What is the Difference Between Clear, Marketable and Insurable Titles? (And Why You Need to Know!) (2024)

Have you seen something like this in your Additional Terms: “Contract is subject to sellers providing buyers a clear and marketable title at closing.”

Aclear titleis a title without any kind of impairment, lien, or levy from other parties that poses no question as to legal ownership.

A marketable title is a title that is free and clear of any defects or clouds that a reasonable buyer would find objectionable.Buyers should also be aware that a marketable title does not have to be aperfecttitle.Real estate transactions are handled by human beings who sometimes make mistakes, and the documents in any given title are likely to contain some sort of minor mistake.These can be minor typographical errors, superficial form defects, and other deviations that do not raise questions about the intent of the parties to a transaction or the recorded instrument in question.So, to put it simply, a seller would be able to convey marketable title if an examination shows no doubt as to their ownership of the property and that there are no clouds or encumbrances which would not be cleared at the closing of the transaction.

Insurable title calls for a somewhat less rigid standard when compared to a marketable title.An insurable title may contain some cloud or defect that would otherwise make it unmarketable,buta reputable title insurer has been informed of the defect and agrees to offer title insurance that affirmatively covers the buyer or does not except to the defect.In other words, there can be a known problem affecting the title, but the title insurer will protect the buyer from damages or losses which may result from that problem, up to the limits of the title insurance policy.Common defects found in insurable titles include uncanceled prior owner mortgages, questionable easem*nts for access, and unresolved judgment liens against prior owners.

Knowing the difference between marketable and insurable title will help buyers understand what they are purchasing.Buying property with insurable title is not necessarily a bad thing, but it is important to know the implications and potential problems with buying property under this standard.An insurable title might not be a worse quality title, but it may relieve the seller of an obligation to clean up a problem with the title before closing, if one is encountered.Also down the road when the buyer of the insurable title wants to sell, they could find some issues with buyers who are not okay with this title. If you are unsure about your sales contract and what its terms mean to you, always ask an attorney. Your Realtor, agent, best friend and/or neighbor who are not attorneys-are not legal sources that you should rely on to make these choices.Your Realtor provides in important role of providing guidance in your real estate transaction but never legal counsel.

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