Key Takeaways
- A perfect title means property ownership without liens or defects.
- Titles represent ownership rights, while deeds detail the legal specifics of properties.
- You can discover property defects like easements, undisclosed heirs, or creditor claims through a title search.
- Title companies provide insurance policies against future title defects.
- Error in how deeds were prepared are a common title defect, along with third-party easements and legal challenges.
A perfect title refers to ownership of a property through a deed free of any liens or defects. This is sometimes referred to as a good, clean, free and clear, or absolute title. This type of title gives the owner unequivocal title rights that cannot be disputed or challenged.
Common challenges that can arise when securing a perfect title include third-party easements and legal claims. Buyers can work with a title company to ensure title security through searches and insurance against future defects.
The Role of Perfect Title in Real Estate Transactions
A perfect title refers to a state of ownership resulting from a deed unblemished by liens or other defects. Such a deed provides the holder with clear ownership that cannot be challenged by a creditor or other claimant. The deed is in optimal condition for a smooth sale or transfer of property.
It is important to understand the difference between a title and a deed. A title refers to the rights of ownership of a specific asset, often a unit of real estate. The deed refers to the physical document prepared for a sale or transfer. The deed lists legal details of the property, such as exact location and any easements or liens on the property. When preparing to issue a mortgage for the purchase of a property, a title company will thoroughly research the title history of that property. The goal of this research is to uncover any hidden defects that would have to appear on the deed being prepared.
Overcoming Common Challenges to Secure a Perfect Title
The title search may seem archaic in the age of electronic record keeping, but it safeguards the lender and purchaser against legal problems that could arise and dramatically threaten the value of a property. Below are some defects that a thorough search can uncover.
- Easements are third-party claims to the usage of some portion of a property. This can range from the harmless, such as an obsolete cart path running through a backyard, to a serious problem, such as a government easement to build a future road through a property.
- The legality of a former deed can be challenged for a wide variety of reasons. Perhaps it was made by someone not of sound mind, a minor was involved, or a familial relationship was incorrectly listed.
- Previously unknown heirs to a former deed holder may come forward to make a claim on the property.
- Creditors to a former deed holder may hold legitimate claims on the property to recover their debts. A common example of this is unpaid property tax.
- Human error in past deed preparation is the most common defect. This can occur in the public registrar’s office as well as in the clerical work of any lender, appraiser, or title company formerly associated with the property.
Once the title has cleared the title search, ideally in perfect form, the title company will produce an opinion letter summarizing its findings. It will also issue an insurance policy protecting the lender and purchaser against any further unforeseen defects in title.
The Bottom Line
A perfect title ensures property ownership free from liens or defects. This facilitates smooth sales or transfers of ownership. Buyers can use a title search to identify potential issues like easements, creditor claims, and clerical errors. Obtaining a perfect title can sometimes involve overcoming legal challenges as well.
Buyers can purchase title insurance to protect against defects that are uncovered after the initial title search.