Clear Title
Definition and meaning of Clear Title in real estate.
A clear title is a property ownership title that is free of liens, clouds, defects, mortgages, or other legal encumbrances that could call ownership into question. Establishing a clear title is a mandatory requirement for a property sale or refinancing to close.
In more detail
Before a real estate transaction can be finalized, a title company performs a detailed title search to verify ownership history and identify any outstanding issues. A clear title means that no other parties can claim a legal right to the property, such as contractors with unpaid mechanics liens, ex-spouses, or government tax agencies.
If defects are found, they create a cloud on title that must be resolved before closing. Lenders will not issue a mortgage without a clear title and title insurance. Buyers should always purchase an owner's title insurance policy to protect their investment.
Key facts
| Category | Legal, Titles & Closing |
|---|---|
| Also Known As | Clean title or marketable title |
| Required By | Mortgage lenders and buyers |
| Key Protection | Title insurance policy |
A title search reveals an old, unpaid property tax lien from a decade ago, which the seller must pay off at closing to deliver a clear title to the buyer.
Frequently asked questions
What is the difference between a clear title and a marketable title?
A clear title is completely free of all encumbrances, while a marketable title is reasonably free from doubt, meaning a prudent buyer would accept it without fear of litigation.
How is a cloud on a title resolved?
It can be resolved by paying off outstanding liens, obtaining a quitclaim deed from an interested party, or filing a quiet title lawsuit in court.
Related terms
Sources & references
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