When you buy a home, you expect it to be free of any liens or claims and that you can legally do what you like with the property. A marketable title is a title that is transferred to a new owner without the risk of an outside party making claims on it. This outside party could be relatives of the former owner or a lender.

Make Sure It’s Free of Defects

A marketable title is a title that is “free from reasonable doubt and such as reasonably well informed and intelligent purchasers, exercising ordinary business caution, would be willing to accept.” So when you purchase a property, you expect that it’s free of claims and you’ll be able to “hold it in peace.” If a title has a defect on it, such as an outstanding lien, it is not considered marketable.

A marketable title is free from defects like:

  • Poor recording of ownership
  • Previous liens or encumbrances
  • Problems with wording in real estate documents

Have Evidence of a Marketable Title

Having evidence of a good, marketable title will help prevent an outside party from making any claims on the property you just purchased. Evidence of a marketable title includes:

These documents identify the past owners and history of the home and are often based on professional examinations by a real estate lawyer of property records. Having a warranty of title is another way to ensure that the title is good.

A warranty of title is a good way to make sure a title is good as a seller cannot sell a home with a warranty of title if it has claims on it or they cannot legally sell the home. If there are any disputes over the title, you can get a quiet tile action, which is a lawsuit to determine who has claim over a property.

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The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.