(TRENTON) – The General Assembly advanced on Thursday legislation Assembly Democrat Marlene Caride sponsored to require provisions regarding a sellers’ obligation to deliver marketable and insurable title in certain residential real estate contracts of sale. The measure was approved 70-1-1.
The bill (A-2180), which supplements the “Fair Foreclosure Act,” addresses situations in which a residential mortgage lender foreclosures on a residential property, buys the property at the resulting sheriff’s sale, and subsequently seeks to sell the property (commonly known as a “Real Estate Owned” or “REO” property) through a contract with a new purchaser.
Assemblywoman Caride notes that issues have risen in these transactions with respect to the seller’s failure to deliver marketable and insurable title at closing, thereby breaching the contract and leaving the buyer with considerable expenses incurred in connection with the purchase of the property.
“These contracts are one-sided, with very little negotiations available to the buyer,” said Caride (D- Bergen, Passaic). “The contracts have specific time frames that buyers must adhere to. If the seller cannot provide clear title, the buyer is only reimbursed deposit monies, while also having incurred appraisal fees, mortgage application fees, title and survey costs, as well as legal fees.
“This bill gives the buyer the ability to recover these out-of-pocket costs.”
The bill provides certain protections to a purchaser in these situations by requiring that a real estate contract of sale between a seller who takes title to a residential property as a result of a sheriff’s sale under the provisions of the Fair Foreclosure Act and a purchaser will provide that:
(1) The seller will provide a marketable and insurable title to the purchaser;
(2) Any failure of the seller to satisfy the requirement of providing marketable and insurable title pursuant to paragraph (1) will constitute a breach of contract;
(3) In the event of a breach of contract pursuant to paragraph (2), in additions to any other remedies that the purchaser may have, the seller will return to the purchaser any deposit money paid by the purchaser and will reimburse the purchaser for any expenses incurred by the purchaser in connection with the purchase of the property.
The bill was released by the Assembly Financial Institutions and Insurance Committee on May 12. It now awaits further consideration by the Senate.