Quick Answer
A title defect is a problem, error, claim, lien, gap, or other issue affecting ownership or the ability to transfer or insure title as contemplated. Title defects can range from minor clerical errors to significant legal disputes over ownership.
When you hear the term "title defect" in a real estate transaction, it can sound alarming. But not every title defect is a closing killer. Understanding what a title defect actually is, and how it fits into the broader title examination process, helps you respond appropriately when one appears.
What Are Some Examples of Title Defects?
Title defects come in many forms. Some of the most common include:
- Unreleased mortgage: A mortgage that was paid off but never formally released from the public record. Read why an old mortgage may still show on title.
- Incorrect legal description: A prior deed describes the wrong parcel or contains an error in the legal description. Learn what to do if the legal description is wrong.
- Missing deed: A transfer occurred but the deed was never recorded, creating a gap in the chain of title.
- Wrong signer: A document was signed by someone who did not have legal authority.
- Deceased owner: A previous owner died and the property was never properly transferred through probate.
- Unknown heir: A person who may have an ownership interest was not accounted for in a prior transfer.
- Judgment, tax, or mechanic's lien: A recorded claim against the property that was never satisfied.
- Improper prior transfer: A deed was not properly executed, notarized, witnessed, or delivered.
- Forged document: A signature on a deed or mortgage was forged.
- Missing signature: A necessary party did not sign a document that affected title.
- Broken chain of title: The recorded history does not show a clear, unbroken sequence of ownership transfers. Learn what happens when the chain is broken.
- Conflicting public records: Different government records disagree about ownership or boundaries.
For a broader look at issues discovered before closing, see the most common title problems found before closing.
What Happens When a Defect Is Found?
When the title examination reveals a defect, the title company typically works through a series of steps:
- Identify the specific defect: The title examiner documents exactly what the problem is.
- Determine the severity: Not all defects are equal. Some can be cured with a simple corrective document.
- Trace the cause: The examiner traces back to understand how the defect originated.
- Identify who must participate: Depending on the defect, different parties may need to be involved.
- Determine the curative requirement: What document or action is needed to resolve the defect?
- Obtain underwriting approval: For significant defects, underwriting review may be needed.
- Coordinate the cure: The title company works with the parties to obtain necessary documents.
- Verify the cure: Once documents are obtained, the examiner confirms they properly address the defect.
- Proceed to closing: If the defect is resolved, the transaction moves forward.
For more detail on how specific title defects are cured, see How Are Title Defects Cured?
Is This a Closing Killer?
Not automatically. Many title defects can be cured through standard curative processes. Even significant defects may be resolvable with the right documentation, underwriting approval, or legal action. The key is identifying the defect early so there is time to address it before closing. Learn how long it takes to cure a title defect.
Why Experience Matters
1st Option Title was founded by Scott Horne, a title attorney and investor with more than 30 years of relevant experience. Learn more about Scott Horne and 1st Option Title.
FAQs
Can you buy a house with a title defect?
Depending on nature and requirements, it may be possible under some circumstances. See Can You Sell a Property With a Title Defect?
Does title insurance cover title defects?
An owner's policy protects against certain covered defects not discovered during the search. Known defects listed as exceptions are generally not covered. Learn about title insurance coverage.
What is the difference between a title defect and a cloud on title?
A title defect is a broad term. A cloud on title is a specific type creating uncertainty about ownership. Learn about clouds on title.
How does a title search find defects?
The title search examines public records to trace ownership and identify irregularities. Learn what happens when a title search finds a problem.