Finance
In NJ, what is the primary function of a title company's 'title search' and 'title examination' in a real estate closing?
ATo determine the property's market value
BTo trace the chain of title, identify any liens, encumbrances, or title defects, and determine the insurability of title✓ Correct
CTo conduct the home inspection
DTo verify the seller's mortgage payoff amount
Explanation
A title search traces the complete chain of ownership and encumbrances; the title examination analyzes the search results to identify risks, liens, and defects, and to determine if title insurance can be issued to protect the buyer and lender.
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Key Terms to Know
Title Insurance
Insurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.
Chain of TitleThe sequential record of all transfers of ownership for a piece of property from the original patent holder to the present owner.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
EncumbranceAny claim, lien, charge, or liability attached to real property that affects its value or limits its use.
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