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What is Clear Title or Marketable Title?

by | May 2, 2022 | Real Estate |

Owning a home is a goal for many, but the journey from finding a home to moving into it is often complicated. Even if the buyer and seller agree on a selling price, the contract can fail for a variety of reasons. One of the reasons why a sale can fail is that there is a lack of a marketable title needed to transfer the property. A property owner usually needs clear title to sell the property.

What is a marketable title? A marketable title identifies the actual owner of the property. If the title is marketable, it does not contain any claims against it. This means that any other party could not have a lien in the property that would allow it to assert a claim. Claims made by a third party, such as liens or unpaid debt, are called clouds or encumbrances. For the title to be marketable, the property should be “reasonably free from doubts” in that the seller must own the property in entirety and the title must contain neither clouds nor encumbrances.

Texas, unlike other states, adheres to a “Good and Indefeasible” title standard. This is less certain than a guarantee that the title is good and marketable. The seller’s claim to ownership is clear, but the buyer is responsible for protecting himself from the claim to the property if another party attempts to claim the land. According to the Title Examination Standard, a title “need not be free from every possible suspicion” but that the “mere possibility of a defect that has no probable basis does not show an unmarketable title.” Most buyers choose to buy a title policy to protect them from title issues in Texas. However, if you do not have the option to purchase ownership insurance, buyers are advised to review the ownership report or certificate of ownership to verify the marketability of the property by thoroughly checking title reports before completing the transaction.

Real estate transactions are a major investment. We invite you to contact our board-certified real estate attorney to review your closing documents regarding a property transaction to ensure the process goes smoothly. Our number is 713-572-4900.

 

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