Ensuring that a real estate title is “marketable” is one of the most critical aspects of a real estate transaction. A marketable title is one that is free from significant defects, encumbrances, or claims that could threaten the buyer’s ownership rights or impede resale. Below is a structured guide for verifying marketable title.
Conduct a Title Search
A title search is the foundational step in establishing marketable title. It involves examining public records to confirm that the seller legally owns the property and to identify any encumbrances or defects in title.
Key components of a title search include:
- Grantor-Grantee Index Review: Track property transfers and chains of ownership.
- Civil and Court Records Review: Look for liens, judgments, or lis pendens.
- Tax Records Examination: Confirm taxes are current and no unpaid tax liens exist.
- Vital Records and Probate: Research deaths, estates...
A thorough search may involve tracing the chain of title back 30 years or more, depending on jurisdictional requirements and underwriting standards.
Analyze Title Defects and Encumbrances
A title is not marketable if it contains defects that would expose the buyer to litigation or impede full use and transfer of the property. Common encumbrances include:
- Mortgages and mechanics’ liens
- Easements and covenants
- Judgments and bankruptcies
- Unreleased prior mortgages
- Encroachments, as revealed by a survey
These must either be cleared, insured over, or disclosed as acceptable to the buyer.
Examine the Title Commitment
A title commitment provides an overview of the proposed title insurance policy. It includes:
- Schedule A: Lists parties, legal description, and insurance coverage details.
- Schedule B-I: Lists requirements that must be satisfied for the policy to issue.
- Schedule B-II: Lists exceptions that will not be covered unless removed
To ensure marketability, items on Schedule B-I must be resolved (e.g., payoff letters for liens, affidavits of heirship), and objectionable exceptions on Schedule B-II must be addressed or removed through curative actions or endorsements
Order and Review a Survey
A property survey reveals boundary lines, encroachments, and easements. For marketable title:
- Confirm there are no encroachments from adjacent parcels.
- Identify and address any boundary discrepancies.
- Determine if public utility easements affect usability or title value
Verify Deed Validity and Ownership
The deed must be valid and properly recorded:
- Ensure names on the deed match the parties in title and contracts.
- Check for proper execution, acknowledgment, and notarization.
- Confirm that the grantor has legal authority (e.g., trustees, executors, LLCs)
Confirm Legal Access
Marketable title requires legal access to the property. If access is via an easement, it must be recorded and non-exclusive. Absence of legal access may constitute a title defect
Clear Title Objections and Close with Title Insurance
Title objections should be resolved by:
- Releasing liens or obtaining payoffs
- Executing curative documents (e.g., quitclaim deeds, affidavits)
- Adding affirmative endorsements to cover known risks
Finally, issue a title insurance policy, which protects against undiscovered defects not found in the public record. Title insurance is essential for risk mitigation and transferability
How Abstract Authority Can Help
Abstract Authority provides expert-level ownership search reports that integrate seamlessly into the due diligence process. Our services are designed to:
- Quickly verify current and prior owners
- Trace transfers and detect irregularities
- Identify unreleased liens, judgments, or encumbrances
- Deliver clean, documented title histories