What is “Marketable Title”? How to make sure there are no clouds on title

What is “Marketable Title”? How to make sure there are no clouds on title

 

“Marketable Title” refers to the condition of the title and the ability to convey or transfer the property or land to a potential buyer without any liens or encumbrances, which would in essence form what is called a “cloud” on the title.  Essentially, it’s a term of art inferring that the ownership and possession of real property is readily transferable and free from any potential claims or defects. If there is a defect in the chain of title, the defect or “cloud” must be cured before a seller can convey and transfer a marketable title or before a title company will issue a title policy.
If there is a title policy in place and a defect becomes known, the title insurance company may elect to insure against any issues that the defect may cause in the future.  In other words, the insurance company agrees to repair the issue only when or if it ever becomes a material issue.  In some cases title defects in the chain of title may never become an issue or threaten the value or ownership of the real estate or land. Title insurance companies are in the business of mitigating risk and whenever possible they would rather defer the risk as opposed to paying to address the issue or correct it before it is necessary.
For more information on performing a title search to ensure Marketable Title see:

What is a Title Search and what is involved in a Title Search | Part 1

What is a Title Search | What is involved | Why it is critical