortgage books, respectfully. Once recorded, these instruments become part of the permanent public record, and anybody searching the county land records will be able to determine who is in title, and what liens are attached to the property.
The Certificate of Occupancy is required for all new construction transactions, but only certain municipalities require it for a typical resale. There is a document called “T.C.O.” (Temporary Certificate of Occupancy) which can be requested from the Municipality to close before obtaining the C.O. The T.C.O. has strict requirements that must be adhered to. The property is not suitable to be resided in until the requirements are satisfied, the property re-inspected and the C.O. issued.
The lender will send a mortgage statement monthly with payment instructions. Additionally, there are instructions on the mortgage payment statement to set up automatic payment. Alternatively you can contact the mortgage representative who assisted you when obtaining your mortgage to guide you in the right direction.
Mortgage riders are used when a mortgage includes a non-standard feature. Meaning, if your mortgage is anything other than a fixed loan rate on a single family home, your mortgage will most likely require a rider. This rider will be used to highlight unique or unusual loan features to make sure all parties are in understanding. That being said, there are several different types of mortgage riders:
Although the responsibility of paying property taxes falls upon the owner of the property, in many mortgages, the lender, in order to ensure the property taxes are paid on time, may collect property taxes monthly to put into an escrow account and submit the payment on the property owner’s behalf when taxes are due.
In terms of utilities, the seller of the property is a great source for information. They will notify you which utility providers are in the area. In areas where there are multiple providers, you can also search for them online. It is important to contact the providers of when the purchase will take place so a technician can be sent to the property to set up. In areas where Water/Sewer are public utilities, the township must be notified to change the account to the new owner’s name.
Even though the property purchased is a two or more family residence, the property is likely treated as one property for the purposes for taxation. All bills related to the property are the responsibility of the homeowner.
Oftentimes, your lender will establish an escrow account for the purposes of paying your real estate taxes and homeowner’s insurance. They collect a monthly installment and will disburse when tax or insurance bills come due. Even if you’ve already paid your homeowner’s insurance premium for the year, the lender will collect a monthly insurance installment so that they have sufficient funds in escrow to pay your premium when it comes due in the coming year.
The rental agreement will remain unchanged even though the property owner may change. They should receive an Estoppel letter from the seller notifying that the property is being sold, who the new landlord is, and where to remit future payments for rent.
The security deposit for rent, as well as the monthly rent payment itself, will be adjusted on the settlement statement. e.g. If rent for January was paid on the 1st of the month and the property was sold on January 16th, the security deposit would be transferred in its entirety from the seller to the buyer. The seller would then pay the buyer 15 days of rent (represented for the period from January 16-January 31) as the buyer is the landlord during that period.
A 1099-S is issued to taxpayers who closed on a real estate sale during the tax year. Some examples of real estate transactions could be realizing gains or proceeds from the sale of land, commercial and industrial buildings, and residential properties, such as a home or condominium.
This represents the sales price on your real estate transaction, not the net proceeds you, the seller, received at the closing table.
The gross proceeds reported on the 1099-S does not necessary mean you will be taxed on that amount.
The IRS wants to know the total sales price for the property. However, you should consult a tax advisor to determine if any exemptions or deductions relating to the sale can be
considered when you file your tax returns.
Your 1099-S was sent to you and the IRS by the title agency who closed your real estate transaction.
No, married couples at the time of closing are treated as a single taxpayer. However, if you were advised by your tax advisor that you need two 1099-S’s, please reach out to your title/settlement agency.
In instances where the property owners are not married, the property sale price is divided equally among selling individuals (unless otherwise noted prior to closing). Each seller will receive their own 1099-S with their split of the selling price noted as gross proceeds. This amount is individually reported.
If you believe there is an error on your 1099-S, please contact your title/settlement agent.
A 1099-S should be received by most sellers of land, commercial and industrial buildings, and residential properties, such as a home or condominium in the prior year. For example, if you sold property in February 2022 you would receive a 1099-S for that sale in late January 2023. If you believe you should have
received a 1099-S but didn’t, please contact your title/settlement agent immediately.
This document and its information should be referenced when filing your federal and state income tax return. It’s good practice to work with a tax advisor to ensure any exemptions or deductions are considered.