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The title and the property cannot be legally transferred until the title defect is resolved. The titleholder must take care of all and any issues. For example, if there are tax liens on the property, the homeowner must pay off outstanding taxes before going through with the sale.
Title insurance guarantees you or your lender against losses from any defects in title that may exist in the public records at the time you purchase that property, and certain other risks described in the title insurance policy.
Examples of clouds on title include a property's address being misspelled in a deed conveying title, a mortgage lien whose repayment hasn't been officially recorded, a deed which has been signed but hasn't been properly recorded, an easement that has not been properly recorded, unpaid property taxes, a failure to ...
The defect or impairment on the title can be in the form of a lien, mortgage, judgment, or other type of encumbrance. Because other parties can lay claim to the property or asset, the title cannot be legally transferred to someone else. Defective titles are also called bad titles.
A title defect may also be referred to as a ?cloud.? These must be resolved before selling the property, and they include some of the following: Errors in the public records. Mechanic's liens. Bankruptcies. Liens for child support.
A quitclaim deed is often used to cure a defect (a "cloud on the title") in the recorded history of a real estate title.
The term bad title refers to a legal document associated with an asset that doesn't grant ownership to the entity that holds the title. This may be because of legal and/or financial problems, including unsatisfied legal issues or even unpaid financial obligations, or even something as simple as a clerical error.